Check24 has recently announced that it has applied for a banking license. Although banks continue to be regarded as partners, they also want to address their customers directly with their own new products. The established banks are thus threatened with another strong competitor.

On all slides of the Fidor Bank , on which we had presented today’s as well as future competition, it could be seen that comparison platforms were THE future competition for us. With the news that Check24 is now seeking a banking license, we are taking this scenario a significant step closer. Partner of the Bank Blog Adorsys is a partner of the Bank Blog In the competition for the customer, I attest to the comparison platformsan outstanding starting position. After all, when choosing a product (mostly credit) or an infrastructure (account or depot), in the vast majority of cases the customer first and foremost refers to one of the many comparison pages in order to list the individual providers in the form of a simple series. Irrationally, consumers trust these platforms to reflect an objective picture of reality. The fact that these platforms receive brokerage commissions, it should only be clear to a few customers, even if it was discussed again and again in German courts, to what extent the seemingly objective comparison platforms thereby make a real objective image or misuse their market power of the “first stop”.

Scale for the distance / proximity to the customer

Who is closest to the customer? “Is the key issue of digital competition. Who can most likely make the most money out of the crowd of Internet and mobile shoppers? There is a clear unit of measurement that measures the distance between customer and provider: the key figure cost per order or cost per customer, The lower these costs are, the smaller the distance to the customer, the easier it is, the higher the likelihood that a customer will win a transaction. Here, banks perform much worse than make comparison platforms: A current account customer costs between 80 – 120 EUR, depending on how much we need the provider. If one adds “onboarding bonuses” and “satisfaction guarantees” to it, one is quickly at 150 – 200 EUR for a new customer. If you want up-to-date numbers, you just have to look at the popular affiliate networks. There you will find a good indication. Take the consumer-credit product as an example. Around 2 percent of the loan amount is usually necessary as a mediation fee. If you want to be better positioned, you want to sell more loans, then more accordingly. With a long running time, no problem. Only: Consumer loans are usually short-term, so around 1.5 – 2 years. The longer a consumer loan runs, the higher the risk costs. Risk costs must be taken into account by banks at the beginning of the term, as well as the brokerage commission. And: A customer who comes for a loan on a comparison platform, certainly will not remain over the term of this loan. I know examples where a customer returned to the same bank for the next loan, returned to the same bank, and was again allowed to pay the customer acquisition costs for the same customer. This means for a bank: Who mediates on this way loans not only gave up any ambition on a proprietary brand, but also writes negative numbers.

Know how customers “work”

You rub your eyes and ask yourself: Why are the banks doing that? They do not know how the customer works. And after more than 20 years of weaving, very few decision-makers still know the mechanisms of the Internet. Instead, they go into addiction and hang like a drug addict on the drip of their dealer. Our Conversation as DAB / Fidor Bank Founding Team: You have to escape from this murderous mechanism. Already at DAB Bank (in the late 90’s) and later also at FIDOR Bank we had put a user and customer community at the center of our positioning. The users of a community cost a fraction of a bank customer and have the opportunity to exchange or evaluate products. Instead of a comparison platform, this is called “peer-to-peer support” based on individual experience, combined with the possibility of questioning the evaluator of a product according to the evaluation background. Almost incidentally, the bank was able to drive any form of customer interaction and integration with high utility across this community. It also created an outstanding USP , which makes a Fidor Bank unique to this day. (The emphasis is on “until today”).

Turn “users” into “customers”

An alternative to building an internal lab would be to build a team outside the established organization, an approach often compared to a ‘greenhouse’ or ‘green field’ scenario.

This approach makes it possible for the newly created independent company to create its own culture, set its own rules and have independent incentives and performance indicators.

The controller in you now asks: And how do I turn it into a customer? Based on my Fidor experience, it took 3 users in the community to make a Fidor customer out of it. So the magic word is the so-called ” conversion rate “. If you also know that a community user cost us around 3 EUR at that time, then all you have to do is add the KYC costs (about 6 EUR) and you know the “Cost per Customer” of a Fidor Bank: approx. 15 EUR. I dare to say: Cheaper it was not.

What is the conclusion for a bank? Anyone who sells via comparison lists sacrifices his positioning and automatically becomes a commodity commodity . This is justified in the system, because a comparison platform must produce comparability of the offered goods / achievement. This is at the expense of the brand. The sales team and marketing team of a bank certainly do not pull together here. If you do not escape this trap as a bank, you hang like a drug addict on the drip of the comparison side, sacrificing contribution margin and brand and the proximity and relationship with the customer. As a Fidor Bank, we have therefore taken great care to be included only occasionally in comparisons. Rather, we also let ourselves be removed from comparisons and focused on communication in our community. The keyword “brand parity” makes the rounds here, ie the distinctness of brands of individual suppliers in the same segment. Gas stations, insurance companies and banks traditionally perform poorly. No wonder.

Check24 becomes a bank

Why on earth is Check24 taking the step towards the bank? On the one hand, this would make one’s own B2B customer competition. So why slaughter the cow that can be milked so brilliantly and thankfully? Why load the complexity, cost and risk of banking? Even today, comparison platforms operate their own usually very aggressive offers. These are products that are operated by partner banks, but which are provided for the respective comparison platform with a sales-controlled pricing under their own brand in the white label approach. By means of these aggressive products, the comparison platforms compete with each other AND drive the banks ahead of them. For the bank, this means utilization. And in the case of the frequently discussed credits with credit, the respective comparison platforms usually took over these interest rates from their marketing budget, since these are extraordinary and attention-grabbing measures. Only: The banks could not and did not want to portray them like this. Check24 is an aggressive player in this context, who would like to see credit intermediation not only from the partner bank but also the (partial) assumption of interest on loans with interest rates. For this, the bank would receive a large number of (disloyal) customers in return.

Danger for customer sovereignty.

But do comparison platforms have to hold a banking license? If it comes as indicated to an open banking platform, then this can mean:

  • The customers on this platform are legitimized. This is worth something. This is an asset!
  • With the help of PSD2 Check24 can aggregate and evaluate the customer’s account data – of course after approval – and then submit the best financial offer to the customer.
  • In addition, one can offer credit cards and payments. Cash flows from and into brokered products of partner banks thus run over their own offer. The customer will not be delivered to a third party at this point.
  • Loans can also be granted, according to the specifications of your own risk management. I could imagine that some risk management ideas of the partner banks failed. Of course, the same rules apply to everyone here, but I also know that you can interpret these rules differently.
  • (Account) Data-based supermarket for financial products.
  • Insoles? Hardly today, but maybe in the future?

The respective product will not be so much in the foreground in all these considerations. On the contrary, Check24 should have learned from Amazon: There, too, one looks very closely over a certain period of time at which products on the Amazon marketplace customers are particularly in demand, before deciding to develop their own offer. The consequence: The previous provider of this offer has made it significantly harder to sell its own offer. The marketplace operator, however, has the advantage that he is increasingly gaining proprietary customers through this approach, where he was previously “only” the intermediary of customers. No matter how you turn it around: The banks will continue to lose customer contact, are pushed further into the background, pushed away by the customer. They do not miss anything and let it happen. Yes, Check24 has to follow the same rules as the banks. The difference is that Check24 knows its customers. The banks do not know their customers.

In my previous section I´ve set the groundwork by outlining the challenges faced by the banking industry today, especially in regard to the increasing demands of digitization. In this second section we’ll examine some specific strategies that incumbent banks could consider in order to meet these challenges. Of course, that list is not completed.

There are various reasons for change: from processing, technology, supply and distribution channels to positioning, data management, compliance, risk management, customer engagement and the wish for improvements in cross-selling etc. I focus on those, as those reasons could result in the idea to deal with one of those young and innovation-centric companies, today called fintech, regtech, insurtech or whatever might come along.

The following approaches, among others, can be taken:

#1. The Copycat

This involves analyzing, copying and integrating selective publicly-known concepts, processes or services within an innovative organization, incorporating these as the incumbent’s own offer. Sounds mean, but isn’t. At a recent finance conference in Frankfurt, a C-level member of a German bank gave a presentation in which he revealed that, because fintech companies are too expensive to buy, his company had decided to ‘copy’ their concepts instead.

The downside to copying is that you can be by definition a follower only, you’re at least second to market and therefore won’t have a USP. The upside to this approach is that you can take on a proven business model without fear of regulatory issues because there is somebody else already doing it. You may not have a head start but it’s a safe path to take and that’s why it’s become a common route for many banks.

#2. The Lab

If you decide to not only copy but make use of ‘in-house’ innovations you’ll need a team, which for simplicity can be incorporated into the existing organizational structure. This is commonly referred to as a ‘laboratory’.

This terminology comes with certain expectations, namely that research carried out in a laboratory is generally unrestricted. That means off limits, with no pressure in terms of expectations. In theory at least. Labs tend to be ‘hip’ designer spaces with table football (also known as foosball by my American friends), bike storage on the walls, comfortable seating areas and ‘brainstorming hangouts’. I’ve witnessed some established banks attempt to create this type of office environment and it seems somewhat inauthentic – a bit like a ‘masquerade ball’ where once smartly-dressed bankers now arrive to work, tie-less and wearing jeans. It’s difficult to see how the lab scenario could work in reality, where money is invested into a team that has been given no identified boundaries. And in any case where do you find the right leaders and team-members for such a lab? In the existing organization? From outside the company? An option could be to hire team-members of e. g. a (failed) start-up company, creating the target-culture then inhouse. Is it possible to create and protect an “innovation-culture” within the incumbent organization? Well, I know that HR-experts see the possibility of cultures changing overnight. However, personally I am skeptical: It depends what direction to change to. I would expect therefore that the next (inevitable) round of central cost-saving will put a quick end to the lab.



#3. The Greenhouse

An alternative to building an internal lab would be to build a team outside the established organization, an approach often compared to a ‘greenhouse’ or ‘green field’ scenario.

This approach makes it possible for the newly created independent company to create its own culture, set its own rules and have independent incentives and performance indicators.

This is all well and good, but the financing still has to come from the parent company, and the new supervisory board will likely be made up from representatives of the established company. They alone will understand what’s happening in the new company, while others in the incumbent company may become skeptical about the new subsidiary and be keen to see returns on their investment.

There also remains the important question: Who will lead this new company? And where will the team be drawn from? Is it possible to take an existing employee out of the traditional environment and turn him or her into an ‘entrepreneur’? Could the new team be recruited from the existing employee base?

I don’t pretend to have a complete market overview, but so far, I don’t know of any labs or greenhouses that have proven to be sustainable over the long term. I would be happy to hear about any companies that have been successful with this.

#4. The Take-Over

Getting back to the life cycle, the main features of a start-up are the founders, the team and the combination of solution-oriented creativity, risk-taking and entrepreneurial spirit. A lack of competence is often compensated for with above-average enthusiasm and the entire project seasoned with an element of naivety. How many times have I heard founders (including myself) say, ‘if I’d know it would be so difficult, I would probably never have started it’?

For many reasons, good and bad, I seriously doubt the requisite skills can be drawn from within an established organization. Nevertheless, if companies are to take control and shape their future, they have to rely on the property mix described above. Accordingly purchasing or acquiring a controlling interest in a fintech start-up would appear to be a viable solution.

Let’s skip the transaction phase and focus our attention on a period approx. 9 to 18 months after closing the deal. This is most likely to be when the first problems begin to surface. Having started to get to know each other you will have established initial KPIs and have an indication of where you are going and whether things are on target.

My theory: No business idea is so good it remains outside the remit of the shareholders. Why? Shareholders have an inherent drive to protect their investment. Given that shareholders tend to be risk-averse, can there be a sufficient commitment towards change from the entire incumbent organization? Do stakeholders oppose the proposed changes? Does the fintech company have the due processes to meet the minimum criteria of the existing risk strategy? Has a professional governance been implemented and lived?

One of the key players in the politically-charged area of M&A is the takeover sponsor. Who is the sponsor and who is managing the relationship going forward? It’s not uncommon that a sponsor has to resign after a period, a takeover or a merger (see the average lifetime-segment of a company in my first post). A study by Temple University measured the performance of CEOs over time and found that the “optimal life span” of a CEO is just 4.8 years.


Another key-player is the “watch-dog” being sent by the incumbent to control and oversee day-by-day activities and the management-team of that new group member. That person taking over the (in-official) communication creating a very “special” sentiment at the owner, you might not be aware of. Remember: If you are not at the table, you are on the menu. Important to know: What is the mission statement? What is the “character”? Where is that person coming from and where is it heading to after the stop-over at the start up? If that person’s mission statement is for instance to restructure and professionalize the start-up, you can be sure that first reports will draw a very dramatic picture of your company. Why? The worse the starting point, the bigger the success once the mission is completed.

So far, we’ve only discussed the incumbent bank. To be balanced we also need to look at the skills of the innovation team. Do the founders look like good growth managers? This could be in doubt as well. Does the founding team really understand its own life cycle-status and behave accordingly? Do the founders understand how and why their team has to change? Do they see that the organizational structure must adapt in line with the increasing size of the company? Are the founding members more like ‘buddies’ than long-term ‘growth managers’? The start-up’s founders need to change fundamentally from entrepreneurs to ambassadors for a big firm with all the increasing day-to-day administrative duties that brings with it. Do they know the golden rule: “The one with the gold makes the rules”. Their new role could see them losing direct customer contact and proximity to market developments, with more emphasis on engaging in synergies, board meetings, committees, and minute-taking etc.

And then the inevitable happens: Failure.

The ever-present skeptics (both management and stakeholders) will then start to shout, ‘we told you so!’ And they will demand re-action. Leaked media reports may emerge, and the entire takeover process, from management to strategy will be called into question. And questioned it has to be, as part of a regulated system. The founding team will be deluged with multiple audits, and a demand for thousands of strategy PowerPoint slides along with terabytes of Excel files. The entire energy and focus of the leadership team will now be on a defensive struggle while the potential strengths of the plan will be forgotten: these being a desire to translate innovations into customer-centric solutions, a drive keep up with market demand, the intent to keep the competition in check and inspire employees. This lack of recognition will no doubt demoralize the founding team, especially if it has shareholder status remained itself. It now has to deal with managers with no “skin in the game”, no personal financial investment in the process, happy to write the investment off with a stroke of their pen. This is – of course – a worst-case however realistic scenario.

My conclusion? All or nothing!

With 12 years’ experience as board member of an innovation-driven subsidiary at an established organization I cannot see how the fusion of two such inherently different cultures could work. There are many more examples and studies available that back up this my position.

The skills, culture and attitude of a start-up entrepreneur are fundamentally different from the skills, culture and attitude of a decision-maker in an established business. A few examples:

  • When it comes to ‘value creation’ the fintech entrepreneur wants to have that happen at the fintech-company. The incumbent organization, on the other hand, can only see value as being accrued within the established set up and for its shareholders.
  • Worst case: The incumbent has no understanding of value-creation at all.
  • Start-up founders are entrepreneurs with a vested personal interest in their company, having possibly even borrowed money from friends and family. Managers at established organizations are just that: ‘managers’ with no “skin in the game”, aside perhaps from an annual bonus.
  • Fintech founders are often accused of ‘greed’ while managers may be seen as ‘envious’.
  • While ‘innovation’ is integral to the fintech owner, this can look like risk to the incumbent organization.
  • While an established company is might end up in a never-ending decision-making process, a start-up is more “opportunistic” and less likely to make consistent decisions based on professional analysis.

There is an obvious and well-documented gap that must be bridged. Question is: Who must move to create that bridge? Yes, you can educate a start-up to become like an incumbent company. Is that what the buyer wants? I don’t think so. As a consequence, we have to face the inconvenient truth: there is no way out for the incumbent organization, change must happen there! On all levels, including all stakeholders. That change-process neither can be avoided nor “outsourced” to an acquired company. That clearly includes the idea of partnering with an innovative start-up as e. g. a supplier.

Just another attempt to avoid the non-avoidable. Yes, you might appoint a fintech company as a supplier, agree clear terms, roles and responsibilities, creating the necessity for the fintech passing a strong procurement audit. My guess: Not many start-ups are made for that. This solution would allow that the fintech’s culture continues to be undisturbed to a certain degree. But is it really? The fintech must be capable to catch up with the quality requirements of an established, regulated company, as regards to documentation, service level agreements, price expectations, audits etc.

Let´s face it: if there is a remaining “innovation-intolerance” at the incumbent, it will not work.

Only once there is that kind of cultural “cooperation- and acquisition readiness” at the incumbent, the acquisition and cooperation of a start-up will be successful. Analyzing the M&A transaction or a cooperation-onboarding process itself, it’s well-known that HR and cultural biases don’t play an important enough role. With the help of a HR specialist and their team, it’s possible to analyze the potential contribution of human resources and organizational development to the M&A process and develop a suitable program that can be used before, during and after such a transaction. The majority of the points addressed might be common sense. But, are they common practice?

Finally: The digital revolution will make a consistent and consequent culture- and thus HR- management more than ever an essential, central point of success. Errors will scale fast in such an environment and can be then detected in the form of depreciations within the owner´s P&L. Given the current fintech-valuations, proper HR-management seems to be less costly.

Think about it.

Build, Buy or Partner: Is Change Inevitable?

The financial services industry is currently facing a perfect storm of disruption and upheaval, and the challenges that lie ahead will require an unprecedented level of agility and adaptability. To survive and succeed, organizations must be ready to anticipate, prepare for and pre-empt this disruption.

In this, the first of two posts, I’ll uncover the specific challenges faced by incumbent banks. We’ll also take a look at the business life cycle of an established bank and see why banks need to radically change their approach – and make some tough decisions.

No change without a team. No change without cultural challenges.

In this post I want to focus on the cultural challenges of such a change process. Why? Because corporate culture is, based on my 25+ years of experience, the essential make-or-break component. As we say: “Culture eats strategy for breakfast”.

But before discussing whether you should buy, form an allegiance or start a new business, it’s important to have a mutual understanding regarding the lifecycle-maturity degree of a. the incumbent and b. the innovation-centric start up.

On the one hand we have a traditional bank that’s quite possibly been successful in the market for several decades making good revenue in its core business segment. The consensus there is that core business-related revenues and customers must be rigorously protected. Unavoidably, however, existing managers have become aware of ‘digitization’ and that customer behavior and preferences of interaction and transaction are changing. They can see this change on a daily basis simply by observing their kids’ digital activity. Then, first managers are using whats-app instead of email and visit fintech-conferences. Others follow. First ideas are discussed, facing first expected resistance. Central questions are: Why should we (re)act? What should be done? And then, of course: how to do it?

On the other hand, we have the fintech start-ups that are experts in e. g. digital customer-processing or at a specific product with expertise in segments of the B2B or B2C markets. Start-up industry realizes that incumbent players find it hard to act within that fast-moving innovative environment which is why they focus on that segment as future customers or exit-partners (many start-ups are tailor-made to potential exit-partners). That’s the match-making moment.

To understand what I’m aiming to get across, we now need to remember our university lectures and take a brief look back at the ‘Business life cycle’ model: By examining the maturity-degree of a company, we can assume the specific corporate culture. Then let us start to see why various conflicts could arise with each strategic option and why there can be no simple solution. 

Pre-Configured Stages in the corporate life-cycle (adapted from Daft, 2008)


The above chart shows us that a traditional, established bank is in a pronounced ‘maturity’ stage of its life cycle. This bank has the opportunity to maintain its dominant position and grow with the industry. However, if the bank is not in a dominating position – something I would suggest is the reality for the vast majority of banks – then the bank needs to find a niche and defend it, or at least hold onto it. If none of these scenarios apply, the only inevitable strategic option left is retreat. In the chart this is described as a ‘morphing phase’ involving a necessity for a change in identity – the alternative being decline and death.

I imagine traditional bank managers will not share this view. According to them the business is running well, and they see no reason to worry. Profits won’t decline just because of a bit of digital ‘spin’. A phrase I’ve heard more than once at conferences is ‘We’ve been here for 150 years and we’ll always be here’. Firstly, I’d like to point out that 150 years does not equate to ‘always’. Secondly, research by Professor Richard Foster of Yale indicates that the lifetime of, for example, a listed company has drastically declined from 67 years in the 1920s to just 15 years today. And thirdly, we’re already in the midst of a movement towards consolidation: Incumbent banks are busy consolidating markets via M&A measures, and by that create a new company with a new “personality”, no matter that e. g. the brand itself might remain unchanged.

This brings us to the core of the matter: Nothing can be taken as granted, decision-makers at incumbent banks need to make some tough decisions. Banks have never been under so much pressure and at present the entire business model is up for grabs. For the last years, decades, management teams have only focused on executing existing risk strategies. They’ve never had strong ownership for revenues, but high expertise in discussing cost-reductions. They have only rarely and selectively met with clients and have no experience with tough ‘real-world’ markets, having been solely involved with maintaining the status quo. (Analyzing your individual situation in your incumbent organization, I would be very happy if you could at least once disagree to my provocative description).

Out of a sudden, that management team now needs to question fundamental bank strategy and put the themselves consequently in the spotlight. The result of that evaluation could indicate that action is or isn’t required.

If the latter is decided, we might call this ‘duck and cover’ (like in the last centuries 50ies, that “strategy” was the recommended behavior in case of a nuclear strike) in the hope that digitization will not have an impact. This may be down to a feeling that it’s possible to survive in a safe niche or a reassurance that customers will always need and use branches, or simply avoid potential cannibalization –whatever the excuse might be for doing nothing. Taking this approach also has the advantage that no additional costs need to be incurred in the short term. Life can stay at its existing level of complexity. Great!

Alternatively, it could be concluded that action is required giving rise to a number of possibilities. In my next post, I’ll dive into possible strategies that banks could employ in order to meet the challenges faced by the banking industry today.

Spoiler alert: there is no ‘right’ answer

Do you know about and are you using Google Trends? The service instantly shows how search queries change over time. This is particularly useful if you want to understand whether, when and where innovations are developing or demand is arising, in other words where trends are emerging from hype. Just try this with the term “financial inclusion”. Financial inclusion is defined as the availability and equality of opportunities to access financial services. Google Trends shows very clearly that search queries for financial inclusion have increased worldwide since 2017 at the latest. But there are major differences. While even today the number of search queries in Germany is barely measurable, the situation is different in Africa where Google searches are very much on the rise. And now consider these results in the light of the emerging mini debate on the topic in German media. Lo and behold, we should not be surprised. You could summarize by saying once again it takes a shockingly long time before the market potential and especially the social relevance, in other words duty and obligation, are discussed. Specifically, the opportunity and duty of banks and fintechs to really make a difference with customer-centric innovation. So what is the reality? According to studies and media reports, in Africa for example there are still very many people who do not have a bank account. On the other hand, very many Africans have smartphones. This is where technology comes into play. It is the key to financial inclusion. According to the Zenith Mobile Advertising Forecast, as of 2018, 66 percent of people worldwide have a smartphone and therefore access to the digital infrastructure that makes financial inclusion possible. Platforms such as the Fidor Operating System deliver the technology and the interface that enables transfers, for example, to be made easily and reliably. In addition to providing the technology, I believe we also need to offer our community opportunities to exchange experience and knowledge – in other words, to share our knowledge about how saving works, and what investment and financing opportunities there are. Even if there are many voices that are very critical of financial inclusion, I see the provision of financial services to private individuals and businesses at an affordable cost as an opportunity for many people to gain financial independence. I think that this is not only a growing market, but also and above all an obligation on our industry to make a contribution – for an independent and better life. Because in my view one of the pillars of a stable society is a stable financial system. The financial crisis proved to us how distortions can have a lasting disruptive effect on societies. For me, a stable financial system goes hand in hand with a fair banking system where partners are on the same level and where it is not about winning as many customers as possible who generate as many fees as possible to deliver the greatest possible profits – costs should be within reasonable limits. Our collaboration with the IFC in Africa and Latin America proves that financial inclusion works and that it stabilizes the lives of local people. The integration of more and more people in the financial system contributes to the growth of the local economy and also strengthens the national economy.
Innovation is the key to success for any company. But with innovation also comes a need for new leadership skills, new people skills, new processes and a focus on new opportunities. Even though the banking industry is not known for promoting a culture of innovation, it is affected by new business models, the fragmentation of traditional services and changing customer expectations. Existing models will be challenged by a strategic rethinking process. To be successful in this new customer-oriented era, banks should start to develop new services to drive innovation and meet customer expectations. When adopting a customer value-oriented approach, bank managers need to find a way for employees to stay engaged, motivated and connected in order to achieve competitive advantages. If employees do not have the same set of information or skills, they need to work closely with each other. The challenge for a bank striving to become an innovation leader therefore is to bridge the regulatory requirements and at the same time allow innovations to be created. “Translating” an innovative idea or concept into a regulated product, service or process is an essential skill in such a situation. That might sound simple, but it is certainly not easy to overcome internal and external obstacles. Killing an innovation or an idea is easier than working for that idea – maybe then showing ownership for a product or concept which might turn out to be a failure. In traditional cultures, failure might be a setback for an individual career. Bank leaders need to accommodate ways to identify new behavioral patterns in key areas and develop new business concepts to keep pace with these new developments. Moreover, they need to allow their employees to make mistakes. This way they will learn quickly, increase their efficiency and achieve the defined goals. Bank leaders need employees who are creative, who exceed expectations and who deliver outstanding results. It will be necessary to ask the right questions, regain the trust of the customers and convince them of the great performance and quality of the bank. But you cannot force innovations to happen, as they do not come about simply by devising new ideas, but rather by fostering a corporate culture that allows for innovations to be created and enhanced. Process efficiency and increased productivity will always be a business focus, which means that banks need to focus on new opportunities if they want to create an innovative culture. The biggest challenge may be the change from functional control behavior to economic growth behavior. Furthermore, the biggest leadership challenge is to move on from a “manager” perspective of doing only what is expected, toward a “leader” or even to an “entrepreneurial” perspective of doing things the right way and moving forward into new and uncharted territory. Almost two years after the acquisition by Groupe BPCE, I conducted a team survey, asking for the “pain points” within the Fidor organization based on the following questions: What drives you crazy/makes you angry on a day-to-day basis? What hinders you from working successfully to satisfy our customers? What are the rules you still find difficult to understand? Questions that would find tons of answers in any organization. More than 30 percent of the team responded to this non-anonymous survey. Even for a company like Fidor which cultivates a young and open corporate culture, the insights of the survey were quite surprising:
  • We need to reduce the emerging blame culture to an open and trusting feedback culture.
  • We concentrate too much on our own topics and need to refocus on the needs of the customer.
  • We think too much in silos and must strengthen an open team culture.
  • We allowed a culture of “I am not responsible” to emerge and need to reclaim ownership and accountability. This change of course requires managers who are leaders and who can convey and explain these requirements and expectations.
  • We need to change from a state of being “shock-frozen” (post transactional) to being again more flexible, agile and quick. Unsurprisingly, we also need to reduce our approach from only “risk-centric” back to a balanced approach that allows more “customer-centric” and “business-centric” activities.
All those points had been addressed subsequently in leadership training. Those leadership training courses focus mainly on change, and change management as an opportunity seems to be our only constant. And innovation means change. Not new at all, any (new) culture in a company can only be brought about by a good example being set by its leaders. Finally, implementing an innovative culture within a bank is challenging because innovation comes at a risk, a risk that could “cost customer´s and shareholder´s money”. This worst-case scenario must be avoided at all costs. The vast majority of bank managers try to avoid that worst-case scenario and hence innovation by hiding themselves behind regulations, pretending that regulators would not “allow” innovation. I doubt whether that is the right response and I know that this simply is untrue. Our response at Fidor is that we look beyond the horizon and allow innovation to happen. We openly communicate, for example in recruiting discussions, that it is part of our culture to see the upside, not only the downside, of change and of innovation. Preserving such a culture is a challenge. It is not something we can take for granted, which is why we as leaders have to fight for it day after day.
To be successful means being open to new ideas, never standing still, and always reinventing oneself. For this reason, change and challenges are part of Fidor’s DNA. 2019 will be a particularly challenging year for the Fidor team that has successfully managed change on many occasions. This year promises to be a turning point. Let us briefly look back: In 2016 BPCE, the second largest French banking group, took over the Fidor Group. With BPCE as a partner and on the basis of greater financial strength, the digital product offering of Fidor was to be expanded and international growth accelerated. At the same time, it was the aim of BPCE to take a decisive step into a technology-based future. A clear plan by and for two partners who, on paper, seemed perfectly matched and complementary: on the one hand the established and financially strong French banking group, and on the other the highly innovative, agile and technology-driven neo-bank with its headquarters in Munich. That was the plan. Together, much has been achieved in the last two years. With around 950,000 registered community users and 380,000 account holders, the bank continues to show high-quality growth. Customer deposits are now at around 1.3 billion euros. To further strengthen earnings, the Digital Loan Factory and the Efficient Scale marketplace were founded, among other things. It must, however, be ungrudgingly acknowledged that in the same period others have – apparently – achieved more even though they started after Fidor Bank. In the BtoB segment Fidor has been able to maintain its lead and significantly expand its business. The Fidor Group can show guaranteed sales of around 20 million euros for the next five years. There is also cross-selling potential with these existing customers of another 15 million euros for the same period. The attractiveness of the model is reflected in the current sales pipeline, which has a potential total contract value (TCV) of around 200 million euros for the next five years if current demand is fully converted into customers. The BtoB segment is precisely the segment that no longer plays a strategic role for the majority shareholder since the change of leadership. In September 2018 after a strategy review we came to the logical decision that the two partners should go their separate ways. For Fidor, this conscious decision offers numerous new and indeed exciting opportunities in an increasingly digitalizing financial world. The following examples show that we are well positioned for the future. Fidor BaaS Banking is focusing on the European BtoB market. As part of the BaaS offer, Fidor Bank undertakes complete banking services (license, processes and platform) for its business customers (banks and non-banks) with all the necessary tools – from accounting and compliance to regulatory reporting, crediting and state-of-the-art payment transactions. Apple Pay was recently introduced as an innovative product and has already been taken up by initial customers such as O2 Banking. As the only banking infrastructure in the world, the in-house Fidor Operating System offers a customer engagement suite in the form of a community and a loyalty program. The Dutch asset management bank van Lanschot is now the fifth major customer to go live on an fOS platform, following the Abu Dhabi Islamic Bank in the United Arab Emirates and Natixis in Algeria, among others. This proves that the fOS platform can be used internationally and can be connected to different core banking systems. A future-oriented marketplace company was founded in the form of Efficient Scale. The purpose of this company is to scale up, simplify and deepen the cross-selling activities not only for Fidor Bank but also for all partners. Scalability is achieved through standardized onboarding of product partners and the white label capability of sales partners. In this way, B2B sales partners have the opportunity to create a tailor-made offering from a set of products for their own end customer base without having to worry about the complexity of the partner link. On the basis of these and other innovative approaches of Fidor, 2019 will be about nothing less than finding the right partner for us. Three elements are particularly important here. First, the technological backbone of Fidor must be maintained at a high level because the core business of the Fidor Group is “technology banking”. Each of the numerous awards that we win for our innovations, customer satisfaction and so on is confirmation of our achievements in the past. We must and will be faster than the market. Second, technology has to be lived, in other words both understood and consciously applied. And yet, particularly in the context of financial services, technology must never be a means to an end – because with good reason there needs to be respect and understanding for the regulatory systems and supervision. In short, the regulatory challenges of the banking business must be understood (to the full satisfaction of the supervisory authorities) and pursued, both qualitatively and quantitatively. And last but not least, growth is the order of the day. Against this background we are now engaged in promising discussions with a number of potential partners. Each of these partners involves quite different options, and each is exciting. In addition to the above-mentioned criteria, it will also be important for the Fidor team to gain a clear understanding of the possibilities of “value generation”. This will inevitably lead to a situation in which as part of these discussions we will have to hone our concept and focus on our organization. The Fidor story is far from finished. Fidor management is highly motivated to continue shaping the future of Fidor. In our eyes, the present situation represents an outstanding opportunity because we are ideally positioned and are working in a market which is calling more loudly than ever for digital solutions and which sees such solutions in a positive light.