Dhe Deutsche Bank senses new financing needs from companies and has hired fintech pioneer and payments expert Jochen Siegert to do this. Siegert already worked for Paypal and Mastercard and is currently the CFO of the supplier credit platform Traxpay, in which Deutsche Bank has just acquired a minority stake. From August 17, Siegert is to build digital marketplaces (“platforms”) in the Deutsche Bank business division and develop financing solutions for them.
Stefan Hoops, head of the corporate division of Deutsche Bank, explains the meaning behind this as follows: “From many discussions with our customers, we know that machine manufacturers, for example, like to bind their customers more closely. And many customers shy away from investing in the Corona crisis. ”In order to find a good financing solution for both sides, a bank would have recommended machine leasing or machine hire purchase in the past, says Hoops in an interview with F.A.Z. “But today there are completely new possibilities for usage-based financing, because machines are networked with each other in the age of the Internet of Things and constantly exchange data.”
Rent instead of own
What consumers already know from platforms like Netflix, Deutsche Bank also introduces for its industrial customers: own less equipment, instead rent more machines and only pay for use. Industrial networking and the resulting data already allow technicians to know the intensity of use of a machine and to deduce the need for maintenance or the useful life from it. But translating this data into cash flows and then into financing will be the challenge for banks. “This trend is being promoted by our corporate customers. As Deutsche Bank, we want to be able to deliver the financing solution 4.0 for Industry 4.0,” says Hoops. It would take a few more months.
The marketplace is currently being built
First of all, the basics between manufacturers and users have to be clarified on the marketplace: Who determines who has used what for how long or how intensively? Who protects against hacker attacks? And in whose balance sheet is a rental machine paid for according to use booked as an asset – with the manufacturer or with the user? “The market is just emerging. With 30 pilot customers, lawyers and accountants, we are in the process of setting a framework for this new ecosystem,” says Hoops. One thing is already clear: “There will be different financing models depending on the type of machine,” says Daniel Schmand, head of trade finance and corporate loans at Deutsche Bank.
Data becomes cash flows
The cash flows differ in whether, for example, a forklift can be transported and used by several tenants, or whether a machine is permanently installed at a tenant. And Deutsche Bank will then decide which financing solutions it offers its industrial customers on the platform. First, you want to offer your own loans. But insurers, private equity investors and family offices are also likely to be interested in this form of German SME financing as investors. “One possibility could be to bundle similar financing and then place it on the capital market,” Schmand says in an interview with the F.A.Z. ahead.
Securitization as an option
That will start slowly, but the potential is great, says Hoops. “Financial innovations emerge over time. But this market of usage-based rental financing will establish itself in the coming years. It is therefore important to set the rules correctly right from the start. This is the only way to ensure that the market will function in the long term and that undesirable developments such as in the run-up to the financial crisis can be prevented. ”At the beginning of the millennium, banks had bundled real estate loans. A few years later, nested derivatives were launched on this, which ultimately triggered the financial crisis as subprime loans. Of course, this should not happen on the Deutsche Bank platform.
Schmand can imagine that the factoring business will also switch to the division headed by new signing Siegert. “For many companies, the Covid crisis is less about profitability and more about liquidity. That is why new digital marketplaces are now emerging, with which companies sell assets tied up in the balance sheet – be it machines or payments not yet made by suppliers – in order to secure liquidity, ”concludes Schmand.