We interview Daniel Marovitz, Head of Product Management for Deutsche Bank Global Transaction Banking, about technology trends in the transaction banking arena and some of Deutsche Bank’s latest products. We also discuss the continuing market turmoil and the impact on corporate treasurers.

What are your areas of responsibility?

I took on the role of Head of Product Management last September. At that time, we moved trade into the product management function, which until then had predominantly been focused on cash. Cash and trade are now under my responsibility and we have also made some changes around the strategy and management of the overall technology and operations groups and infrastructure. Although I am not directly responsible for product management relating to our trust and securities services product, I do have responsibility for the interface with our internal technology group and operations group across everything we do in the transaction bank.

This was a pretty big change structurally and there were a number of reasons for this restructuring. One is that in the transaction banking business, the percentage of revenue that is consumed by technology and operations and infrastructure is significant. Particularly as the Global Transaction Banking (GTB) platform is now a mature business and has gone through a huge amount of growth, we felt that it was important that somebody sitting on the GTB executive committee had a holistic view across what we were doing with technology and operations. We recognised the opportunities for synergy.

In your new role, on what areas have you been concentrating?

It has become clear that some banks offering transaction banking services do not always make life as easy as possible for their customers. Moreover, in general, liquidity issues are becoming more critical. As companies find it more difficult to tap the capital markets whenever they want, people are instead more focused on squeezing every last penny out of the system. That means they are focusing on cash, trade instruments and liquidity. Those corporate buyers are confronted with the fact that a lot of what banks offer them is really complex, with lots of different legal agreements and different jurisdictions, different legal agreements for different products, different systems which don’t talk to each other, different passwords and lots of geography-specific systems that do not offer a global perspective.

An important element of our strategy is and will always be to make life as easy as possible for our clients. While that might sound like a pat thing to say, we think this differentiates us from some of our competitors. Deutsche Bank is well-known for its product quality.

We have taken a number of steps in order to achieve this ease for the client. For example, we have a system for enquiry investigation which serves corporates and we have another system which largely serves financial institutions (FIs). We also have an electronic banking system, db-direct internet (db-di), which has historically been focused more on corporates but is increasingly being used by FIs. I am responsible for these three systems and have been tasked with pulling them all together: firstly, by aligning the client interfaces, so the client does not have to access different systems for initiating a payment and another for checking what went wrong with the payment, and secondly by tying all the pieces together from a back-end perspective.

What cultural changes have you implemented?

I have been drawing attention to trends and developments beyond the world of transaction banking. Often in the commercial banking world people tend to think that what happens in the retail consumer world isn’t very relevant. I think that’s misguided because corporate treasurers are also consumers, they know what’s happening in the general world of the internet, they understand eBay, they use Google, they have an iPod and, therefore, they have a sense of what’s possible and how systems behave.

The issue is that what happens in the consumer world tends to be much more advanced than what happens in the commercial world. It is clear why this is the case: certain dot-com companies have millions of clients, whereas there are only a few hundred thousand corporates. So by definition the commercial banking’s user basis is constrained since what you can learn is based on just thousands of customers vs. the feedback of millions of customers.

So what does that mean for us? An area that we are focusing on is the need for respecting people’s time. Certain consumer-based technology firms are known for building products which don’t require the reading of manuals to understand them. Could we achieve that with products for corporate treasurers? We will have to wait and see, but it’s a useful benchmark.

How far along are you with this?

We started this effort back in January 2008 and it’s influencing much of what we do. We have hired some people with retail banking experience, particularly on the portal and the access channel side. Someone who has been working on producing online banking applications for a retail bank serving millions of customers has a different view of things than somebody who works to serve 50,000 corporate clients. Those are some of the tangible items that we’re focusing on and you’ll start to see more advances as we get into next year.

Could you talk me through some of the new products you have been developing?

Let’s start with the Single Euro Payments Area (SEPA). When SEPA began coming down the pipe in earnest a few years ago, there were lots of banks who chose to ignore it, or chose to fight it, or chose to do the minimum. In part because we represent absolute dominant share in the euro, we embraced it enthusiastically. We realised that although banks are not necessarily excited about SEPA’s impact on their bottom line, as it controls and constrains pricing, it could be an enormous opportunity for us to be a consolidator. Our approach to SEPA is: whether you’re a corporate or whether you’re another bank, you don’t need to worry about it. If you work with us, we take care of SEPA; we make all the pain and complexity go away. This has been a very successful strategy.

We have banks and corporates from all over the world who have SEPA issues, and they come to us because they know that our technology is robust. We didn’t make a few system tweaks around the edges – we actually put in a brand new SEPA engine, which went live in January 2008. In fact, our direct debit technology was also completed in January 2008, even though direct debits are not scheduled to come on stream until November of next year.

It’s definitely bearing fruit for us in terms of the level of engagement and the kinds of dialogues we’re having with clients, particularly in places where we may not have been so strong in the past. Now that the nation in Europe has become irrelevant from a SEPA perspective, there are lots of people looking to us as a SEPA leader. The fact that we are a very strong German player is irrelevant to them. Instead, what they care about is that we are a strong euro player and a strong SEPA player and we can help them throughout the Eurozone.

Are you finding that take up is low so far?

SEPA volumes are definitely low but we believe that this is well understood in the industry. That said, the growth rates month on month, although coming from a low base, are pretty impressive and you do not have to extrapolate out too far in the future for it to be a significant part of the payments universe.

What other products have you developed?

FX4Cash, our newly-launched global cross-currency payments solution, is a product of which we are particularly proud. FX4Cash was created as a joint effort across two fairly distant parts of Deutsche Bank and it’s a highly powerful combination.

FX4Cash, a payments product rather than an FX product, focuses on ease of use and this sophisticated, 30-second tradable FX capability is embedded into our payments system. A transaction banking client of Deutsche Bank is now getting access to the leading euro clearer and one of the best dollar clearers in the world with a very sophisticated electronic banking interface which scores high marks in industry polls. Behind this solution is the world’s largest FX engine. This product exhibits the enormous strength of Deutsche Bank and the interest has been explosive – it’s been really exciting to see.

Who is this new product aimed at?

You name it – it is attractive to many parties. For a corporate treasurer this is an excellent tool, particularly on the high volume, low value transactions side, which often ends up with payments coming in of various types, and a need to make payments in currencies that are not core currencies for you. If a client is using our e-banking portal, db-di, with the click of a button or two you choose the currency pair, you choose the amount, you click for a rate and you secure a rate which is good for 30 seconds. This is a real market rate – it’s not a rate that’s set once a week or once a month or once a day, which is what some of our competitors are offering. At the moment, we’re up to 92 currencies and we’ll have over 100 available in 2009.

Looking at the industry more generally, how is the financial crisis affecting your clients in terms of liquidity?

It’s interesting to see how the market is changing from a macroeconomic perspective. A year ago, cash management and liquidity issues were technical issues that treasurers were concerned about and CFOs largely weren’t – and CEOs rarely needed to think about them. Now, when evaluating what’s happened to the inter-bank lending market, when you see the world’s major currencies making 5%, 9%, 12% shifts on a daily basis, all of a sudden these issues, which before were technical and procedural, are now critical.

The market shift has caused banks and companies to think about their cash in a very different way. Their tolerance for setting aside a pool of stranded liquidity for weeks and months has gone down, and companies are, sensibly, much less confident that they can tap the capital markets to raise equity or debt easily and at an acceptable price. These dynamics drive CEOs and CFOs to look at their treasurers and say, it is important to extract every penny efficiently out of the organisation that we run because if we tap the capital markets it’s going to be at a cost – or we may simply not be able to do so.

All of a sudden, treasurers are probably in a position that they have not been in for a long time, where they are even more directly involved in managing the viability, stability and sometimes even the survival of the company.

What are people asking about in particular?

Stranded liquidity is an issue. How sweeps are handled is also important because treasurers want to maximise the return on their money, and they don’t want to have money sitting idle. Whereas before this may not have been a central concern, now they care a lot.

They care about security, and there is a ‘flight to quality’ that has benefited Deutsche Bank. The crisis has validated our diversified, stable universal banking model. Companies are still concerned about where the market will head and they are looking to work with banks that they are confident will be there in the future.