Challenger bank offers higher interest rates based on Facebook 'likes', and cash bonuses if you play a part in its 'community'. But is it any good?
A new bank has launched in the UK today, offering savers the chance to boost the interest they earn with just a click of their mouse.
Under the hashtag #bankingwithfriends, Fidor Bank’s model is based around its online community.
The challenger bank is offering interest rates linked to Facebook likes and cash rewards for answering other customers’ personal finance questions.
Fidor Bank
The first challenger bank to launch in the UK since 2010, Fidor already has 100,000 customers in Germany and more than 250,000 'community' members.
With its name derived from the Latin word for trust, the bank says it aims to “re-establish lost confidence in banking with new and customer-focused services, enabling its customers to actively participate in the bank’s decision-making processes”.
Fidor Bank doesn’t employ financial advisors, claiming it doesn’t believe in selling customers products that they don't want or need. Instead: “Managing money should be fun.”
At the moment it offers a limited current account and a range of savings bonds, but plans to offer peer-to-peer lending, crowdfunding platforms and multi-currency investments later on.
Current account
Customers need to open a Smart Current Account before they can do anything else. However, Fidor's account only has limited features at present – it doesn’t yet have a debit card, although it says this is coming soon.
Account holders earn 0.25% interest on credit balances, but this can potentially increase to 0.5% with Fidor’s 'interest for likes' feature. Basically the more 'likes' Fidor UK receives on Facebook, the higher the interest rate on the Fidor Smart Current Account will be.
There’s quite a long way to go until the interest rate hits 0.5% – that will require 10,000 likes. The number stood at a measly 333 at the time of writing.
Even then, the interest rate is far less than the top-paying current accounts on the market. TSB and Nationwide both pay up to 5% AER on in-credit balances, for example.
Fidor’s current account will only offer a basic minimum of transfers to other banks and mobile phone numbers to start with. It also charges a flat fee of £2.49 for transfers of up to £25,000 to the eurozone.
Savings
[SPOTLIGHT]Crucially, customers need a Smart Current Account to open a savings product with Fidor. It’s offering savings bonds for three, six, 12, 18, 24 and 36 months – the longer you sign up for, the higher the interest rate.
Savers can deposit between £100 and £100,000. Deposits are covered by the German savings guarantee scheme, rather than the Financial Services Compensation Scheme, so your first €100,000 - around £73,000 - are protected.
Despite Fidor declaring that its bonds offer “strong returns”, the rates are nothing to shout about. The three-month bond pays just 0.75% AER, a rate dwarfed by the best easy access rates currently on offer – both ICICI Bank and RCI Bank pay 1.65% with no notice required to withdraw your cash.
Fidor’s three-year bond pays 1.8%, compared to the table-topping 2.7% offered by RCI Bank.
To see the top homes for your savings, check out Where to earn most interest on your cash.
Social media
Fidor’s keen on interacting with customers on social media and is active on Twitter, Facebook, LinkedIn, YouTube, and Slide Share.
Alternatively customers can head to its website to join the Fidor Smart Community where 'Community Karma' is on offer.
Community members are financially rewarded for giving and receiving knowledgeable financial advice, as well as evaluating and reviewing financial products and services they are interested in. Any bonuses you earn will be paid straight into your Fidor Smart Current Account.
Through its community, Fidor also invites members to help build the bank’s future services, including the chance to name its upcoming debit card, as well as suggest new functions and features they would like to see.
Not much substance
Fidor Bank’s CEO Matthias Kröner is full of big promises and bold statements but I am not convinced there’s much substance behind them.
For example, he claims: “This personalised approach to banking gives every customer a voice in how our bank is run, as well as giving them unprecedented control – setting their own interest rates, or naming the current account card that the bank will use.”
But in reality, customers aren’t setting their own interest rates - presumably we’d all go for an interest rate of 1,000% given the choice, rather than the rather paltry maximum rates on offer from Fidor.
There is much work to be done here before Fidor can truly challenge the big name banks.
What do you think? Would you bank with Fidor? Do you like its community set-up? Let us know your thoughts in the comments box below.
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