Deutsche Bank CEO John Cryan says the bank “need[s] to revolutionise our business because the world has changed so much” but admits its diverse customer base makes it hard for the bank to fully embrace digital.
Cryan, who became CEO of the German bank last July, appeared on a panel of business executives at the DocuSign Momentum conference in London to discuss how the digital revolution is transforming business. DocuSign is a Silicon Valley digital signature and online document management company that counts Deutsche Bank as a customer.
Cryan told the audience of business executives: “Everything about our business model is changing and that’s why we’ve not worried too much about protecting our inheritance. Of course our brand, of course our client relationships, but we need to revolutionise our business because the world has changed so much.”
Increased regulation in the financial sector in the wake of 2008 financial crash has inflated operating costs for banks around the world meaning they have to be leaner and meaner if they want to deliver the same returns to shareholders as they did in the pre-crisis years.
At the same time, advances in technology and a load of out-of-work bankers in the post-crisis era have given rise to a host of fintech — financial technology — startups who do promise to do different parts of a banks job faster, better, and cheaper than the lumbering lenders. Established banks are locked in a technology arms race with these nimble rivals.
Cryan acknowledged this by saying: “It’s only through the concept of us becoming an applied technology company that we’ll achieve it. Every discussion we now have within the group is about technology: compliance is about technology, audit about technology — things you think would never dovetail with technology are somehow linked.”
Deutsche Bank is not alone in thinking this. Goldman Sachs says it now thinks of itself as primarily as a tech company and JPMorgan CEO Jamie Dimon has warned that “Silicon Valley is coming” and banks need to adapt fast. Almost every other major bank is seriously looking at technology in one way or another.
‘We’re too old fashioned’
Unfortunately, this shift to digital means cutting jobs — Deutsche Bank announced 23,000 would go last September. Cryan alluded to this, saying: “We believe that we need to be sufficiently rapid and accurate that we need to take human error out of our business.
But he added: “At the same time, we haven’t yet developed interfaces with clients that can substitute for humans. We’ve developed robo-advisors, we’ve developed online banking tools, but a lot of our clients, even the young ones, do want to talk to someone. It’s finding the right balance.”
The bank launched a robo-advisor last December, which “uses algorithms to put together individual portfolios for investors who are looking to make investment decisions without taking advantage of advisory services.” Robo-advisors are seen as one of the hottest new areas of fintech, offering the chance to lure millennial investors as customers.
But Cryan told the audience on Tuesday: “We’re not at the right place, we’re too old fashioned, we’re too human-interfaced. We don’t have a direct digital offering that’s right just yet.”
Reuters reported on Monday that Deutsche Bank is reversing plans to launch a digital-only bank in the US, an ambition first announced last year.
‘In the retail world, it’s much more complicated’
Fintech startups like to talk about how banks are at a disadvantage because of their “legacy” systems — complex, old computer systems bolted together over many years that are very hard to modernise. But Cryan says Deutsche Bank has another legacy that hampers it — customers.
He told the conference: “We struggle a little bit. We deal with retail clients, we deal with some of the biggest institutions in the world. In our corporate and institutional bank, everybody wants modern, cutting edge and as digital as possible. In the retail world, it’s much more complicated.
“We find the countries in which we operate in are at different stages in acceptance of modern technology. There’s still a healthy level of scepticism among some people and in some countries in continental Europe trust in modern technology hasn’t yet permeated the entire population. So I think at the moment we’ve got to offer a wide range of access points for people.
“But internally we’ve got to make ourselves super efficient. That means, sadly, taking a lot of people out of the process chain. It also means being intelligent about how we gather, store, organise, and check data.”
Deutsche Bank’s transformation is a painful one. Profit fell 58% in the first quarter of the year. At the time, Cryan blamed “challenging” global markets but admitted it was at least partly down to “our strategic decisions to exit or reduce significantly selected businesses.”