Deutsche Bank
The transaction banking world is going digital, but according to Deutsche Bank’s David Watson, change leads to opportunity, and there’s no harm in taking it slow
You make a distinction between ‘digitisation’ and ‘digitalisation’. Which should financial services firms be focusing on?
They should be focusing on both—you can’t have digitalisation if you don’t first have digitisation.
That being said, most financial services firms don’t have limitless resources and therefore focus for digitisation efforts is often prioritised to areas where it will yield the highest return.
As a simplistic example, we can break these digital assets into three categories:
• Data assets, which can drive informed decision making and more predictive consumer behaviour;
• Algorithmic assets, which underpin the automation of tasks and processes; and
• Assets focused on connectivity, which ensure that a provider is available at point of contact.
How important is it for firms to change the way they interact with financial technology companies?
Many financial services firms are starting to rethink their value proposition. They are recognising that if they want to continue to deliver valuable, market-leading solutions to their clients, they need to be much more flexible. As firms also consider the legacy infrastructure and regulatory framework in which they operate, they have found that matching the pace of change can be difficult. In this respect, interacting with financial technology firms in a collaborative manner is a viable option for mutual success.
Financial technology can provide firms operating in financial services with the opportunity to effectively raise their digital quotient and drive out a higher quality and more valuable service to their clients. Financial technology companies are inherently highly innovative and provide a unique strategic skill set and a fresh talent pool that enables them to quickly adapt and deliver on-trend. Therefore, financial technology companies can sometimes better fulfil a portion of an existing value chain and service offering, and at times better extend their own service.
Is the transaction banking industry late to the party when it comes to the technical revolution? Are firms doing enough to catch up?
In comparison to more retail-oriented or socially driven technological developments, it can feel like the industry is behind. However, growing client sophistication demands that we be an intelligent follower. Leading can come with an inherent risk that many are unwilling to take.
By property of what transaction banks do, clients and regulators hold high expectations for security and compliance. In order to meet these needs and to ensure that we have deployed the most efficient use of new technologies and future-proof their value, we go through rigorous concept, build and testing cycles—all of which take time. In this regard, first to market does not outweigh stability, security and longevity.
Do regulatory pressures encourage technological improvements, or hinder them?
The pressures coming out of the regulatory landscape are vast. They provide a very stringent operating framework. This can understandably lengthen time-to-market for solutions but doesn’t necessarily hinder technological improvement.
Once understood, solving for these complex demands is like solving for any other type of market problem or requirement—it requires an element of technological innovation to assess your parameters and/or limitations and find a valuable, appropriate solution.
Regulatory pressures have encouraged broader thinking that is more conducive to achieving long-term, stable growth—not only in terms of how we manage our own product development but also in how we partner, as has already been highlighted with the financial technology industry.
Could new entrants to transaction banking, like Google, pose a threat to traditional institutions?
So far, entrants like Google are toeing the line of financial institution and corporation—but not crossing it. While the likes of Google don’t necessarily want to become a bank, they do offer compelling innovative solutions that beget the extension of a bank’s existing value chain and market.
They bring unique insight and digital strategies that, in partnership with banks—and when effectively integrated with core banking capabilities—can create a much richer shared value proposition for clients in the long term.
Can ‘disruptive’ technology actually benefit transaction banking?
It has the potential to significantly benefit transaction banking because, as disruptive technologies continue to emerge, they create a motivating force for incumbent firms to evolve, innovate and deliver a higher quality service to end clients. Change ends complacency with legacy services and is consistently prompting questions; how can we improve? How can we provide more effective, efficient services?
David Watson is head of global transaction banking cross-product components and head of product management for global transaction banking in the Americas at Deutsche Bank
