© Maleki Group / Jose Poblete

"Digitalisation has transformed the banking sector," Bundesbank Executive Board member Carl-Ludwig Thiele told a Euro Finance Week conference in Frankfurt am Main. But he cautioned that the major waves of change still lay ahead of us. Pointing to the intense pressure that banks were facing from both providers and customers to develop fast and secure digital payment methods, Mr Thiele told his audience, "Young customers, especially, are already familiar with new technologies and apps, and they want to use apps in their banking affairs as well." These consumers, he noted, felt at home communicating in real time and expected innovative payment methods to offer the same capabilities. Turning to providers, Mr Thiele explained how fledgling enterprises in the financial sector - players known as "fintechs" - as well as telecommunications and internet firms were challenging the banking industry head on with their new products. He described how some of these firms enabled consumers to invest money or take out a loan online, bypassing banks altogether, while others were developing new payment apps.

Advancing digitalisation was making it possible for these enterprises to carve out more and more of the payment chain and to deliver services that had once been impossible without banks, Mr Thiele said. In effect, he emphasised, they were encroaching on what had once been the exclusive domain of banks: "If these firms have access to customers and their data, they are capable of offering financial services of their own." But at the end of the day, innovative players would only gain a piece of the market if they inspired confidence in customers. "Only providers who can build up and retain confidence will be rewarded with long-term success," he cautioned. It was a matter for banking supervisors and the anti-trust authorities to ensure that a level playing field was in place.

Paydirekt: a secure and efficient means of payment

The Bundesbank is supporting the banking industry's efforts to develop new payment methods. Speaking at the same conference, Jochen Metzger, head of the Bundesbank's Payments and Settlement Systems Department, praised the merits of Paydirekt, the new online payment method operated by Germany's banks and savings banks. "One thing we like about Paydirekt is that it is a secure and efficient means of payment that is subject to banking supervision. Another is that there are no external service providers acting as intermediaries - Paydirekt is directly linked up to current accounts," Mr Metzger said. He hoped that Paydirekt would spur greater competition among online payment methods.

Spotlight on Bitcoin technology

Mr Thiele's speech also touched upon blockchain, the technology behind the virtual currency Bitcoin, which enables amounts to be sent directly from A to B, bypassing intermediaries altogether. "Essentially, banking without banks," Mr Thiele noted. Financial institutions, fintechs and in some cases, even central banks, were currently exploring the opportunities for harnessing this technology. He observed that the focus of attention had thus shifted away from the virtual currencies themselves, which were widely seen as the future of payments. Mr Thiele explained how some players were forgetting that money and currencies needed to be stable to function properly, and that the virtual currency Bitcoin had experienced strong volatility recently.