Deutsche Bank plans to partner with fintechs that have complementary business models, rather than buying out tech start-ups and competing in the market, says the bank’s global trade finance head.
Daniel Schmand, Deutsche Bank’s head of global trade finance, said that the bank is looking at creating efficiencies with robotics, at a press briefing in London this week.
“We are very open to cooperating with our peers in the industry to find a good solution for our clients,” said Schmand.
“We have a very clearly defined strategy. We are not looking to buy and compete on technology. We are looking to partner with fintechs that have a business model which is complementary to what we are doing.
Schmand cited Deutsche Bank’s acquisition of a 12.5% stake in TrustBills, a German auction platform for trade receivables, in April this year.
“That auction element is very attractive to us,” he said.
The bank is also taking a focus on ‘sensor-based financing’ whereby client’s use sensors to digitally service and monitor leased products, according to Schmand.
Today the latest technology in manufacturing, especially heavy industrial equipment, is usually built with digital sensors in that collect data on usage, maintenance and the environment the machine is being used in.
Data: more is not more
Deutsche Bank can provide finance based on that data, explains Schmand. If a payment is not received, businesses increasingly have the power to switch off machinery, he adds.
Part of Deutsche Bank’s transaction banking investment strategy will be focused on digital and data going forward.
“There is a big difference between the two,” said Satvinder Singh, head of global securities services and head of transaction banking for Europe, the Middle East and Africa.
“In the securities space, more data isn’t necessarily better data. There is this buzz that the more data you can provide your client, the better. That is actually not true,” he explained at the press briefing.
Singh said that many clients have said they don’t know what to do with the data when provided with multiple reports and information points by the bank.
“Our clients are struggling with the same questions that we do: how do we create efficiency? How do we impact our own margins?” he said.
Singh said his team must be focused on giving clients the right data that improves efficiency and processes.
“Clients must also have the right data so that they can demonstrate to regulators that they are fully compliant. Focusing on digital and data future proofs our business,” he added.
Payments and securities: two tectonic shifts
Both the securities and payments space are undergoing a period of ‘perpetual change’ according to both Singh and Michael Spiegel, head of trade finance and cash management corporates in Deutsche Bank’s global transaction banking division.
“There is an Ice Age movie called ‘Continental Drift’ – I think there will be some continental movements soon in the payments space. And the question is ‘when’ not ‘if’,” said Spiegel.
“Payments are the gateway to many services, whether it is foreign exchange (FX), trade finance, bond settlements or FX settlements.
“Electronic payments are truly critical to the banks and if we don’t find an answer to it we will run the risk of becoming second to the telecoms companies in the ’90s – where you run the infrastructure but you don’t have the value-added services anymore,” said Spiegel.
“Everyone in the industry is looking to see what the new business model will look like,” he added.