New banking regulations in Europe introduced after the financial crisis in 2008 have made a material impact on the banking landscape, including the arrival of new digital first players. According to Accenture these new entrants have grabbed one third of banking revenue growth in Europe over the last 13 years.

These new players have attacked high margin profit lines at banks, competing on price and quality of experience for digital users. Fidor has been at the forefront of this change in Europe over the last decade and, through partnerships with companies like Finn AI, continues to innovate on the banking experience, making it more accessible and human.

From financial crisis came a challenger opportunity

In response to the 2008 global financial crisis and in an effort to mitigate future risk from too-big-to-fail bank giants, European countries issued more bank licenses to create competition and distribute market share. This opened the door for many new challenger banks to emerge.

New regulations such as the PSD2 (Revised Payment Service Directive) created further opportunity for new competition. These regulations enable bank customers (consumers and businesses), to use third-party providers to access their transaction data and manage their finances, removing the traditional walled garden created and defended by banks.

This also happened at a time of financial distress for many Europeans. Recognizing the opportunity in this new regulatory landscape, and with a desire to help consumers navigate through financial stress during the crisis, Fidor Bank established itself as one of the first in this new wave of digital challenger banks.

Fidor is unique. Not only does it operate as a direct-to-consumer digital bank, it also offers a cutting-edge, Banking-as-a-Service (BaaS) solution—powered by the fidorOS that enables non-banks to offer banking services.


Fidor is unique. Not only does it operate as a direct-to-consumer digital bank, it also offers a cutting-edge, Banking-as-a-Service solution powered by the fidorOS.

 

Bringing banking to our favorite brands

The Fidor Solutions BaaS platform enables non-bank players, including airlines, automotive, telcos, insurance companies and others, to offer banking services to their customers without having to take on the material cost and risk associated with building a bank from scratch (and being regulated).

These organizations have established customer bases, vast lakes of customer data, and many customer touch points. They have also established a level of trust with their customers that could easily be transferred to a banking service.

European telecommunications giant o2/ Telefónica in Deutschland leverages the Fidor Solutions BaaS platform to offer banking services to their large customer base in Germany. In this way o2 is able to provide additional value to its customers, without the need to obtain a bank license, build a full banking technology stack, or to be regulated as a bank.


Telecommunications giant o2 is able to provide additional value to its customers without the need to obtain a bank license, build a full banking technology stack, or to be regulated as a bank.

 

Image source: Fidor

Banking-as-a-Service opens the market up to additional competition

Barriers to entry into the banking industry are very high. New banks must first obtain a banking license and also make a huge investment. Fidor Solutions helps aspiring banks cross some of these hurdles by offering all the services needed to run a bank including:

  • Fidor Bank EU license
  • Digital channels
  • fidorOS digital banking platform
  • Regulatory, risk, and compliance services
  • Customer service
  • Banking and customer engagement advisory services

To maintain its position as a banking innovator, Fidor also works tirelessly to continually push the technology envelope so they can offer their banks and brands the latest in fintech. Their most recent achievement was the distinction of being one of the first digital banking service providers to embed a conversational AI virtual assistant (Finn AI) directly within its technology stack.

“It’s a very exciting time for Fidor. We’re empowering organizations to spin up cutting-edge, digital banks that can target a niche segment or expand an additional consumer service portfolio,” said Matthias Kröner, Founder and CEO at Fidor. “We’re thrilled to be on this journey with innovative partners like Finn AI who help us deliver more human, conversational experiences for customers and improve service quality and scalability.”

 

“It’s a very exciting time for Fidor. We’re empowering organizations to spin up cutting-edge, digital banks that can target a niche segment or expand an additional consumer service portfolio.” – Matthias Kröner, Founder & CEO, Fidor

 

What does it mean for North American banks?

North America has lagged behind markets like Europe in terms of the impact new challenger banks have had on the market. There are many reasons for this, but regulation is certainly one of the most significant. The complex state-by-state banking system in the US is harder to navigate. Regulators have been less active in opening markets up to competition and driving through changes like PSD2. But times are changing. Consumers are demanding better digital, mobile, and self-service experiences. And they expect personalization. De novo banks are delivering on all of these fronts.

According to a recent study, digital-first, direct banks like Fidor are outperforming the world’s top 50 banks on nearly all customer service scores. In response, large incumbent banks like Goldman Sachs and Chase are launching new digital banking plays — hopeful that these digital arms will satisfy consumer demands (and help stave off competition from the well-funded digital banks that are migrating across the Atlantic).

Non-bank players including consumer, tech, and telco giants are also moving into financial services as they seek new ways to simplify and enhance the lives of their customers. This is mirroring the model we see in Asia where consumer and financial services are more closely bundled together.

For example, Grab is a Southeast Asian ride-hailing and food delivery service that just launched its own digital bank to serve consumers and small businesses in the region. Tencent is probably the best example—the Chinese conglomerate offers consumers every service from social media and entertainment through to payment and banking services.

This trend is becoming more common in the US. For example, Uber now offers a credit card to its customers. Amazon is teaming up with Chase to offer bank products to consumers, and Apple recently announced that it will issue its own branded debit card to Apple Pay customers. This market is just warming up and as more challenger banks and non-bank players enter the fray, established banks will need to compete harder to deliver a modern user experience and greater value to their customers.

Finn AI is excited to be a part of this revolution, partnering with innovative players like Fidor in our shared goal of improving the banking experience for people around the world.

Jake Tyler
Jake Tyler is Co-founder and CEO at Finn AI. He can regularly can be found featured in the likes of USA Today, VentureBeat and Bloomberg, or on stage at Money20/20, Finovate and VivaTech Paris. Originally from Australia, he has worked and lived in five countries in the last decade. Prior to founding Finn AI, Jake was a Director at Brook Intelligence, as well as an M&A Strategy Consultant at PMSI Consulting (London). MBA at IE Business School.