The hits are coming in for 2016, which is shaping to be The Year of Fintech. Just recently DBS launched Digibank, their forward thinking mobile only offering, and now Fidor and Telefonica have done something very similar in Germany. Although, there’s something missing here.. hmm, I can’t quite put my finger on it. Oh wait, I got it!!
This is a real bank, yet
there’s no bank involved!
This is that watershed moment we’ve been waiting for. We will look back in a few years and think it normal to do banking without banks, but years of research, development, positioning, lobbying, legislation, failures and breakthroughs have taken place to get here. So let’s break it down. What the heck is so special here, isn’t this just another digital wallet…?
Banks are so 2015
I’ve already heard a few people compare this to previous tie-ups with banks and telcos. There are several examples around the world. In Singapore, the collaboration of Singtel and Standard Chartered springs to mind. There’s a natural synergy there, to provide simple mobile payment or wallet facilities through the telco channel. Co-branding and co-marketing. Throw in contactless for added innovation points. Yay. Yawn. It was solid marketing. Transformative? Disruptive? Not so much.
We’ll call you, don’t call us
This is different. Instead of opting to leverage an established financial services brand, like a bank, Telefonica is effectively doing their own thing. By partnering with a startup in Fidor, they call the shots. Make no mistake, Fidor is a provider to Telefonica, not the other way around.
For Telefonica, this move represents a new revenue stream, increased revenue per user, and opportunity to create stickiness with their customers. How many of their telco competitors also offer you banking services? Uhh. Yeah not many. Actually, ZERO! Globally! Not often you see that these days.
Cool, so what is it, some kind of app right?
Not a mobile wallet!
Fidor has been busy for years building a complete offering, including their own banking license, which is a feat in and of itself. Yes this initial service is for Germany, but Fidor’s license is valid across Europe! Imagine that! When’s the last time you saw a Fintech startup in Asia with a license across the region? The answer is never! A few hopefuls like Bambu, Tryb and Marvelstone are paving the way…
What mobile wallets are to Fidor
That’s what makes this so different. It’s a real bank. Not a quasi financial wallet thingy that you have to top up at 7-Eleven, and can only buy things at compatible vendors with some special payment terminal. Pfft, I say! This is a real bank account, on your phone. Yes it’s an app, just an app. That means no branch, no queues, no crap. You get a virtual credit card by Mastercard, and they’re even doing small loans! Not your father’s mobile wallet, then!
Let’s talk about KYC baby
Know. Your. Customer. If banking is the least sexy field to work in, the compliance team is the least sexy division inside a bank. KYC is the thing they like to do the least. So, gives you an idea.
I want to do KYC when I grow up.
– said no one, ever
The burden of all financial institutions is regulation and compliance. Nobody wants it, but everyone needs it. Customers need it. Banks need it. Governments need it. It’s necessary so that firms don’t get greedy and accidentally fund hippies, terrorists and the like. The result is piles of paperwork, multiple layers of authentication, and bags of tokens for every occasion. So what is Fidor doing in this area?
Full online onboarding, supposedly in “a few minutes”. No paper. No meetings. As an interesting addition, they are using a video link inside the app to verify identity. Let’s see if that approach catches on. They could be onto something here… MAS, wink wink.
So what’s in it for Fidor? Why not go at it alone and challenge all the institutions? Because B2C is haaaaard. As a startup, you’re that guy on the street handing out discount leaflets that nobody wants. Nobody wants to be that guy. So don’t be that guy. Increasingly, startups are looking to leverage institutions for that very reason. Institutions already have customers. Why reinvent the wheel, when you can just use theirs?
Don’t be that guy in the popcorn suit
One of the more innovative things Telefonica have done is to incentivize their existing users to adopt their banking app. For example, you might get additional free data on your 4G plan as a reward. Synergy, convergence and gamification. Hmm.. I wonder where could this go..?
Where to from here?
If you haven’t heard, two banking licenses were handed out in Korea in 2015. One was a telco. The other a chat app. Tencent and Alibaba already have banking licenses in China. Expect big things. Dinosaur big.