To say Deutsche Bank is going through a rough patch is an understatement on par with astronaut Jim Lovell’s famous claim that Apollo 13 had “a problem” when one of the shuttle’s oxygen tanks exploded 200,000 miles away from earth.
Since being hit with a $14 billion fine last month following a U.S. Justice Department investigation into mortgage-backed securities, the bank has culled thousands of jobs, seen share prices slump, and triggered widespread questions about the toll such settlement talks could take on other banks moving forward.
With the events of the past weighing so heavily in the here and now, it may seem almost flippant to zero in on a paper Deutsche Bank published earlier this year sharing some of their big ideas for the future. And yet, the report – Creating New Opportunities Through Strategic Alliance – stood out as offering a relatively unique take on how collaboration between banks and FinTechs might play out further down the line.
For starters, the bank gave an unusually honest assessment of why incumbent institutions as a whole fall short in the area of innovation. The paper claims “risk appetites are lower than ever” among banks, leading to an “increased aversion to more creative ‘out-of-the-box’ projects.” Deutsche Bank also casts banks as “lagging behind in the skills and language of the internet age,” and “lacking the fertile atmosphere” of openness that has served FinTechs so well in rethinking financial services.
Such extreme introspection isn’t always readily found in a bank’s public messaging, and the news last week that Deutsche Bank has actually opened a new digital factory in Frankfurt whilst culling 30,000 jobs elsewhere in the company is an indicator that they may well mean it when they say “We don’t want to be driven by digitalisation; we want to be in the driver’s seat.”
Where the report does tally up with much of today’s conventional wisdom on bank/FinTech collaboration is in its belief that the best future is a shared future. Banks, says the report, “can be at the cutting edge” of the digital revolution by partnering with FinTechs, while FinTechs can take advantage of the “global reach, processing infrastructure, financing capabilities and client-knowledge” offered by incumbents.
Deutsche Bank’s paper also dedicates an unusually large chunk of airtime to what it calls “the first wave of exciting developments” in the B2B space. It is an area the bank categorizes as holding “even greater potential than the retail advances so far,” pointing out that online sales estimates for B2B revenues in 2020 double those of B2C. The report also acknowledges that businesses are still bound by payment options that “hail from the 1970s” and can be “costly, inefficient or slow.”
We can certainly get wholeheartedly behind those claims here at Traxpay – such shortcomings are the reason we exist. We’re also inclined to agree with the paper’s assessment that it is FinTechs who will primarily “effect change” in the area of B2B payment inefficiencies. And last but not least, we share the report’s belief that corporates are “no longer willing to accept off-the-shelf products dictated by banks. Instead, they are demanding new systems that are truly fit for purpose.”
It remains to be seen what lies around the corner for Deutsche Bank following its recent troubles, but, for what it’s worth, its report on strategic alliances certainly dared to delve a little deeper into what banks stand to gain by partnering with FinTechs, as well as what companies everywhere want when it comes to B2B payments – and who they should be banking on to lead the charge.