Open Banking in Germany: Deutsche's perspective

This interview was originally published in the Open Banking Report 2021. Click here to download the report.

What stage has Open Banking reached in Germany?

In reviewing Open Banking in Germany, it’s worth considering where the industry is today and how it is starting to evolve. Most Open Banking business models still rely heavily on the idea of opening payment services or linking existing account services and exchanging bank data (mostly accounts and transactional) with third parties who can then leverage it to provide additional services.

However, the industry is moving beyond this – and the questions have become: What can we do if we open up more? What new propositions can we build for customers by making banking and financial products available through APIs? And how can this help to create an unbroken customer journey?

Several market players are game changers, offering a full suite of self-service API-based products to bank and non-bank brands alike. This approach opens up multiple opportunities for banking partners who can – regardless of whether they hold a banking licence – begin to embed digital banking, financing, and payment services directly into their existing product flows and customer journeys. Customers to get a richer, more seamless experience without having to hop between multiple channels.

So our discussions should extend beyond the PSD2 framework – as the concept of Banking-as-a-Service and embedding financial services in the customer journey is the natural evolution.

What challenges does Germany face?

To enable this innovation, APIs are key. What we still see in the market is the unavailability of stable and standard APIs across the financial services industry.

Traditional banks have taken – and will continue to take –longer to open their services through APIs. This isn’t just a problem of agility – several factors must be taken into account. For example, how do we maintain visibility and control to manage key processes (such as risk and compliance checks) at the right time in a financial transaction involving multiple parties and their customer journeys – many of them far removed from the bank itself. 

Since this is directly related to the licencing aspects of the bank and safeguarding the financial and social health of our economy, it’s not easy to achieve. Careful planning and creation of new digital risk and compliance-related processes are required.

From a consumer perspective, let’s add another interesting spin – Germany’s traditionally cash-based economy. This innovation could also offer a great opportunity to unlock new value propositions that would otherwise be unavailable in a cash-based system and hence can work as a catalyst for consumers to adapt to more digital methods of payments. For example, today’s ease taxi travel reflects the innovative embedding of digital payments/fare-split capabilities provided by Uber and others.

Will regulation continue to play a key role?

The UK’s exit from the European Union has sparked debate about who will house Europe’s next financial hub in the longer term – and Germany is well positioned. Regarding regulation, this has also created an interesting dynamic. When it comes to the API economy, and how this can unlock Banking-as-a-Service, it is unclear whether the UK and EU will align in their focus, or whether the regulatory environment will create a competitive landscape.

Regardless of what follows, regulation will continue to play an important role. As mentioned, a key challenge with API business banking models will be when we reach a point where banks no longer directly control how their services are being consumed. Suddenly, they are dependent on a party that could be three or four times removed. So, regulations will need to evolve to protect consumers and third-party providers as well as banks. In this world, real-time transactional visibility and auditability across multiple parties will be key.

Finally, the concept of data sovereignty will be central in addressing some of these challenges. The idea of self-sovereign data – something the EU is driving and creating enabling capabilities for – could serve as a basis for establishing and enabling this data sovereignty across the financial system.

Who benefits most Open Banking?

Right now, solutions are targeted more towards SMEs than large corporates. As this sector has less to spend on individual integrations with banks, companies look for services tailor-made for their needs, whether that’s embedded financing, payments, or insurance. To achieve this, the key is in evolving our traditional product development approach to accommodate end customers’ needs so we build ‘exciting digital customer journeys and solutions’ for both our direct clients and their end customers as well.

From a bank perspective, what excites you most?

There’s a perception that Deutsche Bank and peers are unable to move quickly; people often ask me, why don’t you join a fintech or startup? While these kinds of newcomers can be nimbler than traditional providers, this slightly misses the bigger picture. These companies often have large, operationally resilient organisations such as ours as their backend providers. So banks should lead the way – and Deutsche Bank is not just saying, but also doing. We are driving change both in Germany and across Europe – and we hope that positive steps, such as our 10-year partnership with Google Cloud to co-innovate the next generation of cloud-based financial services, will continue to inspire financial services industry.

About Deeptasree Mitra

Dee currently heads up the API Strategy and Banking as a service/Embedded Finance topics for Corporate Bank. Previously, she led the Public Cloud Strategy for Corporate Bank in DB and prior to that she headed up the Payments infrastructure and Data analytics and modelling domains for the UK regulator, the Bank of England.

About Deutsche Bank

Deutsche Bank provides retail and private banking, corporate and transaction banking, lending, asset and wealth management products and services, as well as focused investment banking to private individuals, small and medium-sized companies, corporations, governments, and institutional investors. Deutsche Bank is the leading bank in Germany with strong European roots and a global network.