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A call to action for Europe

Christian Sewing hasn’t been stitching Deutsche Bank back together so much as carving lumps off it. However, the strategy appears to have been paying off with the bank refocusing on transaction banking and its newly created Corporate Bank division. In passing, it is worth noting that in 2018 Deutsche Bank returned to profit for the first time in three years.

Speaking at SIBOS 2019, the first time in 15 years that he has attended the event, the Deutsche Bank CEO called on Europe to “seize the opportunities offered by digitisation”. First-mover advantage in technology will be worth “at least about $15 trillion over the next five years”. But Europe is likely to lose out to America and China, he warned.

Unless… Sewing outlined five key priorities that Europe needs to address: “First, we need more Europe, we need a single European market that deserves this name. Second, Europe needs to become a more attractive business location. There is a global trend to lower corporate taxes, which we have to address… in Germany corporate taxes are eight percentage points above the OECD average – that’s not sustainable.

“Third, Europe must become more attractive again for the best talents… it is a common practice at US tech companies to include stock options in a compensation package. This is very difficult in certain European countries, including Germany, due to unfavourable regulation. Fourth, Europe needs to invest more, particularly in technology, digitisation and related infrastructure. And fifth, we need to take a look inwards at our attitudes towards the technological disruption that is already reshaping the global economy.”

With regards to the future of Deutsche Bank itself, among Sewing’s priorities are to be more client-centric and be technology driven with the aim of making Deutsche Bank Europe’s leading corporate bank with a global network.

“Frictionless, real-time payments is influencing consumer choices,” said Sewing. “For instance, when choosing a taxi-hailing app, one factor will be whether the app interfaces with any existing digital wallets you have – and whether the payments are seamless, in the background, so you don’t even have to think about them. Problems with payments at the end of a journey will dent a customer’s overall experience – and may affect their brand loyalty heavily – so it’s up to transaction banks to keep everything running smoothly behind the scenes. We must be utterly reliable.

“Real-time payments are perhaps the most important positive development in our business, but they create challenges. For one, real-time payments need real-time monitoring. And it equates to real-time risk. Managing this effectively will require significant investments in technology.”

Sewing noted the bank is collaborating with a large-scale payments provider, building the infrastructure for the client to cover the Single Euro Payments Area (SEPA) to create a product that will allow SEPA Instant Payments directly from the customers’ wallet to their own or any other account, including a push notification from Deutsche Bank to the client.

To facilitate its technological developments, Sewing explained: “That’s why we are working with – and bought a stake in – US-based ModoPayments.” Terms of that deal, which concluded in August 2018, were not disclosed. Modo’s expertise is helping Deutsche Bank extend payments into non-bank payment platforms such as Alipay, Paypal and WeChat.

Regulation has also been a driver for the bank’s innovation. Sewing cited the EU Payment Services Directive (PSD2), which has resulted in Deutsche Bank starting to cooperate with the International Air Transport Association (IATA) to create IATA Pay, which “connects the customer’s bank account directly to the airline. Since most flights are booked with credit cards, which means processing fees for airlines, IATA Pay can cut costs to the benefit of the airlines and their customers.” He added: “So in seizing the opportunities from PSD2, Deutsche Bank has gone beyond a bank’s usual role to become the Payment Initiation Service Provider, acting as aggregator for payments.”

So how will Deutsche Bank stay relevant? By building, said Sewing, on core strengths: trust, long-term client relationship and security.

 Article by-
Robin Amlôt
Managing Editor

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