The Customer Effect

Why Deutsche Bank is suddenly big on open source

  • Deutsche Bank has open sourced its code for the very first time, as banks keep trying to show they're really tech companies
  • Deutsche is trying to stay competitive by making interactions with clients and third party financial apps more seamless and taking advantage of the distribution channel open source offers
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Why Deutsche Bank is suddenly big on open source

Deutsche Bank has just made 150,000 lines of code for its electronic trading platform available publicly for the first time ever, and now it wants to lead an open source movement in an industry that historically has been a little too protective for that.

The code is designed to connect thousands of banks and clients’ systems to talk to each other through various different applications and was written as a response to client demand for a standard platform not locked to a single provider. Today, most people use multiple applications that work independently of each other to access data, news and trading.

The bank declined to comment on projected revenue and cost savings, but said ultimately this would reduce the cost of doing business. It also wants to improve services it offers its client, collaborate with industry peers and accelerate the quality of interactions, a Deutsche spokesman said.

“Rather than seeing this as a money making venture, I expect them to be driving toward more of a free model, really trying to get people on the platform and using the software so they can better understand it and help design the future, rather than being a money maker,” said Craig Beattie, a senior analyst at Celent.

Open source is a model for developing software in which the original code, or source code, was written in an open, collaborative way and is available for anyone to download and use freely for their own purposes. By making code open source, Deutsche is allowing third parties to build applications on top of its own, effectively making it a distribution channel for its product.

It’s a move that signals the attempt to digitize the back end of financial services operations. Most innovation has focused on client experiences and outward interfaces — and boomed when banks began getting aggressive about their API strategies, which allowed external applications to plug into the financial institution.

It’s also the obvious way large banks can stay competitive as they contemplate the promise of a platform business model and grapple with how to actually transform their existing models. It’s impossible to tell today how the model would evolve, but Craig Beattie, a senior analyst at Celent, said Deutsche could go the way of a software support consultancy or even hire or create a new entity to do that.

“This is part of a wider move to make sure Deutsche Bank not only has a position in the future but helps design the future of financial services,” Beattie said.

Making proprietary information available for anyone to borrow is still a scary idea to some of Deutsche’s peers, he added. Historically, banks have seen investing in technology that ultimately is made free kind of risky; plus, just convincing others to open source their products is a feat of its own but necessary to build scale. Banks have become more and more open recently with the development of open APIs and blockchain technologies.

In the past year, Citigroup, BBVA, JPMorgan Chase, Wells Fargo and Capital One have made some of their code and data available to third parties through APIs. Many major banks are developing and testing open source blockchain technologies with companies like Hyperledger and Quorum.

However, open source has benefits Deutsche clearly thinks should be more widely embraced by the industry: If a company fails, its open source code can still survive and continue to improve; experts can patch bugs or enhance the code without waiting for the next software release; and it’s another distribution channel.

And those benefits speak volumes to an industry whose giants are constantly trying to show they’re really technology companies, or at least that they can operate like one.

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