Project Idea

Creating New Businesses Across Investment & Capital Markets in CEE

CEE has strong financial institutions, established investment and capital-markets capabilities and two decades of effort to modernise how these businesses are delivered.

So why is creating genuinely new businesses across investment and capital markets in CEE still so difficult?

Financial institutions across CEE have many of the ingredients from which new businesses can be built: customers, trust, distribution, licences, capital, data and deep knowledge of their markets. Technology companies and digital challengers add new capabilities, operating models and ways of reaching customers.

Yet having the ingredients is not the same as having an effective way to combine them.

The market02

Different models shape the market.

Across investment and capital markets in CEE, different types of players operate with very different economics.

Many CEE financial markets are highly concentrated, with a relatively small number of established institutions controlling much of the customer base, assets and distribution.

Regional banking groups such as Erste Group, Intesa Sanpaolo, KBC Group, OTP Bank, Raiffeisen Bank International and UniCredit operate across multiple CEE markets. Alongside them, domestic institutions remain important players in several countries.

VC-backed digital players such as Revolut, Trade Republic and Lightyear add a third model, entering CEE selectively with different economics and growth ambitions.

Domestic institutions

Strong positions. Attractive economics. Limited scale.

In several CEE markets, domestic institutions hold important positions in investment, wealth and related financial services. Their models often combine relationship- and branch-led distribution with attractive margins and proprietary or affiliated investment products — including group-managed investment funds and, in some markets, bonds issued by the institution itself. Savings and unit-linked insurance products can complement the same customer relationships and channels.

Their local focus keeps customers, management and market opportunities relatively close. At the same time, smaller scale can limit the resources available for specialist capabilities, technology investment and dedicated innovation activity. Attractive existing economics can also reduce the urgency to create fundamentally different businesses.

Regional banking groups

Established models. More scale. More complexity.

In their individual CEE markets, regional banking groups often operate with much the same established business models as domestic institutions: local customer relationships, branch and relationship-manager distribution, proprietary or affiliated products and attractive incumbent economics.

What changes is scale. Operating across multiple markets gives the group greater capacity to fund technology platforms, specialist teams and dedicated innovation capabilities.

But that capacity often sits above the local market. Strategic priorities, major investment decisions, technology platforms and innovation capabilities may be controlled at group level — frequently from headquarters such as Vienna, Milan or Brussels rather than from the individual CEE business. A locally attractive opportunity therefore also has to compete for attention, capital and priority within the wider group.

VC-backed digital players

Focused proposition. Growth capital. Built to scale.

VC-backed digital players start from a different position. They typically enter with a focused proposition, digital distribution and a cost structure designed to scale without the legacy of an established financial institution.

Their economics are also different. Venture capital can fund growth ahead of profitability, but it comes with an expectation that the business can become materially larger. A proposition that works in one relatively small market may therefore not be enough: the addressable customer segment, revenue potential and ability to expand across markets matter from the outset.

That makes CEE expansion selective. Players such as Revolut, Trade Republic and Lightyear enter different combinations of markets and localise to different depths. Those choices provide another indication of where customer demand, market size and achievable economics can support a scalable digital investment business.

The approaches03

Established institutions have tried many ways to change.

Established financial institutions have spent years trying to become more digital, faster and more entrepreneurial — while preserving the institutional strengths on which their existing businesses depend.

That has produced a wide range of innovation approaches. They are often grouped together under the broad label of innovation, but they were designed to solve different problems and produce different outcomes.

Transform the existing businessDigital Transformation · Digital Units

Modernise technology, processes, distribution and customer experience — and introduce new ways of working into the existing institution.

Build innovation capabilitiesScouting · Innovation Teams · Communities of Practice

Build the capabilities to identify opportunities, develop and test new ideas, and embed innovation skills and practices across the organisation.

Create space to exploreInnovation Labs · Incubators · Accelerators

Create environments in which new technologies, customer propositions and business ideas can be explored, tested and developed with greater freedom from the priorities and constraints of the core organisation.

Work with external innovatorsStartup Collaboration · Venture Clienting

Bring technologies and propositions developed outside the institution into real business contexts — as suppliers, partners or through other forms of commercial collaboration.

Invest in emerging businessesCorporate Venture Capital

Use corporate capital to invest in external companies that may provide strategic insight, access to technology, financial returns or future relevance to the institution.

Build new businessesCorporate Venture Building

Set out specifically to create a new business rather than transform, explore, partner or invest.

All of these models can create value. But they are designed to create different kinds of value.

Better digital businesses, stronger innovation capabilities, learning and experimentation, technology adoption, startup partnerships, strategic investments and new businesses are not the same outcome. Each financial institution therefore needs to find the combination of approaches that works for its own innovation ecosystem and ambitions.

But only one of these approaches explicitly sets out to create a new business.

The contrast04

Twenty years of innovation. How much has the business really changed?

Around twenty years ago, I worked in this industry in CEE. Returning to it years later, what struck me was how much of the underlying business still felt familiar.

Technology has changed. Digital channels and customer interfaces have changed. Financial institutions have invested heavily in transformation and experimented with many different approaches to innovation.

Yet much of that effort has been directed at changing, improving or extending the existing business — not at creating a new one.

Meanwhile, digital challengers have moved in the opposite direction. Businesses once watched for inspiration have become competitors, attracting customers, assets and activity with propositions built outside the incumbent model.

The question is no longer how established institutions can become more innovative. It is how they can create new businesses of their own.

The Concept Brief05

What It Takes to Create New Businesses

A KT11 Venture Concept Brief on new-business creation across investment and capital markets in CEE.

This is where the public argument ends — and the KT11 Venture Concept Brief begins. It takes the question further: what have we learned from previous approaches to innovation and new-business creation, what has changed, and how would we approach the challenge in CEE today?

Among the questions it explores

Why have previous models struggled to create new businesses consistently?
What has changed in the economics and technology of building new businesses?
What would a new-business creation model designed around the realities of investment and capital markets in CEE need to look like?

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