Hansjörg Leichsenring, a passionate banker and blogger, spoke to Oliver Gassner about the joy of innovation (or lack thereof) in the financial sector, PayPal, Bitcoin, and his views on the Occupy movement.
Hansjörg Leichsenring: Hello Mr. Gassner, certainly. I’m 51 years old, a banker by profession with over 30 years of experience in the industry, and I’m currently active as a consultant and blogger with a couple of further tasks and topics.
OG: What are the topics that you cover that currently interest banks?
HL: I provide consultation in traditional corporate strategy, with a special focus on retail banking and sales strategy. At present, I spend a lot of time talking to banks about innovation, social media and better customer service.
OG: You had a blog post in which you explained that innovation is not a central point in banking. Could you please sum up the core argument for us?
HL: Banks shy away from risk by nature. Managing risks is also one of a bank’s most “natural” tasks. Unfortunately, (most) bankers see innovation primarily from this risk perspective, which then leads to an innovation avoidance strategy.
OG: But then you nevertheless did find innovative bank offerings. Which of those approaches impressed or surprised you the most?
HL: I’m fascinated by innovation rooted in customer value that provides banks with a powerful way to differentiate themselves. Personal financial management is a good example of this (even though I’m a bit biased in this respect, of course). This is a real win-win situation, since both the customer and the bank stand to profit from it.
OG: How does a good idea differ from a true innovation?
HL: Steve Jobs once said that you don’t have to invent anything, just observe with care and do a better job of copying and adapting. Innovation is the implementation of a good idea. There are many ideas out there, but bringing them to the market and the customer is what I consider innovation.
OG: The streets are currently filled with anger directed at banks. Are the demands of the Occupy movement justified? Does something need to change?
HL: No, and yes. In my opinion, it would be appropriate to direct the anger more toward politicians than banks since they don’t seem to be able to think past the horizon of the next election, and they would rather resort to populism than properly tackling the existing problems. The national debt was not accrued by banks. And that banks would fully exploit their scope for action is not only nothing new – it is also perfectly legitimate. The mission of policymakers is to prevent abuses, and to do so as proactively as possible. They have not succeeded in doing so.
But banks also need to change: in recent years, they have been putting their good reputations on the line, along with the trust of their customers that took decades to build. And all that simply because of supposedly mounting profit demands by the capital markets that I frankly can’t make out. New thinking must also take hold there.
OG: Some say that retail and investment banking must be separated. Someone else said to me recently that a division must be created between lending and trading, because much stricter rules apply to lending. What would be your approach?
HL: In my student days, the Glass–Steagall Act was repealed in the United States. At that time, investment banking and commercial banking were strictly separated. We Europeans always argued that our system of universal banks was superior due to its distribution of risks. In principle, I still consider that to be correct. In future, however, it will be necessary to provide a more generous and consistent equity capital foundation for financial transactions. Joint concerted action by all countries will be crucial in this regard.
OG: In your opinion – and feel free to focus on the banking field –, who is currently the most creative in the web and mobile sectors? And why?
HL: Do you mean people or companies?
OG: Preferably people, but companies will also do.
HL: With regard to companies, I see Apple and Google way ahead internationally in terms of creativity in the mobile sector. Time and again, they come up with new ideas rooted in customer value. In terms of banking, I consider PayPal to be a pioneer. They cleverly combine payment, discounts and localized services and are very pragmatic.
OG: PayPal was criticized heavily for freezing the Wikileaks account, despite the fact that legal proceedings had not been instituted in any country. Diaspora – an alternative to Facebook and Google+ – only just had its PayPal account enabled again last week. Does PayPal need to play “bank cop”?
HL: Every (serious) bank in the world continuously serves as a police on behalf of governments when it comes to issues such as money laundering or KYC (know your customer). That role arises from regulatory obligations. U.S. banks may sometimes be called upon to go a bit further, as in the case of PayPal. That certainly is debatable. Nevertheless, all banks have the right to terminate a customer relationship.
OG: What will change in society, the web and the mobile sector in the next two, five, or ten years in terms of our money? Completely mobile payment without bank cards? Virtual currencies such Bitcoin? Or even Wörgl stamp scrip for everyone? Are all major currencies set to collapse – as some predict on a yearly basis? Or will the rise of the Pirate Party lead to an unconditional basic income, and a thorough restructuring of the job market and tax system?
HL: In a few years, it will still be important for customers to entrust their own money to banks. In this respect, it will be interesting to see whether the new entrants rely on cooperation with banks or open their own institutes. I personally believe in a future of paying by mobile phone. Cards will ultimately be “out”. But the transformation will not happen overnight, in the same way that the euro check only gradually disappeared in this country. I don’t anticipate a currency collapse, or “free” currencies. Bitcoin demonstrated just how quickly speculators come to dominate such developments. Government supervision would certainly be preferable and safer. The Pirate Party still needs to develop its own positions on many issues, especially economic ones. Transparency is good and important, yet it’s a basic condition and not a catchall solution. Nevertheless, it is certainly going to breathe fresh air into politics, as the Greens did in their day. And a restructuring of the tax system has definitely been overdue for some time…
OG: Is the model of the basic income proponents feasible – abolishing all subsidies and tax breaks and levying 50% VAT instead? Subject to gradual introduction with an increasing basic income, of course?
HL: Hardly. A higher value-added tax puts a disproportionate burden on lower incomes. But we should recall tax models à la Kirchhoff and Merz. The abolition of subsidies and tax breaks would also be helpful. We need to get away from political lobbying, but a precondition for that would be politicians with the appropriate expertise…
The welfare state is a great thing. I’m also a believer in a social market economy. However, I sometimes think Ludwig Erhard would roll over in his grave if he could see what policymakers have turned it into. We urgently need more personal responsibility. The government has above all a subsidiary mission, and it cannot “save” everyone.
OG: OK, we’re not here to talk about competent politicians – And to wrap up: what is the biggest misconception that non-bankers have about banks?
HL: That all bankers are dull, numbers-driven people that lack a sense of humor. Many are, but certainly not all of them. Most are just normal people.
OG: And on that note, thanks for the interview!
HL: Thank you too!