Innovation in Banking: Fidor bank – banking with friends – get rewarded for liking your bank
As part of our competition in banking project New City Agenda will be profiling innovative banking business models from across the world. Some are new start-ups (finsurgents), others are owned or backed by existing banks.
Only time will tell whether these new financial businesses and approaches will be the next Netflix – disrupting the Blockbuster business model of the traditional banks – or whether they will go the way of thousands of other start-ups and ideas which promised to change the financial world.
What is certain is that, together, they are changing the definition of what it means to be a bank and offer a bank account, savings, lending or investment product. They all share a relentless focus on the customer and innovative use of technology. We can all learn and benefit from their new approaches:
- Consumers can use these new entrants to get better service, manage their money, accomplish their financial goals and improve their returns.
- Policymakers can understand how these innovative business models can be encouraged and used to promote competition
- Regulators can understand how to supervise these new companies and ensure that their regulations do not impose barriers to entry or protect the position of the established banks.
- Existing banks can understand how these new entrants threaten their business models and how they need to respond to improve their services and retain their customers
Over the coming weeks, I will be looking at the latest trends in Peer-2-Peer lending, Personal Financial Management, banking apps and banks using data to help you better manage your money. This week we start with the world’s first social bank – Fidor – a German bank using social media to drive customer engagement and marketing.
Fidor – ‘Banking with Friends’
When was the last time you ‘liked’ your bank’s official Facebook page? Or Re-Tweeted something positive about them? What did you receive in return for highlighting this bank to your friends? At Germany’s Fidor bank (Banken Mit Freuden) each social interaction you have with the bank is rewarded. Social banking is at the heart of its business model.
The more ‘Likes’ the bank’s Facebook page gets, the lower the interest rate all customers will pay on their overdraft. Rewards are also paid to customers for interacting in the ‘Fidor community’, such as asking or answering a question, sharing a money-saving tip, rating a product or providing an idea for the bank to develop.
Some other banks may have a ‘refer a friend’ option where you have to spend 10 minutes inputting your own details and your friend’s details and email address. The bank then sends emails to your friend about their products and services. At Fidor, one click generates a personal advertising link which you can share with your friends on Facebook, twitter, Linked-in or on your blog.
Using the Fidor account, you can send money to other people using their bank account, email address, phone number or twitter username. You can also make interest-free loans to others with a Fidor account, allowing you to lend to or borrow from your friends.
Partnerships – integrating Peer-2-Peer lenders and virtual currencies into the bank account
Instead of just offering its own products, Fidor integrates selected partners into its ‘smart’ account. It offers you a full picture of your assets and money held in your Fidor savings and current account together with your holdings on partner Peer-2-Peer lending sites.
In just 60 seconds you can buy or sell holdings of precious metals and foreign currency, with these holdings also summarised. Virtual currencies, including Bitcoin, are also incorporated into this platform. The interface for the Fidor account can be adapted by each customer, so that it only displays the services which you want to see.
In addition to the standard overdraft and the ability to borrow from other customers, Fidor offers an app which gives you the ability to access a short-term loan, starting at a cost of €6 for borrowing €100 for 30 days.
In July 2014, Fidor had 300,000 users of its community and 65,000 customers who had gone through the full ‘Know Your Customer’ checks. Its total deposits were €232 million. It is relatively simple to sign up to view the community services and look round the site, you just need an email address and mobile phone to activate it. To open the full bank account, customers are required to prove their identity and complete the ‘Know Your Customer’ checks. This can be done at branches of the German Post office.