This is the continuation of a previous post.
How the new guys do it
Online banks have a completely different approach than traditional banks when servicing their clients. Lacking a branch network, they rather rely heavily on online services. For the inevitable presential activity such as withdrawing cash, they count on agreements with other banks allowing their clients to use an existing ATM network. With this online focus comes a big cost reduction, but of course a relevant question mark subsides on how ready the bulk of clients is to fully adopt online services. This is probably why their adoption is only gradually going beyond the tech-interested segment of clients, including young generations who prefer to do everything online. Oh, and let’s not forget the cost-saving point as well, especially because online banks are generally exempting clients of general account maintenance fees.
So, even if bringing a bank online does not seem like such a disruptive innovation at this day an age – most decent banks have an app and a decent online banking facility, right? – there is nonetheless something fundamentally different in providing financial services mainly online.
Looking at the practical case
Let me give you an example, while I bring my most recent experience with an online bank account, with Fidor. I came across their services as I was buying Bitcoin for the first time in 2016. The local Bitcoin Exchange would only do live transactions for Fidor clients, no doubt because they exchanged payment confirmations quicker than normal banks. After seeing this apparently little advantage, I got interested in what else this “different” bank could offer, and honestly found a few cool functionalities.
Fidor’s offer range from an automatic link to social crowd-lending platform Smava, another functionality they call social trading, as well as community pages where people can interact about desired new products or savings hints. Between what clients and traditional banks can do, nothing of what Fidor offers is exclusive, but having it available inside your online banking makes a lot of sense.
Not only is it easier for clients who actually want to use such services, but if nothing else it creates awareness of innovative services, inexistent a few years ago. This attitude promotes, rather than resists, financial novelty. The option every banks has is to fight against new tools within financial services, instead of embracing it. If they do, the side-effect is keeping clients on their own to seek information about how finance is changing. Does your bank help you know what is out there, or just sits comfortably on the business you give them?
Other relevant online banks
When referring to online banks in Germany, I also cannot forget DKB, Comdirect and N26, all of which I have tested and with interesting approaches within the online bank concept described above. Whereas I can make a detailed description of each of them, this will have to follow in a separate text, we will focus here on the perceived starkest difference noted between them, trying to look at the best of their offer.
DKB is the longest standing online bank I know, founded in 1990 and offer simple and reliable basic account services, without charging clients to maintain the account, make local transfers and withdraw cash. Comdirect is a few years younger than DKB, and cultivates a startup innovative culture. This FinTech bank not only offers bank accounts without fees, but they also have investment accounts with a two year break on fees, and under certain minimum usage conditions you can maintain it for free. N26 is the youngest meaningful online bank and launched the concept of mobile first. Their initial selling point was to open a bank account within a few minutes using only your mobile and video-identification. All of them, and maybe this last one even more visibly, continue to work to launch different functionalities, powered by their online/mobile focus.
Conclusions
As much as I understand a general preference for security – which for some justify choosing traditional banks over the newer online banks – I argue that trusting the new banks and their potential makes more sense than aging organizations tackling significant internal challenges. If your resistance if just a general lack of interest, you might be surprised how easy it is to change banks.
As a critical client, the least I can do to build an informed opinion is to try both online and traditional banks and see what I like and trust best. If you are having a hard time choosing or deciding on your next steps, feel free to get in touch and I will be happy to help.