Change is essential – banks must grasp the opportunities of digitalisation

The global financial services industry is currently undergoing a period of upheaval. New technologies are threatening old structures. Digital banking is booming – especially mobile banking. The innovative strength of FinTechs is shaking things up. Based on new, digital customer demands, they are forcing banks to rise to the challenge of digitalisation.

Just two years ago, FinTechs were still being ridiculed. Things have since changed. The innovative financial solutions and ideas of young tech companies are playing an increasingly important role and are about to completely change the way we handle our money. From instant payments, to paying via QR code, peer-to-peer lending, blockchain applications or even being advised by robots and robotrading – FinTechs and their technologies are laying siege to all aspects of payment transactions.

The basis of success: the customer.

Especially in retail banking – which was long neglected by many banks, leading to a loss of trust among their clients. There are now around 400 FinTechs in Germany. And the new services being offered by these start-ups are groundbreaking. According to the Association of German Banks (BdB), the services most likely to succeed at present involve digital mobile payments and transfers.

The pressure on established banks is growing accordingly. They are opening up more and more, entering into collaborations with the young guns or launching their own initiatives. Deutsche Bank, for example, has opened “Innovation Labs” in London, Palo Alto and Berlin and plans to create 400 new jobs on the topic of digitalisation at its digital factory in Frankfurt am Main. “We are building a digital think-tank,” reported Deutsche Bank manager Dr Patrik Pohl at the recent FinTech Talk in Frankfurt, initiated by GFT and Deutsche Bank. In other words: new blood is needed, preferably personalities with digital DNA and new ideas. The latest initiative of the Frankfurt-based bank may seem anachronistic – coming as it does 17 years after the launch of US online payment pioneer Paypal – but Deutsche Bank is demonstrating that even the megaships of the global monetary system are slowly changing course.

Better late than never.

New technologies pose a threat to traditional structures – but, above all, also offer tremendous opportunities. For example, by joining “others” along the path. “Joint ventures with start-ups are having a profound impact on our industry and transforming the value chain,” adds Pohl.

It’s time the financial services industry began recognising and utilising the opportunities which digitalisation offers. Because the trend is substantial – banks need to rethink their role within the system. “It’s long been about more than just banking in the future. It’s now about the bank of the future,” says FinTech entrepreneur and founder of figo André Bajorat, for example, whose banking-as-a-service platform forms a link between the traditional financial world and modern financial solutions.

Christian Tiessen of Savedo, which brokers fixed-term investments within the eurozone, is such a tech pioneer with digital DNA and used the FinTech Talk to show how the digital transformation of the finance sector is progressing. “Almost all financial transactions can be done online,” claims Thiessen. “What’s more, people no longer use just one bank but different providers – and this trend already cuts across almost all age groups.”

Cashless transactions are steadily growing throughout the world – at eight percent per year, according to the World Payments Report. And as a brand-new Bitkom study shows, a third of all online banking users already do their banking via the smartphone, and 70 percent of all Internet users make their transactions online. And no less interesting is the fact that almost a third of all users are prepared to use Internet companies for their banking Needs.

Growing trend.

The provocative question – also briefly discussed at the FinTech Talk in Frankfurt – remains: What role is left for traditional banks? In the case of long-accepted online payments via Paypal, for example, the traditional banks and their brands no longer come into contact with customers – they have to make do with payment processing in the background and must realign their business models. Virtual currencies and new blockchain applications will accelerate this process. At first glance, that cannot be to the banks’ liking. But does it have to be bad news? Can’t it also mean new business opportunities? Just take identity management – an area where banks could completely reposition themselves. The data are available – as is the customer’s trust. Ultimately, it’s all about being faster – and learning from the incredible dynamism and flexibility of the digital sector.

A lack of Vision.

There’s been a lot of talk in the last few months about “banks vs. FinTechs” or “old economy vs. new economy”. This discussion is nonsense. Many bank managers feel the same way. Despite all the fears about disruption, the main thing is to work together to seize the opportunities of digitalisation and to benefit from them. This will not be possible without banks having their own research and development departments – they need to change their views here. This means testing products over several years, displaying patience and flexibility, and not just focusing on short-term return on investment.

At the first new.New Festival of our innovation platform CODE_n at the Center for Art and Media (ZKM) in Karlsruhe, banks and FinTechs will be able to meet up again. 13 FinTech finalists from our international start-up competition will be showcasing their ideas and business models. There will be joint discussion rounds, pitches and workshops, focusing on how to shape the bank of the future. Together with further 39 start-ups from the fields of Connected Mobility, HealthTech and Photonics 4.0, they have the chance to win the CODE_n CONTEST under the motto “Unveiling Digital Disruption”, as well as 30,000 euros in prize money. As the technology partner for leading global financial institutes, GFT itself is sponsoring the FinTech cluster. By the way, the new.New Festival in Karlsruhe will also be the venue for the next FinTech Talk.

I’m looking forward to some exciting discussions at the ZKM in Karlsruhe – and with you here in this innovation column. We have to learn to stage new products and technologies better – people are always keen to know what the future will bring. We need to work passionately on this more in Germany.

Inspiration and excitement – these are the keys to the future.

Ulrich Dietz has headed GFT since its foundation in 1987 and is now leading the company into the future as CEO of GFT Technologies SE. In addition to his role as head of GFT, Ulrich Dietz serves on various national committees. In 2013, he was appointed Vice-President of Bitkom. In this role, he actively promotes the development and expansion of international relations in Germany’s ICT industry. In this innovation column, Dietz will be writing regular comments on digital change, start-ups, IT trends, new business models and networked daily life – including his own personal impressions.