Fidor Bank Closing In on U.S. Launch

© Can Stock Photo Inc. / vichie81Fidor Bank is closer to its U.S. launch, but is still missing a critical piece to complete its services: a bank charter.

Fidor began in Munich in 2007, and gained traction as a digital bank during and after the financial crisis. It has routinely been hailed as one of the most innovative banks in the world, working with cryptocurrency back when that was still terrifying to most banks. The bank held about $300 million of deposits at the end of 2014. Fidor opened a U.K. operation in 2015, simultaneously announcing plans to come to the U.S.

But gaining a banking charter in the U.S. is no small task. So while Fidor went through the process to gain a U.K. license, it won’t be doing that here, company officials told Bank Innovation. Instead, it will partner with a U.S. bank and leverage that bank’s charter, while offering its cutting-edge technology in return.

This is similar to the Fidor Tecs AG model, which is Fidor’s made-for-export brand in the European Union. Fidor is a bank with its own operating system, fidorOS, which makes it well-suited to serve other banks, but Fidor wants to be a brand in the U.S., too. Fidor was reported to be in talks with a bank partner for a U.S. launch a year ago, but it seems those negotiations did not work out.

“We’ll essentially be a technology partner of a U.S. bank,” Carsten Luth, vice president of international markets, told Bank Innovation yesterday. The time and resources necessary to gain a charter in the U.S. were simply not worth it to the bank, Carsten said. Implicit in this is that Fidor can do business profitably as a technology company — an enviable position for any bank to be in. Luth and his team are camped out in Brooklyn’s DUMBO neighborhood while the search for a partner — or partners — goes on.

It’s “partners” plural because Fidor is not seeking an exclusive relationship. It needs a charter, but it is looking to offer its tech services to multiple U.S. banks. They can use the help.

Fidor’s offering is a presentation layer, as well as middleware, separated from the bank core. This allows for realtime functionality, even for banks without modern cores, which is just about all of them.

The idea is to minimize interaction with the core system. Duplicate ledgers can sometimes appear from importing, so Fidor’s OS will hit the core for info only when absolutely necessary. A bonus is that since the core data is replicated on Fidor’s OS, it can offer short-term loans to users in context in realtime — say, at a car dealership or point of sale. On the backend, Fidor’s OS features open APIs, allowing for banks, or fintech companies, to build apps on top of it. In its presentation on Wednesday at FinDEVr, attendees were pitched Fidor’s developer sandbox for open-source skunkworks.

Fidor faces several challenges: finding the right partner; implementing its technology; and building a brand in America. But not having to acquire its own charter, in fact, makes that all seem doable.

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