German fintech Solaris aims to triple revenues despite sector pressure

Berlin-based fintech Solaris aims to triple revenue to €300m over the next two years despite job cuts, struggling clients and a recent rebuke from the regulator.

Solaris, which has a German banking license and offers white-label banking services to fintechs and corporate clients, has long been a poster child of Berlin’s vibrant start-up scene, having raised €400 million from investors including credit card group Visa and Spain’s BBVA.

Revenue doubled to €101m last year, making it one of Europe’s biggest so-called ‘banking as a service’ providers, and it bought UK rival Contis in January. Although it recorded a pre-tax loss of €34 million in 2021, Solaris said it is on track to become profitable by the end of this year.

However, the rapid growth has recently hit a speed bump after clients such as online lender Nuri filed for insolvency and other cash-strapped fintechs scrapped their growth plans as funding became more scarce. Financial regulator BaFin also reprimanded Solaris this year for organizational shortcomings, parachuted into a special monitor, imposed stricter capital requirements and insisted on approving any new customers.

Outgoing CEO Roland Folz, who will leave after more than six years at the top by the end of April, acknowledged that “2022 has been a very, very difficult year.”

His successor, Carsten Höltkemeyer, the former Germany head of Barclaycard and currently chairman of Düsseldorf-based fintech auxmoney, will join the board in November before taking up his new role in May.

He outlined Solaris’ growth plans to the Financial Times in his first interview since the appointment was announced. “I see the potential of €300m net income [by 2024]and of course have the ambition to achieve it, he said.

While he said achieving the target would partly depend on wider market conditions, he said the bulk of the increase had already been locked in for the group after it won Europe’s biggest car association, ADAC, as a customer. This will mean it will start processing 1.3 million ADAC-branded credit cards from 2023, which alone will generate more than €100 million in additional annual revenue. Meanwhile, rising interest rates are predicted to bring in an additional €25 million per year.

However, Höltkemeyer said he could not rule out further job cuts on top of those already announced earlier this year, when the lender cut close to 10 percent of its 750-employee workforce. “At the moment we are jointly evaluating [headcount] situation and consider how to find the right balance between further growth and efficiency, he said.

Pointing to his experience dealing with financial regulators, Höltkemeyer said he wants to make compliance “one of [Solaris’s] core competence”, adding that he welcomed the presence of the special monitor, as it meant an “intensive dialogue” with BaFin.