FinTech versus „No Tech“?
Executive Education / 26 February 2016
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Senior Programme Manager Executive Education
Thomas Kohrs is head of Asset & Wealth Management in Executive Education at Frankfurt School. He is a qualified banker and focuses on the areas of securities and sales. He has more than 25 years of practical experience as a consultant, trainer and lecturer at Frankfurt School.

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“Banking is necessary, banks are not” – this is what Bill Gates said, in fact already in 2000. At the time, the Microsoft founder already predicted that the business models of the banks would one day become outdated.And even if it took a while,slowly but surely, it could be so far:already three years ago, the topic of FinTechs was on everyone´s lips.And many people are seriously concerned about the future of the banks.“Future of the banks?!”already headlined the business magazine brand eins in 2013 (Issues 1, 3, and 7), still referring to branch systems, excellent advice with professional fee, and good, honest services.Paypal was still a daughter of ebay and it looked as if other providers may still develop alternatives.There were many ideas and approaches, but the current reality looks very different.The mail-order company Otto gave up its Yapital system.The credit card provider Visa remains silent concerning the future of its offering.And Telekom will cancel its online payment service Click&Buy in May 2016.In the press release, it reads, in the figurative sense and somewhat succinctly, that the critical mass was not reached.Are we really already too late against the superior power of Paypal, Apple and all the others?And the banks themselves?Did they learn anything new?

Paydirekt as measure

While two years ago it still appeared as if the banks were condescendingly resting on their “payment laurels”, things do at least look a bit better at first glance in the mean time.Paydirekt, the online payment method of the banks and savings banks has been launched after a certain amount of toing and froing.Around 1000 banks offer the service, also including Commerzbank, Deutsche Bank, Postbank, ING Diba and HVB.

Also virtually all Volks- und Raiffeisen banks are involved.As of February 2016, already 220,000 private customers had registered for the new service.For all that!

Unfortunately, you will still be looking in vain for the larger savings banks in this environment.But they are planning to be there from April 2016, so they say.And even if the figures of paydirekt cannot be compared with those of PayPal, one thing becomes obvious:here it is not David fighting against Goliath.The delta is much bigger!By its own account, PayPal has 16 million users in Germany alone, can be used in 7 million online shops worldwide, of which over 50,000 in Germany, and its turnover in the 4th quarter of 2015 was over $US81 billion.

What can be done in the payment system market, then?The solution can only be based on three pillars:acceptance, trust, and safety.Acceptance by customers and shops, trust and safety on all sides, quickly achieving a large turnover volume, and winning customers both on the private and business side.

Time is running out!

Hence a fast implementation is required.There is an old saying that it is not the big ones that take over the small ones, rather the faster ones that take over the slower ones.Especially the savings bank organisation is moving at the pace of an oil tanker.Once it has gathered speed, there is really nothing that can stop it.But a change of course also needs time.Time the providers of so-called antiquated banking services actually no longer have.And to boot they also stand in their own way.The savings banks – even though they are actually sitting in the same boot – criticise the cumbersome registration procedure and its implementation by contractual partners.For example, when it comes to taking merchants on board.And they are right in that point!  But the comments of Georg Fahrenschon, President of the Deutscher Sparkassen- und Giroverband (DSGV) [German and Savings Bank Association], at the bankers´ convention in Frankfurt were not particularly helpful in this respect.Here the new service was described as unsafe and any use more or less only recommended at the user´s own risk (Source:Die Welt online of 3 September 2015).  That´s naturally a good way of implementing paydirekt…..And not to forget the opinion of the Cartel Office.

Cartel Office forbids common conditions for paydirekt

The Cartel Office finds it difficult to accept that all banks agree common conditions for paydirekt with the merchants.Consequently, every online merchant must negotiate prices individually with every single bank.(Source:FAZ online, 31 December 2015). This way, you definitely do good business!And competitors have great fun.Thus, paydirekt, like many providers before, may already turn into a flop before it really kicked off.Paypal, as an oversize giant on the market, must also have its weak spot somewhere.But where?

Unity is strength

If at all, the providers in Germany only still have the chance to score with one voice, with one clear structure, with a simple procedure and with a simple system.It must be safe, and the solution is so easy that the cash till rings according to the motto:One face to the customer, keep it short, simple and secure!Only so do banks stand a chance.If savings banks appear hesitant and do not participate after all, it will end before it began.But they should actually have learnt from the experiences of the past years.Hence either or: either they implement the system by overcoming all obstacles and provide for acceptance and sales or they leave the market to another.But then nobody should complain afterwards if many banks simply disappear from the market.

And the following is still valid:the focus is on the customer!And he is not a bar!He is the focal point of all the banks´activities.One very much feels like telling every bank to take good note of this:look after the customer, what he would like, his interests, so as to satisfy his needs.“Banking is necessary, banking is human!”, in a slightly modified version,  to come back to Bill Gates at the beginning of this article.With the best will in the world, this cannot be that difficult!