A technology-savvy German bank's plan to open a branchless banking platform in the U.S. could eventually pave the way for more mainstream use of cryptocurrency platforms, such as Ripple and Bitcoin.
Fidor has not released a detailed mix of products it will offer in the U.S., but it's one of the first and still one of the few banks to embrace cryptocurrency, working with Bitcoin startups, including bitcoin.de, a German Bitcoin exchange and Ripple. The bank's Web 2.0 service, which is central to Fidor's U.S. expansion plans, includes a real time international money transaction network which can be implemented through Ripple. The bank also has about 30 business clients that operate in cryptocurrency.
Several states, including California, New Jersey and New York are developing rules to govern businesses that use cryptocurrency. The mix of national and state regulations is still unclear, but Fidor is encouraged that authorities are attempting to accommodate virtual currency rather than treating it as a threat.
“They all aim for proper regulation and not for a general ban. That is something we clearly appreciate,” said Matthias Kroener, CEO of Munich-based Fidor Bank. “As a fully regulated entity we are used to such an environment and see lots of advantage in it.”
Cryptocurrencies such as Bitcoin have a reputation for risk because of volatile price fluctuations, reliability of some of the exchanges and past links to criminal activity. Regulators are attempting to oversee virtual currency without hindering innovation, a departure from other countries such as Russia and China that have issued bans.
Most banks have traditionally avoided virtual currency because of the risk, and Fidor is still working on its business model to manage changing compliance requirements. “We have to overthink pricing for those accounts, simply because our supervisory and audit function is increasing driven by regulators,” Kroener said.
The bank has signed an agreement with an unnamed partner to help Fidor launch its Web-based banking model in the U.S. Fidor’s internet platform, Web 2.0, includes the Smart Cash Account, which allows users to manage funds, buy foreign currency and precious metals, apply for low-value credit and participate in crowd finance through a mobile device. The bank also offers application programming interfaces (APIs) or web tools that developers and e-commerce merchants often use to build payment interfaces.
Fidor's branchless model would be a good fit for younger consumers, who do not like traditional branch banking, though Kroener did not specify a demographic target. Fidor joins a market that includes companies such as Moven and Simple which are using mobile payments as a means to build a broader online financial services relationship primarily with younger consumers.
“Banks are first of all solving their problems and [then] maybe the problems of their customers,” said Kroener. “Just have a look at the products and their pricing.”
Kroener believes banks lack of response to consumer problems is one reason why there are so many financial services and payments startups in the U.S. “The reason that a lot of very successful fintech startups are happening in the U.S. is not only because there are so many talented people setting up those businesses,” he said. “It is also because there is a huge gap and demand in innovative services.”
Fidor is pursuing additional markets outside Germany. It is in the final stages of launching in the U.K. and plans to serve the entire Eurozone, Brazil, Russia, India and China within the next few years.
“As a lender, Fidor Bank is already active in the U.K. today, so it is a clear, logical step now to offer the full Fidor-stack according to our vision: community, payment and banking,” said Kroener.