WeOwn continues its live conversations with experts in digital assets, finance and banking. For our second episode, we invited Richard Manger , the bank manager with more than 30 years of experience in top management positions at DZ BANK Group in Germany, Switzerland and Luxembourg. Today, Richard Manger holds supervisory board and advisory positions at banks, family offices and funds of high net worth individuals.
In this live talk, hosted by Albert Brenner, Chief Commercial Officer at WeOwn, Richard discussed, among other topics:
– General expectations of banks and wealth managers in the current pandemic, war, commodity crisis, inflation and volatile investment markets [00:04:24]
– Starting points for how banks and asset managers can leverage digital assets and blockchain technology to meet their clients’ expectations and differentiate themselves in the market [00:08:21].
– Which approaches and use cases are most promising from the perspective of wealth advisors and family offices [00:11:16].
– The state of digital asset projects in Germany. How can banks currently proceed with blockchain adoption – wait or invest? [00:11:45]. – Why is Switzerland already further ahead in blockchain adoption in the financial sector and what are the prospects for the German market [00:16:40].
Disclaimer: This is not investment advice.
Below you can find the text version of the interview with Richard:
WeOwn: Dear Richard, I’m glad you took the time to talk to me today about the transformation of the banking industry through blockchain and digital assets. I’m sure many in the banking sector know you from your last position as CEO of DZ Privatbank. For everyone else, could you please introduce yourself briefly anyway?
Dear Albert – I’m happy to do that. After more than 30 years in leading positions in the DZ BANK Group in Germany/Switzerland/Luxembourg, I am currently focusing on supervisory board and advisory mandates for banks, family offices and wealthy clients. As always, this is about returns and costs and thus also about setting the right course for successful market positioning in the context of digital challenges. So very close to our topics like distributed ledger technology/blockchain and digital assets.
WeOwn: You have gained an equal amount of experience with private and institutional investors. What are the general expectations of investors from banks and asset managers in the current situation of pandemic, war, commodity crisis, inflation and volatile asset markets?
Actually, the same expectations as during the many crises in the last 30 years. Investors expect far-sighted analytical, trustworthy and competent/holistic advice – paired with empathy and understanding/consideration of new technologies, and increasingly also taking into account their own social responsibility. Opportunities and risks of digital/crypto assets and sustainability/ESG issues are naturally part of this.
Whereby the area of tension and the accumulation of current challenges has certainly increased in complexity compared to previous crises. Traditional solution patterns are unfortunately less and less applicable. But with an open mind, one can use the further developed capital markets and technologies and the resulting new variety of offers to be able to advise and invest in line with expectations.
WeOwn: Through your activities as a board member and supervisory board member, as well as a keen observer of trending markets, what starting points can you identify for how banks and asset managers can use digital assets and blockchain technology to meet their clients’ expectations and differentiate themselves in the market?
From a European banking perspective, the legal and regulatory framework for using Blockchain technology and Digital Assets has been and is being created very slowly. As a result, it is primarily new FinTechs that have taken up these topics and met customer demand. Nevertheless, the established banks actually have the best prerequisites for an integrated and sustainable implementation, both in terms of investment power, customer base and position of trust. At the last WEF in Davos, numerous analyses and studies were published which assume that by 2029, about 10% of the global GDP will be tokenized – the value amounts to more than 10 trillion US dollars. In view of this potential for digital assets – which today are commonly equated only with investments in the well-known cryptocurrencies – a revolutionary development is expected for the financial world. High cost savings through efficient digitalized processes in asset management for asset managers and the fund industry and a changed, expanded investment spectrum is only part of it. Based on the latest EU regulations, most financial players, companies and investors will move from a concept study to implementation. The positioning opportunities for banks and asset managers are manifold and now to be redefined – from advisor/broker of digital assets to operator of a trading platform for new digital capital sources and investment forms – new business opportunities arise.
WeOwn: Which approaches and use cases do you think are most promising from the perspective of wealth management consultancies and family offices?
Investors and wealth management clients have always expected -in addition to top returns and cost-effective settlement and custody solutions- from their banks/wealth managers and family offices holistic wealth and investment advice as well as a consolidated view of all assets. At best, this could be achieved with the well-known “financial assets”. In the future, so-called non-financial assets can also be included in the analysis/advice/assessment/investment. This enlarges and completes the asset base for consulting and fee generation. With the new digital asset base, new advisory approaches and revenue streams can be developed – far more and targeted than we have seen with cryptocurrencies in recent years. For many players, this can become a trade-off for lower costs/margins in transactions/administration and custody of traditional client assets. Especially in the current market environment, the pressure is on for higher settlement efficiency, same-day trading/booking, and low costs on the customer side. Today’s fees and services will also be questioned in light of DLT and new standards will be established.
WeOwn: In the last two months, we took an intensive look at the state of digital asset projects in Germany as part of a market analysis and examined around 100 projects in the D/A/CH region. It could be seen that during the steadily rising prices of cryptocurrencies, some banks initiated first pilots. At the very moment, fewer projects are being newly launched or only a few banks are jumping onto the arriving train. Conversely, a few innovation leaders stand out among banks that continue to implement their digital asset strategy very intensively. What advice would you give banks on how they should proceed with the topic right now – wait or invest?
No bank or asset manager will be able to avoid actively dealing with the topics in order to find answers that are suitable for their current and future positioning. Which investments are called when follows the proven pattern “structure follows strategy”. If the current forecasts regarding the “disruptive character” of Web 3.0 for the financial industry and the market potential regarding crypto securities and security tokens (with a much higher potential than the known cryptocurrency solutions) is only halfway coherent, no market participant will be able to close its mind to the technology and the resulting advantages for institutional and private investors. New standards are also being set in the equity and debt financing of companies. Whether as a “digital asset follower” or even as a “digital asset leader”, the possible market positioning remains to be decided on an institution-specific basis. I would very much like to see the established banks/asset managers succeed – with far-sighted investment strategies – in actively accompanying their customers into the new digital financial world on the basis of the new technical and regulatory possibilities. The conditions for this can be created – before FinTechs take another piece of the value chain from banks.
WeOwn: In Germany, for example, the first legal framework for digital assets has been established with the eWpG, various ordinances and adjustments to the KWG. In Switzerland, there has also been the possibility of tokenizing equity for years. Why is Switzerland already further ahead here and what do you expect for the German market?
In the context of the implementation of the EU Digital Finance Strategy and the transfer into national regulations, European players will also increasingly address the topic of token-based equity financing – especially since, similar to Switzerland, most banks have more or less said goodbye to this business segment due to regulatory and legal restrictions. The many universal banks – unlike in Switzerland as a country of asset-managing banks – will not be able to avoid dealing with token-based debt AND equity financing of the broad SME sector in Germany. For many banks, this is a key pillar of their interest rate business alongside mortgage financing. If German banks do not succeed in positioning themselves permanently with digital solutions in the ecosystem of SMEs, this business area will also migrate to new/existing FinTech platforms and endanger their position as a principal bank. After all, we still experienced a similar development under the old technological framework in the profitable consumer credit business. Today, this is essentially taking place off the balance sheet of German universal banks at specialist banks and newly established financial platforms.
WeOwn: Together with the other members of the advisory board, you have been supporting WeOwn for 1 ½ years now. What is your perspective on WeOwn and how does WeOwn differentiate itself from other technology providers in the market?
Good closing question here. I’d like to focus on 3-4 points uh. First, what excited me about WeOwn from the beginning was that you guys spared no effort and expense to develop deep experiences with peer-to-peer platforms. Then, of course, you’ve done a lot of research into the basic mechanics and security standards of different blockchains, to the point of developing your own blockchain architecture. That’s exceptional in the market, because after all most providers or consultants rely on other blockchain technology to expose him, which do not come from their own inventory. Then linking the new digital IT world with the established banking system. This is the most important point for me, because we all know that especially when established banks deal with the new issues, the old machines are not put in the basement overnight and completely switched to the new digital world. Establishing this link between old traditional banking systems and the new digital IT world and really grasping this topic holistically, also in a regulatory-compliant manner. That is also one of the key assets of WeOwn and “last but not least” your long professional and implementation experience of you and your colleagues, both in the old but also in the digital new world.