Challenger bank Fidor adopts ‘attack formation’

By Carl Flinders for Computer Weekly

Challenger banks have disrupted the banking sector without actually changing that much to date, but the acquisition of Fidor Bank by French banking giant BPCE could see real inroads being made into the traditional retail banking sector.

Referring to a description used in a German newspaper, Fidor CEO and co-founder Matthias Kröner said the bank’s acquisition by BCPE means it has adopted an “attack formation”.

The acquisition takes Fidor from being a potential challenger to a real threat to the status quo in retail banking.

Fidor was launched in Germany in 2009 and gained a banking licence in the UK in 2015. It has also set up operations in the US and Dubai. The bank has 350,000 members in its community and 125,000 banking customers. It uses social media to overcome the cost and complexity of traditional banking, while increasing customer trust through an online community.

BPCE in contrast has 35 million customers, 108,000 employees and 8,000 branches in France.

Financial muscle

Kröner said being part of BCPE gives Fidor the strong financial background it needs to cope with an often volatile economic environment driven by macro uncertainties. He added that it gives the bank the freedom to focus on innovation and coding in relation to its digital banking infrastructure, known as Fidor Operating System (FOS), an important differentiator.

The FOS open technology platform that Fidor developed itself can be plugged into through APIs. For example, as a result of open APIs, its current account customers can access 25 different services and even deal in foreign currencies and precious metals using the same account.

Telefonica deal

Another factor that will give Fidor firepower in its bid to take business from traditional banks is its recent deal with Telefonica in Germany, where the mobile telco offers financial services via O2 Banking using Fidor’s technology. This increases potential customers to many millions.

“With Telefonica we announced our partnership deploying O2 Banking – which gives us access to 40 million Telefonica customers in Germany and millions more beyond Germany,” said Kröner.

Despite the many benefits of being part of a large banking operation there are risks. Fidor was established on the back of traditional banks’ unpopularity. Although its creation was more to do with the momentum of Web 2.0 technologies and the advent of social media, by coincidence it appeared at a time when people were more likely to consider switching banks because of their unhappiness with banks following the unanticipated financial turmoil of 2008.

Independence mission

It is therefore essential for Fidor to retain its independence from the parent bank so it is not seen as just another high-street banking giant.

Kröner said Fidor will never be fully integrated with BCPE and will avoid being typecast as just another big bank.

“Given the fact that nobody intends to change Fidor corporate culture or its management team, we can assume that our customer-centric attitude will remain,” said Kröner.

He said other factors that will ensure Fidor retains its character are BPCE’s similarly community-centric approach and his own position as a shareholder. “This means I still have skin in the game and it strongly would affect me co-owning a bank which is unpopular.”

He add that corporate culture and governance were important topics during the acquisition negotiations. “Those points have also been critical in our decision-making process, so I am pretty positive that we can maintain our identity.”

Kröner admitted that not everything that Fidor has touched has turned to gold and that BCPE can improve the bank. “Not all of our activities and actions have been successful, which means we are also happy to improve ourselves and our organisation with the strong support we will now receive.”

Kröner said he and the other Fidor founders had anticipated it eventually being acquired, but were open-minded about what type of company would buy it. “Yes, we anticipated that one day there might be a major transaction resulting in a dominant shareholder. But we never made up our mind who or what type of organisation that could be.”

The fact that its new parent is French rather than German should not be a surprise, he added. “Over the last decades French banks have more open to innovation than German banks.”

More to come

Kröner believes the scene is now set for other challenger banks to be acquired.

“Some of the concepts are made to be acquired. And I am not criticising that. To me, it seems a matter of fact. But I think investors will have a clear look whether they receive substance.”

First appeared at Computer Weekly