“On the topic of ‘challenger’ banks - while the underlying technology may be more adaptable, the requirement to do things differently to adhere to local regulations will ultimately end in the loss of competitive advantage; as opposed to building something in a much more homogenous environment where you only have to worry about one version of it,” says Rick Striano, managing director of digital product development at Deutsche Bank.
Striano added that apparent tension between fintechs and incumbents has forced the established banks to raise their own standards.
“There is this ongoing dialogue around the inherent tension and competition of the zero-sum game between fintechs and banks – in my opinion, this has not proven itself to be true. It doesn’t mean that we don’t compete – we absolutely do compete in specific cases - no question. But that is making us better,” says Striano.
Europe’s PSD2 and various moves toward Open Banking have forced banks to work closer with the fintech community. But while clients are keen to explore fintech propositions, they are keen to do so through their existing banking relationship rather than change providers says Striano.
“We are seeing more and more fintechs approach us and ask to work with us. In fact, there are a number of fintechs that are coming to us specifically because a client of ours met them and said ‘what you have is really interesting but I’m not necessarily going to change my process. So, please work with Deutsche Bank because I want this under a Deutsche Bank contract.’”
“Subsequently, we are seeing many more opportunities in co-innovation and co-development where we all get smarter as an outcome.”
In a 2017 PwC survey of incumbent financial institutions, 82% of respondents said they expect to increase fintech partnerships over the course of the next three to five years.
Striano referred to a panel discussion at the recent Money20/20 conference, in Las Vegas, to draw attention to a perception that banks are trusted more than tech firms.
“In one of the keynote sessions at the start of this conference, there was a discussion around trust - and what was particularly interesting was that when the audience was polled about trust, banks scored much higher than tech companies, including big tech, and fintech. Banks were at 76%, with the nearest competitor in the 20th percentile,” he says.
Striano was speaking after Deutsche announced its third-quarter financials for this year, reporting that net income was €229m compared to €649m in the same period last year.
“We can take some pride in what we have achieved over the past few months. However, there’s no reason to let up. On the contrary: we need to end the year on a strong note,” Deutsche Bank CEO, Christian Sewing, said in a statement which accompanied the banks Q3 report.
“We have our costs under control and sufficient capital to grow. We are on track to be profitable in 2018, for the first time since 2014,” said Sewing.
Striano added that common standards around data management from regulators would benefit the banking industry at large.
“In order to create mechanisms where multiple parties can participate in a given process, one must have a common standard for data - including data privacy protection and a set protocol for how you manage the risks associated with controlling that.”