Innovation Investments Deutsche Bank Drags Itself Towards Digitization

Germany’s largest financial institution will cooperate with Microsoft, IBM and HCL Technologies at new hi-tech research labs.
Creative juices flowing? Deutsche Bank plans innovation labs.

Deutsche Bank plans to work with IT giants IBM, Microsoft and HCL Technologies in new innovation labs that are being set up in Berlin, London and Palo Alto, California, sources in financial circles confirmed this week.

Germany’s largest bank will send employees from various divisions to the labs to speed up digitalization of its business. The goal is to better respond to needs of clients and ward off attacks by new hi-tech competitors that have sprung up in recent years.

Deutsche Bank officials wouldn’t comment on details of the innovation labs, which was first reported in the Wall Street Journal. IBM also wouldn’t comment, and officials with Microsoft and HCL Technologies could not be reached.

Competitors from outside banking, such as the credit lenders Auxmoney and Lendico, are moving in and taking business from financial institutions. They connect investors with private individuals or firms that are seeking loans – without involving banks. Money transactions are also more and more contested, with companies such as PayPal or Apple entering the business. And users can monitor their finances or invest money with any number of new mobile-phone applications that are being developed.

Deutsche Bank's Internet competitors have mocked its conservative attitude

Deutsche Bank seemed for a long time to not be concerned by growing financial competition from hi-tech newcomers. In May, the bank announced it would invest €200 million ($250 million) in digitalization, but how the money would be used remained a secret.

Other banks, however, have been busy trying to catch up with technology. With its Main Incubator, for example, Commerzbank has worked with start-ups and established companies since March. DZ Bank is already collaborating with iZettle, a Swedish mobile payment company, and Crossinx, an electronic invoicing firm based in Germany.

Deutsche Bank's Internet competitors have mocked its conservative attitude. Last week, for instance, the bank’s research department explained “fintech” on Twitter as “the digital (r)evolution in the financial sector.” Christian Nagel, a partner at Earlybird Venture Capital, scoffed that the post could only be a joke. “After five years, Deutsche Bank discovers fintechs,” remarked Mr. Nagel, whose firm participates in several financial start-ups ― or fintechs in professional jargon.

But now Deutsche Bank seems to be getting up to speed. When the management board was restructured last month, the digital agenda was elevated for the first time to a board-level responsibility. Henry Ritchotte, the board member in charge of operations, was chosen for the task.

On Monday at Euro Finance Week in Frankfurt, Jürgen Fitschen, the co-head of Deutsche Bank, said digitalization was a fundamental issue for the bank in coming years, along with Europe’s weak economic growth and high costs in the banking sector. He sees possibilities for lowering costs through digitalization, for example through an improved internal network and better communication with customers.

“A more efficient utilization of the data that we already have opens up new commercial possibilities,” said Mr. Fitschen.

The bank has also acquired new expertise in the field. Last week it announced that JP Rangaswami would take over as chief data officer, a new position at the company. The well-known technology innovator, economist and blogger from India will supervise information processing at the bank.

 

Laura De La Motte is currently an editor at the Handelsblatt finance desk and a specialist banking correspondent. Peter Köhler is Handelsblatt's finance correspondent and head of the paper's Frankfurt banking team. To contact the authors: [email protected]; [email protected].