Fidor Exec: Banks Can't Avoid Competition from Cryptocurrencies

Michael Maier is the COO of Fidor Bank, which is based in Munich, Germany, and is the banking partner of San Francisco-based cryptocurrency exchange Kraken.

With its refreshingly open attitude towards digital currency technology, the bank recently decided to use the Ripple Labs open payment protocol to allow customers to move money.

Maier was recently in San Francisco speaking at a cryptocurrency event hosted by Merriman Capital, where CoinDesk spoke with him about regulation, Ripple and the banks' competition from cryptocurrencies. 

CoinDesk: What is your sense of the digital currency market in Europe? 

Michael Maier: In Germany, it happens to be that bitcoins are regulated. The German authorities [classify] bitcoin as a so-called 'accounting unit', and therefore there is a kind of regulatory framework that a bank can rely on. That makes it a little more easy for us to work with bitcoins. It was important for the authorities to take a stand on that.

Bitcoin and therefore Ripple has built up a payment scheme – a payment protocol – which enables you to do so with a lack of time, fast settlement and, of course, within some regulatory environment, because Ripple is implementing its trusted gateways.

The good thing on that is that, as a member of the Ripple protocol, one can choose whom to trust, and this is very important from an AML [anti-money laundering] perspective. That made it much more easier for us at Fidor Bank, having this kind of regulatory clarification.

We are a small innovative bank, and therefore we try to set up innovative things as well.

Why did you choose Ripple as opposed to another digital currency?

It’s not regarding the virtual currency. Ripple is much more, because you’re not only able to send virtual currencies, you are able to send fiat currencies as well. That makes it interesting for us, because basically from a bank, usually, you send euros, US dollars, Swiss francs, whatever.

We see it like a payment scheme or payment channel that you can use to make payments faster and easier and more directly. Maybe even much more efficient for the customer.

Is the plan for Fidor to have Ripple gateways?

Yes. The first stage of cooperation will be that we will implement Ripple for our German customers.

But, you might be aware that we are already touching base in Russia, with a partner there, and opening up a Fidor Bank there.

Let’s see if the traditional payment channels [in Russia] are worthwhile. This could definitely be an option, connecting Fidor Russia with Fidor Germany. You have on two sides, two trusted gateways.

What’s Ripple’s role in this?

Two kinds of relationships. The first relationship is that we are implementing the Ripple protocol payment channel for our customers.

If I have a banking customer and he wants to send money out, why not use Ripple? If he knows a beneficiary with a Ripple wallet, why not use that? On the other hand, we [will] maybe try to connect these gateways within the Fidor family.

We are also looking for other gateways in the US, [or] wherever, where these trust relationships can be built upon [and] both sides can send and accept money transfers.

Is the goal to help save customers money or speed up transactions? What makes Ripple a better proposition?

It’s not that we don’t like the existing systems. We are very customer-centric, and the customer should get the payment channel he wants to have.

It’s not that Ripple is superior, but we think that it will have a future and that our customers will choose Ripple for certain use cases. In other use cases, they will use (in Europe) SEPA. Other use cases, cash-to-cash transfers.

This is our policy: be open and cooperate with everything else. It’s not that one is superior [to] the other, the customer has to decide what’s best.

So you are giving them the option. Are they going to know that Ripple is an option?

Yes. It will be [branded]. Within the account, you can see all the different payment channels. So if somebody says I want Ripple for whatever reason, he gets Ripple.

What level of fees will you charge for this service?

We want to make a reasonable offer to our customers. We will position Ripple as a very reasonable option.

When would you allow customers to hold bitcoin?

This is a very difficult question because then you have to store the bitcoins. A very small and young bank doesn’t want to be the first bank who stores bitcoins and gets attacked from all hackers all over the world. That is why we aren’t brave enough.

There’s no standard for storage of bitcoins yet. What is the right standardization on that you can offer? That’s not our core business, as a bank.

As a banker, what do you think about bitcoin exchanges and wallets? Because basically what they are doing is they are becoming financial institutions for cryptocurrency.

You are absolutely right. The lack of regulatory clarity is exactly what all the authorities have to think of. Because if this is widespread, the question is if you can forbid it. Or do you want to regulate? I have a personal opinion on that: it is always better to regulate than to forbid.

Then, an exchange might be a financial institution. With all the constraints that they have and rules to follow. [But] this will create trust, for the customers of the exchanges and the financial institutions.

As a banker, how do you feel about that? These companies are coming out of nowhere. If they aren’t regulated out of existence, they will be competing against you. 

Can I avoid it? So what I have to do is accept it and cooperate. That’s what we are doing. That’s the Fidor way.

I think a lot of bankers are already realizing what is happening out there.

I’m pretty sure there will be a lot of digital customers out there that want to have a different kind of financial services in the future. [But] bank accounts are the last mile. Finance has had a hold on that, and will continue to leverage it.

Image via Fidor