Your modern day "post-disaster bank"- conjures up images of a bleak dystopia and yet what it might represent, if Fidor Bank Matthias Kröner’s enigmatic rhetoric is to be believed, is retail banking utopia. Anna Milne speaks to the banker with "quite a good sense of humour for a German"
Meet Matthias Kröner, innovative banker about to break the shores of the UK, and indeed America, because Fidor Bank, with its open API, web 2.0 banking and a service in which the customer is treated as the co-manager, is coming to the UK this quarter.
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This is the banker who addresses the Anthemis Executive Roundtable by drawing an analogy of his banking style from Shakespeare’s Hamlet:
"To be or not to be, that is the banker’s question. Whether for CEO Hamlet, Prince of Deutschmark, ’tis nobler in the mind to suffer the slings and arrows of outraged customers or errors of an outreachist media or to take arms against them and, by opposing, end them?"
But before we get sidetracked by Shakespeare soliloquys, we cut straight to the chase.
AM Tell me about your UK entry strategy and the reasons behind it
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By GlobalDataMK I can share a little bit- I will not be too open actually, for competition reasons but nevertheless let me explain why we’re going international. Why not remain a German bank- isn’t that a good enough story? No, it isn’t. Of course it would be satisfying, no doubt about it, and fill my days nicely but we think the web business is a cross border business, the internet doesn’t mind borders and all the successful web stories we know are cross border. Why? Because firstly there’s a global demand for the services and secondly because they can deliver and supply their services in a very efficient way and they’re driving down their cost by scalability. Setting up something like this is costly but we trust very much that we can deliver these services in a cost scaling way and moreover- there is a demand, I can tell you, there is definitely a demand.
Fidor bank is already operating as a loan provider in the UK via partner organisations so it’s a matter of putting the second down and offering its full range of community services.
MK Fidor started in Munich- in the hometown of BMW and the Oktoberfest. And we made a great joke once out of that. We were recruiting crowd finance people.
Kröner proceeds to explain the ad, which went along the lines of: "When you want to watch a final at Wembley you watch German football; when you want Vorsprung durch Technik, you drive our cars and when you want Gemütlichkeit at Oktoberfest, you drink our beer. So, why not also become a part of … Kraut Finance."
You read it here first (or second, if you saw the original campaign). This guy does have a sense of humour; and boundless energy it seems. The kind of energy that comes from having a successful bank that is five years old and in profit. The latter point is key to Kröner’s vision as a truly unique offering within the UK’s somewhat crowded consumer finance market. Kröner says this will set Fidor apart from other competitors or so-called challengers: "Will we be a challenger bank? I don’t know- I don’t care. I wouldn’t put us in the same bracket.
AM So what will be your defining USP, what will attract people to German bank they’ve never heard of over homegrown digital start-ups, Atom and Starling?
MK "We’re the post-disaster bank- set up with knowledge gleaned from disaster; we’ve got five years’ experience and, crucially, we’re in profit. And we’re a tech culture. There will be several dimensions you can look at as regards USP. We are very much driven by web 2.0 development- which means integration, interaction and transparency with the customer. To us the community is extremely useful- integration of the community user is absolutely crucial. The Fidor operating system is superb- and it’s up and running; it is no longer an experiment, it’s a proven concept.
AM Well I know that you recently implemented the Ripple protocol. (Since November, this implementation has meant that Fidor customers can transfer US dollars to Fidor’s US partner, instantly and at a fraction of the normal international transfer cost. Ripple will facilitate the transfer of any currency (even gold), cutting out corresponding banks and hence transacting at a fraction of the cost. In the near future, Fidor wants to extend the service through additional partners and currencies.)
Says Patrick Griffin, head of business development at Ripple Labs: "If you can connect one bank on ACH in the US and one bank on SEPA in Europe, then you have effectively connected all of the banks on those two networks- we’ve got Fidor on SEPA and CRB and CBW on ACH so now we’ve got to work on China, South America and India." Fidor was the first to implement Ripple.
MK Yeah, we have an open API environment which is tremendous and this allows us to integrate with partners like Ripple in a very short time. Also that means that we have third party offers integrated in our account and the account itself is a marketplace, it’s not only a cash account. Don’t forget we have integrated in Germany FX, precious metals, we have different crowd finance partners, we have different peer-to-peer partners and so on, it’s all in the same account. So, it’s a tech USP; it’s a cultural USP- because we dare to do so and we are operating as a profitable bank already- everything I hear about those challenger banks- collecting a hundred million here, twenty million there, for setting up new systems and operating systems structures- that’s just a huge gamble, is all I can say.
Next, we have the culture- we respect the customer; we have a good sense of humour, we are bankers and we are German- this sounds extremely odd, doesn’t it?
AM Well, I suppose it’s an unusual combination, stereotypically speaking.
MK We think the UK, besides Germany, is the cool market in Europe. There’s both a personal and a strategic interest to do a good job in the UK. It is the first choice step after Germany- of course we will roll out further internationally and even globally as you might have read, we have signed a term sheet agreement with a US partner, and we are discussing how to serve other European countries.
AM You’ll agree you are renowned for extremely low cost of customer acquisition, using social media- is that something you anticipate being able to emulate in the UK or was it a Germany specific thing?
MK I would hope to copy it. In our meeting today I learned the results of an ongoing customer survey- we asked whether those customers recommended Fidor Bank to their friends and more than 80% said yes they did. And we learned that approx 20% of customers learned of Fidor via a social media channel; 100% learned about us via the internet, so yes there’s no reason not to copy what we tested and learned here in Germany.
AM Are you likely to set up the Fidor Pay account- where the more Facebook likes the account receives, the lower the overdraft interest rate becomes?
MK– Whatever successes we can take from our experience and use in the UK, we will try to do so, of course.
"If people think the ‘like’ interest rate is a cool story and it looks like it will do well in the UK, you can be sure it will be there."
And vice versa. This is why I’m so excited and positive about this development because I’m really optimistic that there will be a huge influence from the UK on the rest of the Group. If we create products for the UK, we will bring them to the rest of the Group. So it all feeds in to improve the services for all Group customers.
AM What products will you initially be launching with- will there be a regular current account?
MK Well, at this point I have to keep that secret, please. But be assured, at the end of the day, it will be what we have in Germany. And I’m not saying what dates or what’s coming first but we do have a fixed procedure of how to go to market and we will apply that as well. Of course the UK has some specific requirements; with the payment connect for instance and KYC standards, etc. I’m very optimistic that you will see something in the first quarter this year.
AM Is the vision to still be the European leader for online and mobile community banking?
MK Well, operating in the US makes us not only European. Once, when I was in the office of our partner in San Francisco and they asked me how were we going to go about the expansion, before I knew it I answered, "Global expansion? That’s easy- planet by planet". I collapsed laughing and retracted my comments, saying that was of course bullshit.
"Our international strategy is to cover the main economic areas within the next two years in contract, which means in reality three years"
So you will have Fidor in Asia; in my dreams in Latin America; in the US, Europe; our contract partner in Russia. By the year 2020 there’ll be a population of about a billion people which will be working far from home- they’ll need proper banking; they’ll need transparent banking. Why not have transparent, fair and honest banking in Africa- who says we shouldn’t do this? There’s a global need for better banking. Like there’s a global need for Facebook, obviously, and Twitter. That’s right- you taught us the story, you Facebooks, you Googles, you Amazons. They anticipated the need for a smart process and an efficient delivery. We want to be seamlessly integrated into the digital lifestyle of our customers. That’s it.
(MK cont.) I’m always arguing with my friend, Brett King, saying it’s great what he does with Moven, no doubt about it but… at the end of my money, if I still have some month left (ie he’s broke), you just show me a pie chart- so that’s it? I’m broke, so what now – where is my community advice? Where are the other users who could offer peer-to-peer lending? Is there a bank in the background giving me a so-called emergency call? We have this- it’s is our Wonga lesson (ie, fast and convenient) but with fair pricing.
"At the end of my money, if I still have some month left, you show me a nice pie chart.. so that’s it? I’m broke!? where is my community advice?"
AM There is plenty of evidence to suggest that it’s more than beneficial to have a bricks and mortar outlet- even if it’s just one flagship branch. How many times have we heard that a healthy branch network equals a healthy bank?
MK I don’t share that belief- I believe that digital is always superior to bricks and mortar- no doubt about it.
AM Would you consider it at all?
MK I’m not a religious person-I’m absolutely agnostic but I am religious about this- Digi only. Why? If I just think about my community features- none of these features can be executed in-branch. None. You cannot compare your financial profile in a branch; you can’t have a chat with more than five or six people in a branch – you may as well compare apples and pears. I’m not saying it’s wrong if you play the branch game in the right way, if you do it’s great- but we will not because we think what we deliver as a value is not transportable via a branch. I would sooner think in terms of a virtual branch. We recently had a developer day in London- that’s more like a branch to me- gathering developers and talking about our API infrastructure and things like that. Maybe doing this once a month in a specific room. But I’m not providing any water for dogs.
AM what would your perfect UK customer be like?
MK I am totally open, I come from the hospitality business. When I worked in a hotel in London, we didn’t say you’re not our ideal guest- everybody was welcome. Experience in Germany shows us 3/4 of our customers are male, and they’re way older than you would think- on average 35-45, and very tech-savvy. 20% of our customers run their own homepage and have a multiple number of different social media profiles.
"And all those app tools- at the end of the day it’s just a credit card transaction- that’s not a revolution."
We may have heard all this before but it won’t be long before we can judge for ourselves. So, watch this space for Fidor pop-up branches coming soon to a specific room near you- just leave the dogs at home.
