25 September 2019
CEO Christian Sewing of Deutsche Bank remains optimistic in these turbulent times
According to CEO Christian Sewing of Deutsche Bank it is a turbulent time. He was not so much referring to the largest restructuring of the German bank ever, but to the geopolitical tensions that are jeopardizing global economy. Sewing mentions the situation in Hong Kong, the trade war between China and the US and the Brexit. "I'm worried about this, because these are risk factors that bite", said the CEO on day 3 of Sibos at the mainstage.
Tailwind and setback
He also refers to warnings that China's economy will show less growth in future than expected, while the economy in Germany may now shrink for the second quarter in a row after a decade of growth. "We have tailwind because of low interest rates", he refers to the ECB's measures and is concerned that the central banks have now more or less used up the instruments they have to support the economy. Sewing also questions if these instruments still work. "SME clients tell me: we will not invest an additional euro just because the loan will be an additional 10 basis points cheaper."
In addition, he foresees Europe losing more and more of its relevance now that the global balance of power is shifting. Sewing: "In the US and China there are clearly better growth prospects. If we as Europe do nothing, we will lose more ground." Especially when it comes to technological developments, Europe is struggling to keep up with the other two major players. Sewing says that there are a number of areas where action needs to be taken quickly.
Sewing: "We need more Europe to achieve a true single European market, the corporate tax system needs to be more competitive, Europe needs to be an attractive place for talented people and invest more in technology, digitization and infrastructure with better research centres where the new generation can learn about things like IoT, AI and robotics. Also, Europe needs to look at is own attitude and focus not only on regulation, but mainly on measures to stimulate innovation."
His speech shook the well-filled room awake. The faces of those present got a bit depressed, but fortunately Sewing saved the positive news for the second part. He states that even in bad times there will always be a need for transaction banking and banks like Deutsche Bank will certainly remain very relevant for their clients. Sewing: "It is a critical time for banks. Customers have ever more sophicated requirements and want frictionless, reliable payments in real time. It's up to banks to make sure everything runs smoothly behind the scenes."
Sewing explains that Deutsche Bank has already worked hard to create a solid foundation. As a result, the German bank is ready for a possible economic downturn. With the transformation, the bank has identified a number of crititical success factors that every bank should put in place. For success in the future, a bank must become costumer centric, tech-driven, entrepreneurial, decisive and sustainable. This will also attract new talents to the bank in the future. Sewing: "It is a critical time for banks. Customers want frictionless, reliable payments in real time. Payments must be made seamlessly in the background without the customer having to think about it. It's up to banks to make sure everything runs smoothly behind the scenes."
Shift from back to the front
Sewing points out that new payment instruments are challenging the central position of the current account. Also regulation creates challenges, but banks should not lose sight of the many opportunities this also creates. "PSD2 and Open Banking create an ideal moment for banks to shift from the back to the front. That's where the customers are." This will also require banks to consider what to do by themselves and where to partner. Collaboration among banks can be very effective (for example SWIFT), but the same is true for collaboration with fintechs.
Despite the fact that his story contains many ominous elements, Sewing is optimistic about the future of banks. "Our position of trust, the long-term relations with clients and our reliability will help us to stay relevant. The world of financial transactions and payments will continue to evolve, and businesses and consumers will need partners to support them. Banks have a good position and I am convinced that they will have a bright future."