German Banks Seek Solace in Fintechs to Recharge Weary Models

  • Deutsche Bank and Commerzbank CEOs stress fintech cooperation
  • Frankfurt building startup hubs to supply software know-how

German banks need to make better use of information technology and pair with startups to deliver products more quickly as they seek to pare costs and adapt to the industry’s changing landscape, top finance executives said in Frankfurt on Wednesday.

“Our costs have to sink drastically,” Deutsche Bank AG Chief Executive Officer John Cryan said at a Handelsblatt conference entitled “Banking in Upheaval.” Cryan, who took sole charge of the struggling Frankfurt lender in May, cited the digital ledger blockchain and data analysis software as examples of technology the bank could embrace. Fintech startups could take advantage of Deutsche Bank’s reach and contacts, he said.

“If we don’t use these technical advantages, we’ll become less competitive,” Cryan said.

Martin Zielke, Cryan’s counterpart at cross-town rival Commerzbank AG, said retail customers expect banking services to be delivered as quickly as a new “bestseller novel” through Inc.

Frankfurt Fintechs

“Everything that can be digitized will be digitized,” Zielke said. But large banks’ ability to make markets and win clients in tandem with fintechs shouldn’t be underestimated. “The pace and the quality will be decisive,” he said.

Frankfurt, the euro-area’s financial capital, is fostering a culture in fintech, whose services in credit checks, personal lending and business financing offer opportunities to larger, less nimble institutions seeking to quicken their rollout of mobile and Web-based products. Venture-capital investment in fintech companies in Germany rose to $186 million in the second quarter, from $107 million in the first, surpassing the U.K., according to an Aug. 19 study by KPMG and CB Insights.

Deutsche Bank, struggling to shake off a legacy of litigation and risky assets that have strangled profitability, is overhauling its technology systems as it seeks to shore up capital and reverse losses that have depleted its share price and forced Cryan to suspend dividend payments. The CEO poured cold water on a report on Wednesday that it has explored a possible merger with Commerzbank as a way out of its quagmire.

‘Digital Factory’

Germany’s largest lender has assembled several hundred programmers in an outlying neighborhood of Frankfurt to develop mobile applications at its “digital factory.” It plans to provide an update on Sept. 29.

In a separate venture, the state of Hesse, the city of Frankfurt and exchange operator Deutsche Boerse AG are jointly financing an internet startup center dubbed the “Tech Quarters” in a skyrise near Frankfurt’s fairgrounds that’s slated to open in October. 

Deutsche Boerse also funds the “Fintech Hub” in the city’s Bornheim neighborhood, supplying free working space and access to the exchange’s contact network. Among the fledgling companies there are Fintura, which helps medium-sized companies shop for credit financing, and Cashlink, which arranges person-to-person payments via smartphone apps. 

Urs Rohner, Chairman of the supervisory board at Credit Suisse Group AG, said modernizing back-office technology may be an even bigger market opportunity for the burgeoning fintech industry than simplifying payments between consumers and merchants.

Gaining Speed

Still, large German banks may not yet be ready to dip into their pockets to buy startups like French bank Groupe BPCE, which last month agreed to buy German smartphone banking services company Fidor Group for an undisclosed amount.

“They have the financial power,” said Andreas Kupke, managing director at, a Hamburg-based company that works with banks including Deutsche Bank to provide quick online consumer credit for auto loans, renovations and other projects.

Finanzcheck is working on a product that would let banks offer consumers quick on-the-spot loans for smaller amounts by leveraging the startup’s trove of data on creditworthiness, he said. For large banks, gaining speed may be more important in the near term, he said.

“They just want to make the partnerships even closer,” said Kupke.

— With assistance by Jan-Henrik Foerster, and Julia Hirsch

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