Banking on staying ahead of the trends

Deutsche Bank is looking to the future

Deutsche Bank is one of the largest investment banks in the world. It employs more than 75,000 staff and offers business and retail services all over Europe. Stefan Sutter, the bank’s head of advisory IT, talked to Computing about the role of technology in the changing financial services industry.

What are the main trends in the banking sector?

The biggest thing at the moment is the impact of the internet. Online banking in the retail sector has shot up by 200 per cent in four years and we have seen similar growth in the securities and commodities markets.

So the challenge for us is to think about how we can support this growth, at marginal costs, without adding new components and new people in the back office.

The Single Euro Payments Area (Sepa) ­ under which money transfers between
the region’s banks will be treated as domestic ­ comes into force in 2008. Does the directive constitute a major change for Deutsche Bank’s IT infrastructure?

Sepa will heavily affect the European market because there will be consolidation.
Deutsche has already announced that it will reduce the fees for those using Sepa payments and there will be competition between all the big banks that want to grab business.

And of course, it is only possible to reduce fees if everything is automated.

How are preparations going for the other major piece of incoming EU legislation,
designed to create a single market for financial services?

If the Markets in Financial Instruments Directive (MiFID) is carried out correctly, there will be more transparency and an opportunity to attract more customers. It is essential that processes are automated because doing it all manually increases costs.

There is huge pressure because the regulators came late with the requirements, leaving very little time for testing either the software or the processes.

We started our programme last year. When we talk to other banks, some are ahead of us and others have waited too long. It will take some time to get it right and I do not believe everyone will be in perfect shape by the time it comes into effect at the start of November.

Is security still at the top of the priority list?

Everyone was raving about security last year, especially with online banking and all the phishing attacks and trojans.

It is becoming a bit quieter now, but that is only because the next storm is brewing. We have not seen so-called “man in the middle” attacks yet, for example, but they are coming.

The problem is that, like everyone else, we are always running behind. Security is cyclical so we don’t see it as a competitive differentiator. Banks are all in the same boat and trying to find a solution together.

It worked well with phishing when everyone worked together and it will be wise to do the same with upcoming problems.

Mobile banking services are often tipped as the next big thing. Is Deutsche Bank pursuing the model?

Like everybody, we launched a mobile service during the hype cycle. Unfortunately, it wasn’t very user-friendly.

Now that there is a convenient browser on mobiles, it becomes more of a necessity. Take-up will be better this time around and in the future people will do more and more banking with a smart device.

What technology projects are the bank involved with at the moment?

We are industrialising our processes. By that, I mean we are looking at what car manufacturers have done and trying to learn from them about how they standardise their platforms and shrink their margins.

We are also looking at integration with the back end to make it a straight-through process. Previously things have been done partially manually in the back office.

Do you run your IT in-house or use outsourcing partners?

Our mid-range infrastructure in continental Europe was outsourced to IBM four-and-a-half years ago as part of a 10-year contract. The aim was to obtain more flexibility around our variable costs, but in the end what you want is real business on
demand.

Overall it has been a big help for us because IBM built two huge data centres for us in Germany ­ constructing data centres is not our business. The situation means we can move more to a utilities base, whereas before we had the fixed costs of the environment and the people.