Deutsche Bank wants in on the fintech start-up scene. So it's going incognito

December 6, 2019 0 By JohnValbyNation

Deutsche Bank wants to level the playing field with the start-ups that want to disrupt the finance industry. But it wants to keep the effort at arm’s length.

The bank has set up a start-up factory called Breaking Wave. The name and other features of the venture are intended to make it easier to attract staff who wouldn’t otherwise want to work for Deutsche Bank, said Thomas Nielsen, who oversees new ventures at the German lender.

“They have an unfair advantage,” Nielsen said of financial technology companies. “And by the way, they’re building better products than we do. They’re solving a problem that needs solving and they’re doing it faster and better than most of the big companies do, which annoys the heck out of me.”

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Banks around the world are partnering with fintech firms and developing in-house expertise to ensure they’re not left behind as clients seek quicker and simpler electronic applications in place of traditional banking services. Yet they can face difficulty in attracting talented staff, while their size and complexity means they’re often hamstrung by regulation.

Thomas Nielsen, Deutsche Bank AG

Nielsen said the company can pursue a broad range of financial services, but suggested that the way it can distinguish itself from smaller fintech firms is by catering to larger companies with complex business that stretches across borders.

“If you have just graduated and you have a job offer from Microsoft, from Apple, from Google, Facebook and Deutsche Bank, I don’t think you choose Deutsche Bank,” Nielsen said at a conference in Frankfurt on Wednesday. “I just don’t think you do. We don’t have that brand name yet.”

That’s why Deutsche Bank’s new start-up factory has its own brand, physical space and email server, even though it sits with Deutsche Bank’s offices in London, he said. That means it isn’t all that comparable to incubators at other banks, Nielsen said.

“What we care about is to not have the same restrictions on what software, what processes, what culture, what payroll do we want, so we want all the benefits of a fintech and the upside of having Deutsche Bank” as its backer, Nielsen said. “This is not hundreds of millions of euros, it’s a small team,” he said.

The company will have a maximum workforce of 75 and won’t staff any project with more than 15 people until it’s “validated from a commercial and technology perspective,” Nielsen said. Breaking Wave has a “bespoke risk and control framework” to keep it in line with Deutsche Bank policies and regulation and doesn’t have a banking license or the intention to engage in trading, “so all our financial risks do not apply,” he said.

Many of the projects started in the factory will probably fail to become “big” and the majority of them may be spun off to investors, Nielsen said.