Fidor’s digital goals: Smarter banking for a better world?
Mapa Analysts recently attended the Fidor Partnership Day, where the German digital bank explained the structure of their bank and intentions in the market. The plans discussed at the event, outlined below, show how Fidor is taking customer-centricity to the next level – and is a force to be reckoned with.
Firstly, Fidor intends to open up its API to customers (in Germany) in the summer, which effectively means that these users will be able to customise their own banking experience. While few are likely to take this opportunity, at least at first, it is a very forward-thinking idea.
They are also experimenting with the concept of “Login with Fidor.” In the same way that you can currently login to various third party sites with Facebook or Linkedin, Fidor is looking to create a means of authentication to third parties whilst giving customers control over how much data they share. The customers are likely to have the choice about which pieces of information to share, and one possible option is that the data won’t be exchanged, it will be tokenised. The authentication could therefore occur without the third party gaining any customer data. Fidor believes that people trust banks to look after their data and will therefore prefer to login with their bank rather than with the likes of Facebook.
Additionally, Fidor actually pays people to engage in their community. You can get rewarded for recommending/reviewing products and advisors or for asking/answering a personal finance question. The idea here is that people will feel that they are partners of the bank, which fits in well with Fidor’s brand marketing strategy.
The community also enhances Fidor’s proposition, and position in the market. For example, they were going to launch a debit card that would charge a fee for withdrawing money (like they do in Germany) in the UK, but it became apparent that this wouldn’t work from the feedback they received. They asked the community what would be acceptable and came up with a solution where the first three withdrawals a month are free (from anywhere in the world) but customers are charged £1 for any additional withdrawals (and they can avoid this by getting free cashback at supermarkets).
How Fidor Works
The inner technical workings of Fidor play a major role in its ability to focus on, and quickly meet, customer needs.
Fidor has its own platform known as the Fidor Operating System (FoS), which is a modular open API-based operating system, developed by Fidor TecS and built in Ruby on Rails. Fidor TecS is a middleware software platform, founded in 2009 at the same time as Fidor itself, that is built on top of a local core banking system called Bancos (developed by the German software company G&H). Fidor TecS is a 100% subsidiary of the bank, operating the IT and customer service for Germany, Russia and the UK.
Although the underlying system is German, everything runs through the FoS, meaning that Fidor can provide general banking functionality that is independent of country specifics. FoS manages all capabilities and processes that the bank relies on to run, integrating with the core system through its open API infrastructure. Using APIs allows the bank to offer both real-time functionality and integrations with third parties.
Working with Third Parties
Third parties can integrate with Fidor’s open API to develop “in-account apps” that Fidor TecS holds in the Finance Bay (in Germany – coming soon to the UK), which acts as a marketplace for current account functionality.
Fidor’s plan is to make the API integration open to allow customers to build custom apps. The standardisation of the APIs is provided by the Financial Open eXchange Initiative (FOXI) and Fidor has already developed some API starter-packs, which are relatively simple to operate.
An example of how the API integration enhances the offering that Fidor provides to its customers is the integration with Currency Cloud and FoS. This allows current account users to buy currency, make payments and view balances in GBP, USD, CHF, NOK, TRY, PLN, AUD and NZD. The ultimate plan, and one that is already in place for SME customers, is to use decentralized payment network provider Ripple to allow customers to make global money transfers in near-real-time.
Its structure allows Fidor to be fully digital and very flexible which, in turn, allows it to respond to customer demand far more rapidly than traditional banks. This makes the platform more customer-centric, especially as all ideas for developments are discussed with real customers in the Fidor Community. This collaboration means that all the mobile financial services provided by Fidor are co-created with its customers and customised depending on the market.
As well as the significant advantages this structure affords Fidor in terms of customer-centricity, it also means that its IT costs are extremely low, as are its costs for customer acquisition. Fidor states that its IT costs per user per year are just $15, with a tier 1 or 2 incumbent bank likely to spend $200.
This, combined with the fact that Fidor conducts data analytics of customer activities in the community, accounts and transactions, means that it is likely to be able to stay ahead of the competition for some time.
Mapa Research Manager Jess Morley comments: “Overall Fidor’s strategy is indicative of the customer-first approach taken by FinTechs that is almost a complete reversal of the approach to product development traditionally taken by retail banking. In the past, the banking giants of the high street decided which products to launch first and worked out how to sell them to customers second. Now the likes of Fidor and PFM-app Pariti, who spent six months doing qualitative and quantitative consumer research before even building a prototype, have turned this approach on its head.”
“This change in approach seems to be working. Pariti, for example, was only launched in the UK at the beginning of 2016 and is already one of the most downloaded FinTech apps available. Such successes are forcing the incumbents to take note and apply this customer-first thinking to their own product development processes. Barclays, for example, have a beta app that it uses to test new customer features before launching them and Tesco Bank has developed its own social network to gain greater customer insight. This shift will ultimately lead to a greater level of personalisation for retail banking customers, which will encourage them to develop an active loyalty to their banking provider. This will help banks maintain market share in the face of tougher competition from the likes of Fidor.”
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