Banks face margin squeeze as tech groups capture client interface - Deutsche Bank CFO

Gerald Podobnik, chief financial officer of the investment bank and corporate bank at Deutsche Bank, warned that financial institutions risk being relegated to commoditised back-end providers unless they respond decisively to the growing influence of technology firms.

Speaking at the Eurex Derivatives Forum in Frankfurt, he described “tectonic shifts” reshaping global finance and said the industry must act to protect its position in the value chain.

Podobnik highlighted the financial firepower of the technology sector. Nvidia’s market capitalisation now exceeds $4.5 trillion (£3.3trn), surpassing the combined market value of the largest US and Canadian banks. Silicon Valley, he said, is increasingly targeting financial services.

“They own the customer interface, and thus the relationship,” he said, warning that banks could become “invisible, commoditised” infrastructure providers if they fail to adapt.

The transformation is most visible in retail. Digital-native customers expect services to be fast, seamless and embedded in the platforms where they already operate, from gaming to social media and digital assets. Payments are increasingly device- and platform-led rather than bank-led.

Despite the competitive pressure, Podobnik argued that banks retain advantages that technology firms cannot easily replicate.

Regulation, he said, should be seen not only as a constraint but as a barrier to entry that underpins systemic stability and customer protection, particularly since the 2008 to 09 financial crisis.

Safekeeping of assets remains another core strength, rooted in centuries of experience in custody and balance sheet management.

Most importantly, trust continues to differentiate banks. “Transactions may be automated, but human relationships are not,” he said, noting that during periods of stress such as the Covid crisis, established relationships proved decisive.

He outlined a dual strategy of “serve and compete”. Banks should serve technology companies by providing financing, capital markets access, risk management, payments and custody, tapping into one of the fastest-growing global fee pools. At the same time, they must compete for the customer interface, particularly in retail, by delivering faster, more intuitive and creative services across emerging digital environments.

Tokenisation and AI

In wholesale markets, Podobnik identified tokenisation and artificial intelligence as the most significant opportunity sets.

While AI-driven revenues remain at an early stage, tokenisation is already altering parts of the financial system. Distributed ledger technology is moving beyond experimentation, enabling real-time and transparent settlement processes.

He argued that the industry’s focus should extend beyond efficiency gains towards new revenue streams, including digital asset custody, agency roles for tokenised securities, transparent carbon markets and links between tokenised and traditional finance.

Stablecoins form one such link. Market capitalisation has risen from around $5 billion in 2020 to more than $300 billion, supported by regulatory requirements in the US and EU for full reserve backing.

The market is dominated by dollar-pegged issuers such as Tether and Circle, which account for the majority of global supply. Podobnik said Europe needs a credible alternative, cautioning that dollar-linked stablecoins effectively expand the reach of the US financial system. He also emphasised the importance of distinguishing stablecoins from traditional bank deposits, which remain a key source of funding for Europe’s banking sector.

Three ingredients for the future

Podobnik set out three priorities for a resilient European financial sector.

The first is innovation-friendly regulation, providing clarity that enables new business models while maintaining stability.

The second is access to computing power and supporting infrastructure, including data centres, chips and electricity, physical foundations often overlooked in discussions about digital transformation.

The third is cultural change. Institutions must adopt more collaborative and agile approaches, learning from technology firms’ rapid prototyping, openness and tolerance for failure.

“Tech companies come up with ideas, execute proof of concepts and then scale up in an uncompromising way,” he said, contrasting that with the multi-year project cycles common in established organisations.

“The opportunity for us is to bridge the real and the digital world, combining the trust embedded in regulated finance with the innovation capacity of the technology sector.”