Fidor Bank – Introduction
Fidor Bank is a german-based financial institution, founded in 2009 aiming to revolutionize the banking industry. It considers itself a “digital bank (…) that re-establishes lost confidence in banking with new and customer-focused services, enabling its customers to actively participate in the bank’s decision-making processes”. The bank has no branches and is purely online/digital driven. While still very small in scale, it has grown in the past years from a credit volume of €90mln in 2012 to €220mln in 2014. With currently €270mln in deposits, 2014 is the first profitable year with a net income of €2.4mln. Currently Fidor has 70,000 clients and approximately 250,000 community members. The bank recently launched its business in the UK and the US.
Despite the promising financials, this digital innovator has also won several awards, e.g. regocnition by the World Economic Forum as a “Global Growth Company”.
How does Fidor create value?
The key digial value creators of Fidor bank are:
- Community banking
The creators of Fidor Bank believe that people out there have a lot of know-how and experience when it comes to finance. What is needed is a place to exchange this. Fidor Bank does not employ “financial advisors”, instead a key part of the business model is to allow and animate customers to interact with each other. Instead of having financial advisors, customers act as advisors in the Fidor communities. This integrates the customer in the value chain and transforms them to prosumers. Customers that answer questions and act as advisors in the community get rewards from Fidor, in form of additional interest payments. According to the management, the community is the foundation and platform for “doing business”.
- Enhanced transparency and digital capabilities
Fidor is allowing customers to integrate all possible forms of digital financial products and currencies into one bank account that can be accessed from all kinds of devices. You can access for instance your Bitcoins, as well as World of Warcraft Gold. http://www.coindesk.com/bitcoin-de-launches-integration-with-fidor-bank-accounts/ Fidor is simply done via Facebook connect, so data is also automatically processed. In adidition, Fidor offers a range of different digitally enabled services, such as crowdfunding or even online betting. Furthermore, Fidor is partnering with companies to enhance the service offering. In 2014, Fidor launched a partnership with the San Francisco-based Ripple Labs, an global payment network provider. Fidor is the first bank to partner with Ripple and is now offering instant global payments, no matter in which currency at very low costs.
How does it capture value?
Currently, Fidor´s primary advantage is on the cost side (in addition, on the revenue side, Fidor´s digitals value proposition attract a lot of tech-savvy young customers). The digital value proposition allows them to operate with a much lower cost base than traditional banks.
- Lower operating expenses
Fidor´s business model eliminates all major cost components of a traditional retail bank. Mostly no physical bank branches and no financial advisors, which probably lowers the overall costs to a high extent.
- Lower marketing expenses
Fidor has very low customer acquisition costs, since they have a unique way of acquiring customers digitally via social media. One component of customer acquisition is the way FIdor sets interest rates. Depending on the amount of likes on Facebook, the interest rates is set. The rule is: the more facebook likes, the higher the interest rate. So far, Fidor has not spent significantly more money on marketing than €100,000. According to the CEO, Fidors only needs 1€ to acquire one customer, which is significanty lower that the €7 that traditional banks pay per click, just to advertise on product on Google and get the clickthrough.
Fidor – a digital winner?
I would consider Fidor Digital winner, although they still only capture a very small portion of the market and a very specific segment of customers. Still, this company is implementing a lot of features that seem to constitute the future of Banking. Assuming that customer preferences move even more to digitally-enabled banking, Fidor is very well positioned to capture a larger share of the market.
For some more information, check out this youtube video!