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Telefonica enters the retail banking market

number26, transferwise, iZettle – a large number of fintech firms have been giving traditional retail banks cause to sweat for some time. So far, none of the new providers has landed a blow comparable to that of PayPal. However, this could change soon as a result of the attempt by Telefónica.

01.06.2016

Traditional banks have been worried about their retail client business for some time. More and more start-ups – known as fintechs in the financial sector – are offering tempting banking packages tailored to the demands of digital natives or user-friendly and uncomplicated for any user. Account-opening via video authentication, information about movements on your account in real time, quickly transferring the money you have borrowed for your lunch without needing an ultra-long IBAN number – all these services are already on offer. But it seems that as far as financial matters are concerned, the situation is similar to that with electricity providers: it may be worth switching but comfort prevails. To make things worse, banking is a far more sensitive issue than electricity, particularly in an era of data theft and credit card fraud.

Now, an established player with millions of contract customers in the shape of Telefónica, which is extremely familiar with the logic of digital business models, is entering the fray for the first time with O2 Banking. Is the new way of banking about to make a breakthrough across a wide front? At least the Spanish have everything it takes. On top of this, they are tempting customers with brand new benefits such as replacing the unpopular IBAN with the mobile phone number or with attractive goodies such as additional data volume if the account is set up to receive the customer’s salary. Incidentally, Telefónica does not need a banking licence for the whole package – at a technical level the services will be handled by FIDOR Bank AG – an established fintech bank, which was set up in 2009.

Traditional banks must react to the new competition and rethink their value propositions more from the customer’s perspective and design them accordingly. A forecast of the future based on strategic innovation processes will help to identify the correct course for the future in competition with digital ecosystems, fintechs and other banks. 

What the future may bring if Telefónica succeeds with its attempt can be found in the scenario entitled “Added value in the world of digital banks” in the SRC Study "Paying in 2025 – Future Scenarios for Payment Systems in Germany" to which Z_punkt made a significant contribution.

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If you would like to find out more about the future of retail banking, get in touch with Eckhard Störmer.

Contact Dr. Christian Grünwald

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