Frank Schwab, CEO of FidorTecS AG, has a vision: his company enables disruptive digital banking by reshaping the customer relationship through technology. As one of the first German Web 2.0 banks it bridges traditional and new banking and connects customers through peer-to-peer services. Schwab visited the GFT Digital Banking Lab in Sant Cugat, Barcelona, in May. During the event he talked to us about trends and his ideas for the future of Banking and IT.
Everybody is talking about the future of banking, but let’s start off with the current situation: What challenges do banks have to face today when it comes to meeting the client’s expectations?
Frank Schwab: Today’s clients are used to Google, Twitter, Facebook, Uber and Amazon. They expect the same experience in banking – seamless services at their fingertips that meet their specific needs: payments, loans, deposits, mortgages, buying and selling precious metals, peer-to peer-loans, crowd finance, you name it…
To put it in a nutshell: banks services have to become digital. In your opinion, what are the key elements of a successful digital bank?
Frank Schwab: There are two key elements involved. First: User experience. The digital consumer compares and buys products on the internet, loves speed and convenience. These consumers are smarter than ever and use all available channels for communication. Digital means you must offer a great digital customer experience and banking products and services that are 100% STP (Straight Through Processing), without any manual processes involved. Second: Data – and the associated risk management.
And Fidor Bank is providing those key elements?
Frank Schwab: Fidor Bank is based around a financial community in the style of Facebook but creating a bridge with traditional banking, offering products like accounts, payments, and cards as well as new banking services like peer-to-peer loans, crowd financing, and crypto currencies. Fidor has made a deliberate choice in favour of social banking; a model that runs counter to conventional banking: openness, transparency, and client participation. And we know how to monetise communities.
What are you doing that differentiates you from comparable banks?
Frank Schwab: Again, there are several main elements to being successful. First: we listen to our customers. Second: we operate an account like a smartphone. We expose several of our own as well as third party banking services to our customer base and expose all banking services via an open API architecture to our SME customers, all under the umbrella of our banking license. Third: We offer the most convenient access to banking services, globally. At least, that is what our customers tell us.
The market is growing rapidly. Do you fear serious competition from other banks?
Frank Schwab: At this point in time, other banks are not our competitors; rather, we are winning our customers from other banks. But we are seeing more and more FinTechs, retailers, and eCommerce players offering banking services. These companies are both our competitors and our potential partners and customers. Our target is the digital customer, whether a private individual or a medium-sized online shop. This is still a small customer group, but it is growing quickly. From this perspective, the banking world is becoming more and more competitive.
What differentiates you from a bank like Banc Sabadell that also has a heavy presence in social media channels?
Frank Schwab: Customer intimacy and the easy and seamless integration of new third party banking products and services, including peer-to-peer, crowd and crypto banking services differentiate us from Banc Sabadell and every other bank in the world. Our monetising community-model “operated by Fidor” can be used by traditional banks as well as by non-bank organisations.
Speaking of different players in the field: Do you see yourself as a bank or a FinTech?
Frank Schwab: If a bank is not acting as a FinTech, it is facing an uncertain future. A FinTech will also face an uncertain future if it does not understand the rules and advantages of being a bank. So, we are a FinTech with a banking licence.
What exactly is the role of FinTechs in the banking sector?
Frank Schwab: FinTechs are disruptive and the drivers of change. They completely change the customer experience in banking. All other players must follow this direction. Whether they will survive is a different question, which we should discuss separately.
If you had to name three lessons you have learned from your digital banking service offering, what would they be?
- Integrate your customers into the evolution of the bank.
- Create a great customer experience. You need to offer seamless and reliable processes.
- Pricing is important, but it is not everything. According to recent customer surveys, only 15% answered yes when asked whether they would change their bank if another bank offered them better rates.
And coming back to Fidor Bank, what lies ahead of you, what challenges do you foresee?
Frank Schwab: We reached profitability in our second year, so the business model is proven. Now we are starting to scale – both nationally and internationally. That applies to Fidor Bank itself as well as to Fidor TecS. We are very optimistic about this, simply because regulations like the upcoming Payment Services Directive (PSD II) actually create a tailwind for our development. In this respect, we can also be a solution-provider for banks.