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Matthias Kröner, Vorstand, FIDOR Bank A

How was Fidor Bank created? 

Fidor is the second bank this team created – the first bank started in the mid-90s. Using today’s terminology, I’d say this one was the first with a disruptive, customer-centric and introspective approach. We all have previous experience in setting up a bank. Fidor originated in 2007 when we discussed the development of a bank based on community and sharing the economy, the “wisdom of the crowd”, and other models that have influenced retail business. So we thought: “yes, let’s do something like that”. 

 Fidor Group encompasses Fidor Bank, Fidor Solutions and Fidor Factory. What is the purpose of each branch? 

 Specialisation, all in all, is the background to each of those units. We started with the bank on one side, and on the other we started working on the technology, creating our infrastructure. We never did this, in the beginning, thinking that we would eventually sell the technology, and provide those kinds of solutions to other banks, just like we do today to O2 Banking. We created all this for our own purposes. One day, our first B2B customer said: “I saw this on the internet, and I like it, and it’s something I’d like to my business as well”. That was the origin of Fidor Solutions – we then realised that to service those types of B2B customers in the proper way, we needed a very dedicated, differentiated and good organisation than the bank.  

Unlike the bank, Fidor Solutions is a technology provider, so it is not regulated. The reason for having Fidor Factory is a focus on taking care of the whole day-to-day, customer-centric, transactional activities of the bank. We thought it was a very good idea to have this part of the organisation in a non-regulated entity outside of Munich, in Berlin.  

Unlike Fidor Bank and Fidor Solutions, Fidor Factory is not in Munich. There are many reasons for not being in Munich, as much as I like Munich and I was born there, so in a way, I am speaking against my hometown, but Munich has a lot of problems. It has the problem that it has no unemployment rates, and it has the problem of being enormously expensive – anybody with an average German salary cannot afford to live in Munich. Parts of it are here, but the huge chunk is in Berlin. Let’s put it this way – Fidor Factory has got the mailbox in Munich.  

What is the relationship between each of the units? 

Fidor Bank is a significant customer to Fidor Solutions and the closest and biggest one. The bank works hand in hand with Fidor Solutions and helps develop compelling products that later can be coded and offered to other B2B customers within the Fidor operating system (FidorOS) infrastructure. The banks and solutions must work very closely together, and we are seeing that Bank, Factory, and Solutions team members are collaborating and discussing all the topics, according to Fidor’s philosophy, which is having multi-skilled team composition. The cooperation at those levels has never been as good as it is currently, and I’ve got to say I’m pleased about it. Saying this, at the same time, I have to say that the bank is not generating 60% of the solutions, so you can see that outside customer to solutions are, related to revenues, higher than Fidor internal revenues.  

Fidor Factory, as a support service, is a service partner to Fidor bank and to Telefonica O2 banking, which means that every Fidor and O2 banking customer, whenever he or she has a question and is calling the hotline, will end up talking to the Fidor Factory in Berlin. These are the only two customers to Fidor Factory.  

What other clients does Fidor Solutions have? 

O2 Telefonica is a perfect example of a non-bank, for example. ADIB in the UAE, Van Lanschot in the Netherlands, Natixis and the Groupe BPCE, and Cross River Bank in the US. The lead pipeline is impressive, and we will have one or two more announcements to go this year.  

Which element are you the proudest of? 

That’s a difficult question because it is an overall pride! However, I do think the biggest achievement actually is that we have an infrastructure and a setup that allows us to grow quickly into Europe. We have different assets to sell there, we have a very wide and involved community and community infrastructure, we have the conceptual idea of the open marketplace, in which we’re offering great financial solutions to our customers; we also have a very scalable account idea, which is a multi-asset account. So, I think we have enough components to actually play them the right way to achieve the maximum in the shortest time. 

Our channels function in the normal environment, acquiring customers with traditional activities, like SEO and so on. But I think the community is very important because we have a very high ratio of customer-to-customer referral, which is sorting out our customer growth there. What is also particularly important are the partners we are working with. To mention one, Bitcoin.de, which is currently playing a big role in the environment and talks around Bitcoin. All in all, this shows you how we respond to the current behaviour of customers living and doing finance in the digital context they are in, and we are growing on that. And we’ll be growing on that, and disruption and growth go hand in hand, at least in my perspective.  

We were wondering why we had so many SME customers. We had an inflow of some hundred SMEs customers per week, and it is easy to take for granted this customer growth, and that can get really dangerous because if the growth stops and the team does not know why it can present a problem. There is a mixture of reasons for this growth: we rely very much on the feedback from our community, we do additional market surveys, etc. We seem to be incredibly transparent to people, the community is supporting this impression, of course, and we’re acting accordingly, no doubt about it. I think pricing seems to be fair – we never meant to be the super cheap option, because we never to be competing on price only.  

The third component is the variation in offerings – we don’t want to be a bank that says “no” only, we want to give our customers an alternative option. One example: a customer comes to us and requests a loan, and the risk profile is telling us that according to our risk policy, we wouldn’t give out a loan to that person. We would then look at our finance bay, and give him the offer of P2P lending, or crowd finance, so we offer a set alternatives that won’t lose the customers. And if none of these is an option to them, we would suggest asking the community, in which, for sure, somebody will be able to help. I think this very customer-centric approach of dealing with finance in a digital way, which can be compared to what Amazon would call “Next Best Offer”, because if you’re ordering a book on here, you would instantly get informed that people that acquired this book, also looked at these books. So why not do this in finance? 

Being a bank focused on disruption and community, your customer base must be fairly young. 

I would say that the users in the community and customers of Fidor Bank are older than you might think. They’re maybe in the late thirties to mid-forties, and that might be due to the fact that we never did any heavy attracting or addressing to a particular target group, so the outcome of the organic growth is what we have got. For the time being, this is alright, but in the future, we will have more specific communications according to certain products, where we think that the target group is a different one, so we’ll switch it from the digital-only and organic growth onto another tier which will be definitely more sales-driven and more targeted, based on the date we have. We now have more than half a million people registered in the community, and over 200,000 bank customers, so it’s the perfect moment to change the model from an organic one to a systemized approach designed for future growth. 

What is your strategy to expand in Europe? 

We have retail accounts in the UK at the moment, but, as we announced, Fidor will go to Europe, starting from France, but there is a lot of details about the steps to take that I cannot disclose. Entering the UK market, we didn’t put that much effort into it yet. Perhaps it wasn’t a great thing to do, but it was a way to break the ice. We will harmonise the European platform and put in the effort that it requires. That means updating the bits that are perhaps a little bit older, starting with the data model, alongside other areas. 

Is customer growth a challenge? 

I see no challenge in customer growth, but I do see a challenge in handling it. That is a different problem. In particular, with the key performance indicators (KPIs) that I have, I’m very happy with the growth projection. We are absolutely fine in that regard. It boils down more to a technical question of how to play the assets we have.  

I think regulation is always a challenge, in particular given the fact that it is in a very cloudy situation. Until the regulators come up with a clearer definition, it will be hard. We have been talking about PSD2 for ages and only now they’re coming up with something, and now they urge everybody to act quickly on it. What is also a challenge is that “harmonised Europe” is anything but harmonised. We have, even in the continental part of Europe, we have a strong regulatory landscape when it comes to AML, customer protection, etc. But it’s different in every country, which makes it a challenge in itself.  

What is the role of new technologies in Fidor? 

Being a data-centric organisation is one of the main strategic components of Fidor Group, and it means that you can read data very quickly, but making an organisational and set up transformation according to your infrastructural data models is definitely not a quick shot. Yes, of course, we deal with all the major tech, like blockchain and AI. Collecting the data, the next big question is what to do with this data. And in response, in comes the answer – algorithms. But then it gets more complex because you have to ask yourself what kind of algorithms you want, what kind of customer profile you want to service, etc. I think that our very customer-centric nature helps us, in particular, to come up with very compelling answers for that.  

 

This interview first appeared in IBS Journal September 

 

by
IBS Journal Senior Editor
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