Deutsche Bank will become the first big bank to systemically distribute deposits from rival banks through its branch network and wealth management business, in another shift towards open banking in Europe.
The move comes as Deutsche Bank seeks to improve its client offering and fee income at a time when banks – especially in Germany – are facing a stark choice between charging negative rates to depositors or suffering even lower net interest margins.
Germany’s biggest bank, which has a loan-to-deposit ratio of about 75%, is the single-largest holder of excess reserves at the European Central Bank (ECB), according to research by JPMorgan.
Deutsche bought 5% of deposit-marketplace fintech Deposit Solutions in September, the same month that the ECB cut its deposit rate to -0.5%.
It made the platform available on a white-labelled basis with the launch of its Zinsmarkt deposit offering two-and-half years ago, initially through its in-house online broker Maxblue, but previously only on a self-directed basis.
Now Deutsche is moving beyond the test phase, launching active distribution of Zinsmarkt at branch level, and to wealth management clients – in other words, to those most likely to be charged negative rates.
This allows clients to deposit in third-party banks without leaving Deutsche Bank’s online portal. The branch and wealth management salesforce have been trained to help clients consider Zinsmarkt and to start using it.
Tim Sievers founded Hamburg-based fintech Deposit Solutions in 2011, gaining investment from Peter Thiel, the German-born co-founder of PayPal, among others.
He hopes the marketplace’s full launch in Deutsche’s network could now help widen industry acceptance – beyond top management – of an open-architecture model in banking, even for deposits.
“This is a big proof of concept and it’s very visible,” Sievers tells Euromoney. “Deutsche Bank is doing this with a solution that’s performing.”
While other big banks have considered offering third-party deposits – and in some cases rowed back on plans to do so – regulators and technology are pushing banks to distribute a wider range of third-party product providers, according to Sievers.
“Negative rates add momentum to the discussion,” he says.
In January, Hamburg private bank MM Warburg said it would start offering clients third-party deposits using Deposit Solutions, following Munich-based Merck Finck Privatbankiers in August.
Sievers adds that about 100 of German cooperative banks are doing so, too.
Collectively, the 875-strong cooperative banks are Germany’s second-biggest retail network, after the 380-strong public savings banks, but banks are still steering clear of imposing negative rates on smaller depositors, even in Germany.
A source at Deutsche says the Zinsmarkt rollout is not designed to coincide with a new push to pass on negative rates
While Deutsche is by far the biggest wealth manager in Germany, Sievers further hopes this week’s launch will encourage other private banks and wealth managers to use the product: perhaps also in Switzerland, which also has negative rates and where Deposit Solutions launched its proprietary point-of-sale channel Savedo last year.
A leap in distribution capacity, meanwhile, could encourage more banks to use the platform for their funding.
The next step for Deutsche’s Deposit Solutions partnership – perhaps in a year or two – will be to roll out the platform to Postbank, which has a separate IT system.
Thanks to Postbank, Deutsche is Germany’s biggest standalone retail bank. Postbank accounts for about €125 billion of the €290 billion-odd of Deutsche’s total deposits in retail and wealth management, most of which comes from Germany.
Corporate depositors could also be directed towards the Deposit Solutions platform at Deutsche eventually, bringing onboard a potential pool of about another €260 billion.
Rich Germans have a predilection for deposits, which means that German banks – and especially Deutsche – need to deal with the negative-rates challenge more proactively than others. Germany, indeed, is the origin of a vast majority of the €25 billion mediated through Deposit Solutions, €2.5 billion of which comes from Deutsche.
Negative rates are a crucial factor for firms such as Deposit Solutions, especially if more banks start to charge for deposits. The company says it has not seen a notable decline in business volumes and has lost no partners since Covid-19 spread to Europe.
A source at Deutsche says the Zinsmarkt rollout is not designed to coincide with a new push to pass on negative rates.
Nevertheless, corporates are already paying negative average rates in Germany, according to research by Morgan Stanley. Since September, Deutsche has followed other big banks in publicly suggesting its biggest retail depositors must pay.
Deposit Solutions’ Zinspilot – its proprietary distribution platform in Germany – has mediated about €15 billion in deposits, and mostly to banks outside Germany. It even has a high-yield offering from a bank in Greece, ABBank.
Partner point-of-sale banks, however, can decide whose deposits they distribute.
Zinsmarkt is consequently sticking to banks from what might in Germany be perceived safer countries. Two are banks based in Germany (Deutsche Pfandbriefbank, and local Crédit Agricole subsidiary CreditPlus) and the other is from France (My Money Bank, owned by Cerberus Capital Management).
Raisin, also German, is the closest equivalent to Deposit Solutions in Europe. Based in Berlin, it has drawn in about €20 billion in deposits. It has similar hopes to partner with private banks and wealth managers, and became the first to use one of the savings banks as a distributor in January.
Commerzbank distributes third-party deposits to corporate clients through Raisin, although it does not do so to retail or wealth management clients.