Developing Premium Fintech Solutions
Under the terms of this business partnership, Dediq is set to spend over €500 million ($595 million) for the development of premium fintech solutions while SAP will provide intellectual property in return for a 20% ownership stake. A new JV is expected to start operating in the second half of 2021, pending regulatory approval.
The business collaboration comes after the tech company has committed to attract more cloud customers, as well as remain relevant in the fintech business industry. The software business has developed a strategy that aims to serve its clients from 25 industries with tailored cloud solutions.
The software and cloud company previously abandoned its mid-term margin targets and doubled down on the planned shift to cloud computing.
“Through partnering with Dediq, we will significantly increase our support for the digital transformation of customers in the Financial Services Industry and deliver innovative cloud solutions at an accelerated pace that help them transform their business holistically,” said Christian Klein, CEO, SAP SE.
Klein added that the fintech business sector represents a “key industry” for his company and a partnership with Dediq is a further commitment to this market.
SAP has a proven track record in the fintech industry. Over 80% of the top 1,000 banks in the world and insurance companies are SAP clients. A new JV will focus on developing innovative business offerings in the area of core banking, core insurance, and other fintech products.
“The FSI market offers a huge opportunity for us. To unleash this potential, we will use our unique capability to provide enterprise-grade solutions. Jointly, we will extend our existing FSI portfolio to cover banking and insurance processes end to end,” Luka Mucic, member of the executive board of the company, said.
SAP is the minority stakeholder in the new joint venture and will not combine its results, Music added. He also said that SAP is expecting gains from licensing its core database and cloud technology to Dediq.
Instead of investing its own funds to create fintechs products, SAP preferred to form a business partnership, underscoring the company’s strategic priorities. The company said it wants to dominate certain sectors while forming alliances with others.
Dediq is a German proactive investor that has backed seven companies to date, only two of which were publicly disclosed (Senacor and Convista).
“Our approach is to do entrepreneurial investments with evergreen capital,” said Dediq Managing Partner Matthias Tomann.
SAP plans to continue promoting and selling its enterprise information management and line-of-business offerings. On the other hand, the newly-formed JV will invest and focus on key financial service areas, including commercial lending, retail banking, core insurance, and insurance finance and bank management.
Mucic expects the JV to garner business revenue within the high, triple-digit million euro mark or more in the following five years.
In a recent report entitled “Fintech Leaders 2021,” issued by the Center for Financial Professionals (CeFPro), SAP took first place in both core banking/back-end systems and accounting and treasury management.
Software and cloud company SAP said it is forming a JV with the fellow German investing company Dediq to develop new fintech solutions for banking and insurance.
About the Author
Luigi Wewege is the Senior Vice President and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an instructor at the FinTech School which provides online training courses on the latest technology and innovation developments within the financial services industry. Luigi is also the published author of "The Digital Banking Revolution."