French and German banks end talks on challenger bank sale

A proposed sale of digital challenger bank Fidor by French banking giant BPCE has collapsed after months of talks failed to reach an agreement.

Fidor Bank was put up for sale by BPCE in November 2018, and it later went into talks with German Oldenburgischen Landesbank (OLB) and its private equity owner Apollo. These talks have now ended with no agreement.

This puts the future of Fidor, which was one of the earliest digital challenger banks, into question.  Following the ending of talks BPCE said it is "working to find a solution to create for Fidor and its teams the conditions for a viable business."

Fidor, which was launched in Germany in 2009, was acquired by BPCE in July 2016 for over €100m. BPCE itself is the result of a merger of two centuries-old French banks, with in excess of 35 million customers and more than 100,000 staff. 

Following BPCE’s acquisition of Fidor, then CEO and co-founder Matthias Kröener said the move took Fidor from being a potential challenger to a real threat to the status quo in retail banking. Kröener left in April after 10 years at the company.

The acquisition of Fidor was set to become a key part of BPCE’s digital transformation, which, like other traditional banks, was having to change how it serves an increasingly digitally savvy customer base.

At the time of the acquisition, BPCE chairman François Pérol said it was a key step in accelerating the group’s digital transformation.

“It further demonstrates our commitment to innovation, to developing a customer-centric approach enabled by digital banking technology, and to being more involved in the digital and mobile banking field,” said Pérol.

Fidor was an early financial technology (fintech) startup, using social media to overcome the cost and complexity of traditional banking, and increasing customer trust through an online community.

Through an application programming interface (API), it enables third-party financial services providers to plug into its system. The bank also has sells its technology to other banks.

One source said BCPE never really had a strategy on how to take Fidor forward.

The failure of the deal demonstrates the challenges faced by traditional banks when it comes to integrating a different culture into the business. Large, traditional banks, for example, face a lot of resistance to change as a result of their structure.

Other traditional financial services businesses are attempting to overcome a clash of cultures by building standalone digital banks from within their own four walls.

CYBG, the holding company of Clydesdale Bank and Yorkshire Bank, for example, established an app-based bank, known as B. It was built on CYBG’s iB digital platform through a £350m investment. Although customers can use the bank’s branch network, B was designed to be digital only. CYBG plans to migrate its traditional banking brands to the iB platform once it is proven. 

NatWest is another traditional bank that has created a standalone digital business. The company set up Esme Loans in 2016 after looking at what it could do to add a bit of fintech to its small to medium-sized enterprise (SME) lending business.