Fidor Bank announced last week its withdrawal from the UK market, effective from 15 September 2019. Uncertainty surrounding Brexit, among other factors, is likely to have contributed to their decision to shut down UK operations.
Fidor Bank UK, a digital challenger bank from Germany’s Fidor Group, reported in a short statement on its website that it will shut down its activity in the UK by mid-September this year. The bank cited “the uncertainties surrounding the UK market” as the reason behind the decision. Despite no explicit mention of Brexit, the UK’s unsettled political climate is likely to have played a large part.
Fidor claims to have 380,000 account holders across all markets, including roughly 6,000 in the UK. These customers received notices last week, asking them to withdraw all their funds by the closing date. They will have login access until 30 September. While the bank will continue to operate in Germany under Fidor Bank DE, UK customers will not be able to transfer their funds, due to clashes in terms and conditions.
After founding in 2009 in Germany, Fidor obtained its UK license in 2016, aiming to disrupt the UK market with its offering of “no hidden fees, no waiting around, just a free bank account available 100% online”. However, the bank was destabilized by an unsuccessful integration with French-owned BPCE, which acquired Fidor Bank UK in July 2016 for €140m. Following an alleged cultural conflict between the two parties, on the question of innovation, BPCE began to search for a buyer in November 2018.
Is the UK fintech market saturated?
Experts have speculated that, in addition to economic uncertainty in the build up to Brexit, intense competition in the UK digital banking market could have contributed to Fidor’s demise. According to Sarah Kocianski, Head of Research at 11:FS, a saturation of offerings in the UK for digital-first customers, combined with Fidor’s struggle to create a niche offering, could have been the key factors in the bank’s departure from the country.
Statistics show that Fidor Bank was toppled by the thriving fintech UK environment. Other challenger banks like Monzo, Starling and Revolut – the first two having launched in 2015, the latter in 2014 – were far outperforming Fidor. According to data from Apptopia, the Monzo app was downloaded more than 300,000 times a month in 2018. In contrast, Fidor’s UK app was downloaded only 646 times a month on average in 2018, according to data from Crunchbase, compared to 4,833 for its European app.
A downward trend for UK investment?
The announcement from Fidor Bank is not out of line with recent news emerging from the UK. At the start of 2019, reports surfaced that the world’s biggest investment banks – including Bank of America Merrill Lynch, Citigroup, Goldman Sachs and JP Morgan – were set on fleeing London, even if Brexit were to be cancelled.
A report by EY informed that 10 large banks and investment banks were shifting £800 billion ($1 trillion) worth of assets out of Britain and into the European Union because of Brexit. The most popular destinations were Dublin, Luxembourg, Paris, Frankfurt, and Amsterdam. New Financial issued a similar report claiming that over 275 financial firms were moving a total of £924 billion ($1.2 trillion) in assets and funds and thousands of staff from the UK to the EU.
It’s clear that Brexit plans are already being implemented across the financial services industry, and further disruption is expected. Kocianski stated that any digital bank considering entering the UK will no doubt take into account Brexit in its risk calculations. She nuanced, however, that “I wouldn't think it would put serious contenders off. Far more important to any bank expanding into the UK from another geography is understanding the cultural nuances of the UK market, the problems their target customers need solving and a robust business model.”