New business models: How banks want to make money in the future

From blockchain-based payment solutions to start-up financing: In order to survive in the long term, banks are breaking new ground. Commerzbank not only saves, but also tries new business ideas.

Last year, Commerzbank made a profit of 430 million euros and is thus back in the black despite the costs of the ongoing restructuring of the group. The year before, however, the bank had closed with a loss of around 2.9 billion euros. “We delivered what we promised in the first year of the transformation,” said bank boss Manfred Knof when the business figures were presented. However, 2022 will be a crucial year in the implementation of the new strategy.

For years there has been one round of savings at Commerzbank after the other. Of course, it’s not enough to downsize and cut costs, Knof summed up the bank’s dilemma himself. New business ideas are needed.

There is no shortage of ideas

For example, the Mittelstandsbank is experimenting with the blockchain and developing innovative payment solutions for supply chains: “Imagine you have a machine builder in Germany who delivers a machine to Nigeria, then the buyer wants to be sure that he really gets it before he pays,” explains Angela Koll, who is responsible for trade finance at Commerzbank.

According to Koll, thanks to the blockchain, the money flows automatically as soon as the machine is set on its way – comprehensibly for everyone. Those involved save a lot of paperwork, time and money. Ultimately, the financial institution sees potential here and wants to earn money from the new payment solution through fees. So far, however, the project is still in the pilot phase.

With opening steps to new customers

Many banks are also increasingly opening up to other companies, such as Deutsche Bank. For example, if customers look around for current accounts on comparison portals, they can do it there without going through the bank, explains innovation manager Joris Hensen. This was made possible by special technical interfaces: “This opening gives you the opportunity to reach customers at moments when you couldn’t make them an offer before,” says Hensen. In this way, numerous new customers have already been won.

Banking apps are also becoming increasingly important, for example at ING. “The smartphone is the bank branch in your pocket,” says press spokesman Alexander Baumgart. Three million customers now use the app regularly, and not just to check their accounts. For example, they used it to conduct more than half of their securities transactions.

Bankers as sustainability consultants?

The Frankfurter Volksbank is particularly committed to the issue of sustainability: if customers buy an e-charging station there or renovate an old building, the bank not only wants to finance it, but also offer advice. For example, it cooperates with the local municipal utility, a regional electrical company and energy consultants.

CEO Eva Wunsch-Weber sees important areas for the future in this. “The banks’ business models will also change as a result, and we want to be pioneers,” says Wunsch-Weber. Since the start 100 days ago, thousands of consultations have been held. According to the bank, however, it has not yet been able to earn money directly from this and has no plans to do so.

The fact that a small cooperative bank from the Odenwald has become a major financier of start-ups is causing even greater waves in the financial sector. The United Volksbank Raiffeisenbank from Reinheim cooperates with the Berlin company Ratepay, a specialist for online installment payments, among others. There is no interview on request from the bank. And what these cooperations bring in remains open.

The crux of making money

This is where it becomes clearest how the new, often digital business areas call into question a lot of the established, such as the notion of regionality. At the Association of Cooperative Banks, it is said that there is a tension because digitization knows no geographical limits. At the same time, many Volksbanks and Raiffeisenbanks are deeply rooted in the region. A problem that of course the savings banks have in equal measure.

In the end, it’s also about making money. The supervisors of the European Central Bank (ECB) were also very clear at their annual press conference a week ago: “The banks should understand where their strengths lie and concentrate on the business areas with which they can make the most sales,” warned the top bank Banking Supervisor of the ECB, Andrea Enria. For years, the European banks have been financially rather weak.