Do You Remember COBOL? DPS Does! – Philipp Königs [Season 3 | Episode #18]

Jens Seidl 00:00:33  Welcome to another episode of the P.I.T. Exchange, Payments Innovation Technology. I’m here in my hometown in Frankfurt with the company DPS and its CEO, Philipp Koenig. Welcome, Philipp. Good morning. Thanks for having me on the show. Thanks for coming by. Nope. Thanks for having me in your offices here. It’s nice to get out of my home office from time to time. From time to time? Yeah, yeah, for me, the same. I’m not living in Frankfurt. Living more in the Cologne area, but regularly stopping by in the offices from DPS just to show some presence and meet the colleagues. Sure.

Jens Seidl 00:01:06  And inform myself about latest trends. Because simply, these are my people who develop trends and and understand trends and then translate it into what our clients need. Sounds good. Well, we’re going to talk a lot more about that. But before we do, I always like to start my episodes with an icebreaker. Three kind of random questions about you as a person before we talk about work. not scripted, not not scripted. That is true. So let’s start with on a flight. Do you prefer aisle or window? generally I’ll, just because a bit more flexible. and then in stepping out after the plane has landed, it’s just faster. Yeah, definitely the same for me. Especially on long haul. Yeah. Short haul. It’s okay if I end up annoying sometimes it’s good to lean on the window and not on your neighbor’s, shoulder, but generally. Yeah. Yeah. then you mentioned to me and we chatted before we started the recording here. That you’re playing golf. Do you have a favorite golf course anywhere in the world? Yes, absolutely.

Jens Seidl 00:02:07  I’m just coming from it. Last two weeks I was on vacation in Scotland, and there is a tiny little golf course to the to the north Barry coast. It’s called Winter field. And basically you play right next to the shore of the or the of the water. The wind is blowing in all directions. The waves are coming by and it’s just amazing to stand there and and commence your hobby, which is clearly then it feels very special. All right. Well, the I’m a terrible golfer. I tried and failed miserably, but the wind thing, that sounds complicated as well. Winning is definitely complicated when you stand on that tee box and then you basically shoot out into the sea, and then the wind takes care of your ball and brings it to the green. That is something you feel very proud when it works. If it not works, you might get a bit angry. Yeah. So it’s it’s in both directions. I can see that. And last question. Do you have a favorite holiday destination? Either country, city or just a type of holiday.

Jens Seidl 00:02:58  No, I will not say that there is a favorite destination. I mean, for me, destinations where I can combine a lot of things, is, is, is always a favorable. So, being in areas where you have a bit of mountains and a bit of sea is generally very nice because then you can decide what to do. We enjoy a lot of hiking or mountain biking and then playing golf. So I think the the area around Scotland is definitely something we should all consider to make more vacation, especially when the climate change comes. Yes that’s true. Getting very nice over there. All right. Great. Well, thanks for that. Thank you very much. And now let’s talk about business. Business? Yes. Tell us a little bit about a bit about yourself and DPS please. Yeah. Happy to do so. So my name is Philip Philip Koenig. I’m now 50 years old. and I work in the payments bubble. now, since I would say roughly around ten years, it all came down when when I was, starting my career.

Jens Seidl 00:03:55  I worked long time for IBM and then change from IBM to a business partner for IBM and that that procured by a larger group. And that group decided to do more business in fintech payments and then also capital market space. So they combined a couple of companies, in that space. And I was in charge of the managing director of that company. And then in March I changed to DPS. DPS, I sometimes say it’s the oldest fintech in Germany. The company has been founded in 1980s. family led by then. And last year, the family decided the X owner was about 75 years old, decided to retire by the time, and his son was in the company as well. I wanted to do something different because he actually was a lawyer, and they wanted to commence into into a law, tech or tech business. So they were looking for a successor. Found me. I found the company on paper, super exciting. the, the the mix. And we will speak about that. Probably the mix of different aspects that DPS stands for is a bit different than the rest of the of the payments bubble.

Jens Seidl 00:05:03  And so I decided to to come here and become became CEO in March. And now, six months later, I must admit it was the perfectly right decision, right? Absolutely. That’s always good to hear. I haven’t even asked that question yet. What does DPS actually stand for at DPS and typically these 80s terms, right. Three names for a for a for what the company did at the time. It’s data processing services. Oh okay. So already in the 80s, the company saw that data and data management will be in vogue. And that was the name some some. The rumor is that it has to do with the names of the owners, which was dot dot print systems, but it’s officially stated no, it was data processing services. All right. Yeah. Good. Well, let’s talk a little bit about when we talk about the payments bubble, what’s what’s happening in this bubble? What kind of trends do you see at the moment, and what does that actually mean for you and your company? Yeah, I mean, before we go there, I think I need to explain a bit about the three pillars in which DPS is currently active, because that makes sense when when we then come into the trends of payments, which I see in more convergence across other dimensions in the, in the financial services industry.

Jens Seidl 00:06:19  And that is important. So DPS has three main pillars. One is payments. We help our clients to to develop, run and maintain payment systems for, for for zipper payments, for cross-border payments, everything that you need, including all the different interfaces to their legacy systems. the third the second pillar is capital markets. Same for basically anything that has to do with securities exchanges and the internal administration of of of of securities. And then the third part is our services in the ATM and self-service business. Okay, so we have a software that controls in Germany, for example, tens of thousands of ATMs and self-service terminals, cash recyclers and stuff. And from there, we currently now go and bid into the public world as well, having a self-service terminal for public affairs. So when you marry and you need to change your name, you can do this on a terminal instead of walking into a governor’s office. Okay. Interesting. The newest thing we do. So these are the three pillars. And and in all of these three pillars, payments play a certain role when it comes to technical implementation.

Jens Seidl 00:07:32  Yeah, sure. Okay. That’s that is interesting.

Philipp Koenigs 00:07:35  And we see that more and more now that the payments world and the securities world are talking more and more with each other, with the trends that are happening on both sides.

Jens Seidl 00:07:45  Exactly. And that’s I think we will go there in the discussion when it comes to stable content and tokenized assets. Absolutely. And clearly the convergence is very visible. Exactly. Especially interesting for us. Okay. Yeah.

Philipp Koenigs 00:07:56  All right. Good. Well, then where? Which trend do you want to start with? What shall we talk about first?

Jens Seidl 00:08:02  Well, I’m not sure if you can still call it a trend, but, I mean, instant payment clearly is a name of the game for many banks. And and typically you need to, from my perspective, separate between a trend is something that is brand new and then something that that gets reality for the banks and our clients. And typically this is a bit later than when the trend is born. So for us, instant, whether it’s in the super world where instant becomes or became the new normal, for us it means there is a tremendous shift in infrastructure load.

Jens Seidl 00:08:34  And some clients adopt this, early and say, listen, we go we go on the bleeding edge and make the new normal, especially when it comes to a credit transfer in the app. It gets, basically default. Others struggle a bit with the shifting of loads and infrastructure and, And then we come into play and help them in their infrastructures. So so DPS is especially focusing on on on legacy infrastructure. So we even have many, many COBOL and mainframe developers that really go into the, into the dirty old engine room of a mainframe and, and help clients to combine the old world of legacy systems with all the new trends that that come up. Right. And as such, that whole instant play was last 18 months for us. where we spend a lot of our time in developing interfaces, systems and helping clients to cope with what I just said. The, the the, challenges.

Philipp Koenigs 00:09:35  Yeah. That’s interesting. So it’s not a matter of replacing what’s there, but it’s adding to what’s already there.

Jens Seidl 00:09:40  It’s adding towards what’s already there and then and then shifting towards it. Right. So and then that will be the next trend. One constant trend is regulations in payments. Right. clearly, most of the bank states that they won’t earn any money with payments. It depends if this is true or not. I mean, for me, payments is a is a is a service that you give to your clients, whether it’s corporate or private, that that definitely has a qualitative, perception. And as such, it builds the foundation of what you do and you make money with it. Clearly, and especially in Germany, you see lots of of banks are currently trying to enter the German market like Chase or others and fight for, for new accounts. A also a trend, I would say, because ten years ago, maybe the private consumer was kind of get rid of it and now it’s turning back like always in the it. It’s the pendulum that goes left and right. and so I would say, that is, that is also a trend that, that, that regulations and payments constantly needs to be adopted.

Jens Seidl 00:10:48  Now we’re closed before November, where the next CBP release is coming up, the the data, enrichments and payment streams and the unstructured address removals is coming. That means for us with all of our clients that we serve, and we have typically long lasting application management contracts with our clients where we take over the responsibility of their systems. That means we need to adopt, and then we will see what now happens if November stays November and if the release is coming or not. but that is something we need to work with.

Philipp Koenigs 00:11:18  And I think data is actually a very good prompt there, because you said that many players say that they can’t make money from payments. And I think that’s completely ignoring the data aspect. Right?

Jens Seidl 00:11:30  Absolutely.

Philipp Koenigs 00:11:31  Is a data game at the end of the day.

Jens Seidl 00:11:33  At this point in time, if you compare those relatively, let’s say aggressive new banks like revolute or N26 or whatever you want to look at, there are many around. They make a lot of more use of the data aspect in their payments, evaluate what clients are doing well, What clients want and then offer additional services on top of the classical account management.

Jens Seidl 00:11:55  Right. And then you get you get points, you get cash backs, you get, certain subscriptions for other services of it, which the classical bank does not do. And I recently had a conversation with a, with a Ukrainian bank, which is obviously another challenge. They have more the challenge of being, independent of certain data centers and being more, let’s say, spread across many locations. But they want still in their tough economy, want to win market shares in offering services like the Neo banks do. But what Ukrainians are suffering from, from all of the different dependencies do not want to be, is reliant on one vendor.

Philipp Koenigs 00:12:35  Yes.

Jens Seidl 00:12:35  And therefore they need to develop all by themselves. But but they they understood that beyond payment there is a market for add on services that we in Germany, I must admit. don’t see in that, in that same, A visibility or clarity, like like those banks do that have a more, relevant need for change.

Philipp Koenigs 00:12:56  Absolutely. And that is something we hear across the world now that people are worrying about their sovereignty of their their payment systems and their payment ecosystem.

Philipp Koenigs 00:13:05  Because at the end of the day, if they are depending on supply, it doesn’t even matter where they are, but suppliers where they are really 100% dependent. And if, the service would be withdrawn overnight, the whole payment system would crumble. That’s an issue, right?

Jens Seidl 00:13:21  So absolutely. And I mean, I do not want to talk politics today, but we saw that, for example, in the AI space when when a certain frontier model suddenly gets withdrawn from, from the European market by an American provider due to political decisions, what would happen if the same happens to our payment infrastructure and their sovereignty is not just a technical issue in terms of being, in redundant data centers or whatever, having failover scenarios. It’s more a political decision thing. And also there I think the discussion from my perspective, is not open enough yet.

Philipp Koenigs 00:13:58  Yes.

Jens Seidl 00:13:59  And the the sovereignty of a payment system is clearly one where, from my perspective, European banks have to make up a lot of, of of room and, and the runway gets shorter in executing.

Jens Seidl 00:14:10  And as such, I, I personally think that you can discuss a lot about the, the necessity of a digital euro or or the, the, whatever comes up in terms of stablecoins or counter payments or whatever, but we need to be more, self-sufficient in terms of our own payment infrastructures. We need to be more innovative and get rid of the the big American networks. And that is where I try to consult my, my clients in a certain way.

Philipp Koenigs 00:14:37  Yeah, yeah.

Jens Seidl 00:14:38  Sounds good. Yeah.

Philipp Koenigs 00:14:39  and to be fair, I think the ECB has been very clear about that as well. Right. With the digital euro positioning that as a means of being more sovereign, being more independent.

Jens Seidl 00:14:48  That’s the from my perspective, the main goal and clearly the the those who try to see the badmouthing say they are that as a control issue. It’s getting whatever. But it is, at the end of the day, it’s a local coin on your wallet, which you can, by the way, reload on an, on an ATM.

Jens Seidl 00:15:07  So it’s clearly the, the, the it has a very close relationship to cash money. And at DPS, for example, we are in the European Central Bank’s regulation unit for how to deal with the, with the euro at, at the ATM and also at the point of sale. so we try to define the rulebook or we’re actually not trying to define we, we are in the working group together with others to define how that is dealt with. And for me, this is a big step forward. also in terms of what happens if we if God may prevent but if we are under a text somewhere and don’t have those, those networks available for a certain time anymore, then we need to have other options. And then cash clearly is a topic. Sweden brings cash more into play now again. And by the way, I’ve been to Sweden two years ago. Not a single time I had to touch my my my physical wallet and get cash out. Everything runs on bleep bleep bleep here and bleep bleep there.

Jens Seidl 00:16:02  And they think of getting back to cash and cash disposal. And then we need to think about it as well from my perspective.

Philipp Koenigs 00:16:10  Yeah absolutely. Well we for those that don’t know that Chris is very much in both camps where we, we promote choice, we are saying that digital payments is happening for sure. There’s a lot happening there, but there’s still a need for cash. So I completely agree with you. We need to make sure that that the consumer still has access to both. And there is that factor of as long as offline payments aren’t really working reliably across a whole range of different solutions, cash is the ultimate solution. The alternative, if nothing else, works, cash does.

Jens Seidl 00:16:45  And in two weeks time, I will fly to East Africa with a with a delegation from the, from the local digital ministry in Hessen, here in Frankfurt. And in Africa, we see for years that micropayments and accountant payments are a valid option for, for that sovereignty and also for a being less reliant on big tech and making it just easier.

Jens Seidl 00:17:12  And I would wish to love. I’d love to see things in Germany happen in the same place. Right?

Philipp Koenigs 00:17:17  Yeah. Okay. Okay. Well, coming back to data.

Jens Seidl 00:17:20  Yeah.

Philipp Koenigs 00:17:21  I don’t think we can talk about data without mentioning ISO 20 or 22 as well. we’ve seen now it’s been rolled out. It’s been implemented on the rails. The banks have adopted ISO 20 or 22. Do you think that it’s actually used in the right way already and giving us the benefits? Are the the users of those payment systems actually providing the data and using the data richness that ISO provides in the right way.

Jens Seidl 00:17:48  So for my perspective. Clearly, no, I mean, the adoption of ISO or the ISO 2222 is it’s basically done on a data formatting data migration level. So clearly, coming away from empty into the new message format, every bank is now compliant and can use it. But, internally using the possibilities that you get with the enriched data format. Absolutely, absolutely. No. You as a user, you don’t even get an explanation of what are the benefits.

Jens Seidl 00:18:19  Why why should anything change for you, and what are the benefits you could use whether you are corporate or private? nobody has any knowledge about it. It’s a pure technical play right now. And the reason why it is from my perspective is because natively, only few banks are speaking ISO, and in the legacy systems in the bank, everything has to be converted via adapters and parsers and and everything. For us it’s good because we need to maintain these systems. We need to constantly change and adapt. But, if you if you see the, the value that would be possible with this data format, we are far away from using it in the right way.

Philipp Koenigs 00:18:58  okay. So I guess the the basics are there now, but we need to start building on that.

Jens Seidl 00:19:03  We need some data and that goes in the same line with, with making use of the data. It’s making use of the options you get. And then clearly add on services would be possible. That makes sovereignty, reliability, speed of access and everything much better than today.

Jens Seidl 00:19:19  And hopefully we can we can transport that that thought into the heads of our decision makers at the banks, because there is clearly a lot of advantages for us all.

Philipp Koenigs 00:19:29  Absolutely. Yeah. And again, I’d like to think that most banks understand that data is valuable. Right. So I hope the investment will come to actually enrich that data.

Jens Seidl 00:19:42  Absolute Currency. Right? Absolutely. Exactly. Using it in that way. I mean, in Europe, again, you need to be very careful in what is what is possible and what not from a from a data protection point of view. But I think there’s still a lot of, of headroom which we do not use at this point in time.

Philipp Koenigs 00:20:00  Yeah. And I don’t think that’s it’s always a bad thing to say that data is currency or data is valuable. When we talk a lot about, financial inclusion at our conferences as well. And in order to get people onto the financial inclusion ladder and to have let them have loans, etc., you need some data you need to understand are they actually credit worthy, etc..

Philipp Koenigs 00:20:22  So it’s it’s an enabler.

Jens Seidl 00:20:23  It’s not about protecting us for another finance bubble. I mean giving loans to people that definitely cannot pay them back. might be in the first place a social thought, but it doesn’t help anybody and not yet the industry, nor the economy and such. We need to be a bit more careful. And on the other hand, we do not want to limit ourselves in giving loans to people that might want to to make use of the loan, whether it’s for a private property or if it’s for starting a business or whatever they want to do. And data is the enabler for all of that. At the end of the day, absolutely. Clearly.

Philipp Koenigs 00:20:54  Before moving off instant payments and data, we’ve also when we talk a lot about that too, with with our partners, see a trend that frauds have changed tremendously with recent payments. So we moved from very technology focused frauds, which were let’s hack your credit card number and start doing stuff to social engineering and more scam, fraud happening and at scale.

Philipp Koenigs 00:21:21  Right. And growing quickly as well. where do you see your role in that? Is there also is that part of your portfolio looking at fraud prevention, these kind of things? What’s happening there?

Jens Seidl 00:21:32  So to to be fair, DPS is not not, consulting into fraud prevention from a, from a use case perspective or what will fraudsters in the future do or whatever? Back in my time. Years ago, I did the same for the telecommunications industry, where basically a lot of fraud happens on various places, including that you that you lead your calls through various networks to just get the the transfer money out of it. And similar happens of course, also with payments. But in the payments world it’s the main use cases stealing money from from others. Right. Very simple use case. Three years ago a I’m in the board of my golf club and we got an invoice that looked exactly like the invoice from our green keepers. There was a small stamp on it. Attention! The account number changed and we were lucky enough to look it up upfront.

Jens Seidl 00:22:25  And it was a fraud. The Malecon got hacked and then the invoice got got sneaked in. And if we had paid before verification of pay came, it would have gone through in seconds and with instant. You cannot stop it anymore, right? It’s gone in a few seconds. And then then we see the the CEO fraud schemes and, and also in the, in the, in the private payment like like when you buy something online or something, there is a lot of fraud happening. And what we do is we execute decisions that have been made on a, on a system level. So change requests coming in, then we develop and execute and test. But we are not in the in the consulting space here. But but clearly we see the trends coming in and we make our clients aware of the different scenarios when we hear of them. And and fraud definitely is one topic. Money laundering is the same currently. The again regulative changes came in the in the space where money laundry has to be more focused by banks.

Jens Seidl 00:23:24  And there are some some of our clients out there who got some issues with being observed by the by the German BaFin in terms of their way to treat money laundry. And that is something where a constant system change needs to happen as well. And and we’re here for our clients to help them then execute those changes.

Philipp Koenigs 00:23:42  Yeah. Yeah. And it’s also a discussion we see more now happening. Is that fraud and any money laundering. There’s an overlap. There’s fraud prevention and there’s an overlap.

Jens Seidl 00:23:52  Every every shady fraudster tries to weave in the different concepts of their betrayal into each other. And they need to be very, very smart. And again, it leads back to data. I think with a with a good fraud prevention you can understand the schemes. from a from a forward looking perspective. If you use the data in the correct way and set up your systems to, to be able to use the data, then that comes again. We are not we are not good enough at doing so at this point in time.

Philipp Koenigs 00:24:21  I hear you, but I personally, I think there’s also a real need for social media and the telecommunication companies to do more, because the problem is, even we see that in the payment space, that consumers are being warned and being told something isn’t right here. And are you really sure you want to make this payment? You got all of these warning flags, but people have been so socially engineered before they even get to the point that they want to make the payment, that it’s hard to convince them otherwise. So it’s I think it needs a more holistic effort than just the payments industry.

Jens Seidl 00:24:55  On the other hand, you are then typically speaking about a a private transaction, which is, in most of the cases, not not super high value fraud in a in a high value. That’s true. That is a different name of the game. And if that happens then then the industry gets an issue. But you are absolutely right. It is as we say, a village raises a child. It’s a community, right? We cannot blame the social media bubble for it.

Jens Seidl 00:25:23  We cannot blame the the technical implementation or the bank or the regulator for it. It needs to be a we all work together and understanding and developing concepts that then work against it. Yeah. Yeah. Okay.

Philipp Koenigs 00:25:35  well let’s talk a little bit about cross-border payments as well. I mean, the G20, they have put out goals to reduce the cost of transborder cross-border payments, to make them more transparent, to speed them up. And what are you seeing from your perspective, what’s happening there?

Jens Seidl 00:25:51  So what we see is that that banks more and more evaluate alternatives to the classical scheme of cross-border payment, where money gets routed over correspondent banks and each correspondent banks cash in some, some some parts of the of the of the of the transaction. and there is where, where clearly new technologies such as digital tokens, tokenized assets, stablecoins come into play, where simply my perspective would be that in the near future, those cross-border payment networks will totally change and there will be the one network above it that that then suits for an for an instant capable cross-border payment without other currencies taking a a lot of a lot of, risks, taking out the corresponding payments, taking out the, the latency of a payment in terms of its runtime and improving things by far.

Jens Seidl 00:26:48  And that is where DPS now is, is perfectly set because our expertise in capital markets, with the handling of assets, comes into play. And I hope that we will be able to combine our payments knowledge and our securities and asset knowledge and bring them all together when it comes to the first projects in stablecoin implementation or things like that.

Philipp Koenigs 00:27:12  Okay, so I don’t want to put words in your mouth, but am I hearing that you think it is the the tokenization that is going to revolutionize cross-border payments? Or do you think there’s also an alternative way of achieving similar results?

Jens Seidl 00:27:27  Well, if I were a betting, then I’d say it’s the tokenization that is the game in the future. Yes. And you don’t have to put words in my mouth. That’s my view. clearly that that might change. And we all know that that technology trends, alter and some sometimes you also bet on the wrong horse. I mean, blockchain is still a valuable technology, but it is not the one hype that that we might have seen when we talked five years ago.

Jens Seidl 00:27:53  and as such, I would say let’s let’s calm down. But but tokenization clearly is is a is a very interesting topic. And we we do a lot of research in that space. We work together with industry known specialists in defining ways to, to work with tokenized assets and offer them our clients solutions and, and alternatives for it. And so I think it’s definitely very interesting.

Philipp Koenigs 00:28:17  Okay. That is very interesting. and we’ll talk a bit more about tokenization and stablecoins etc. in a minute. But I think what we have. Well, well, I guess where we’ve seen a lot of traction already, in comparison to the tokenization aspect in cross-border is with connecting faster payment systems, right? So especially in Southeast Asia, a lot of the countries, they’re they have interconnected between each other and are enabling cross-border payments already. Nexus has now.

Jens Seidl 00:28:46  Exactly.

Philipp Koenigs 00:28:46  Nexus hitting the road. And they formed a company. And I’ll be rolling this out. So, do do you think that’s just an interim step until we get to the tokenized new world, or do you think the two will coexist or what? What do you think is going to happen there?

Jens Seidl 00:29:04  I mean, in the long run, I think tokenized assets will be the one means of of transferring transferring funds.

Jens Seidl 00:29:13  but knowing the industry and knowing that it all takes a very long time to get away from the from the classical legacy. I mean, we still work with with cobalt Systems, we still hire cobalt developers. We still build them up, which you would kind of believe there is a there is a funny anecdote. we had a 85 year old, Employee here at DPS. His son, already retired, was 65 years while he was still working as a COBOL developer for us. And can you imagine working with 85 still on the same technology? Like like you start and knowing that I think that the coexistence phase will last very, very long. although, with with the AI coming into play, things might change rapidly. And again, it is a big of a crystal ball which we all look into. And also the promises of the AI world are, at this point in time, very, very promising, very, very, let’s say elaborative, but we’ll see where it comes, but that might change the whole, the whole thing fast.

Jens Seidl 00:30:23  And we look very intensively right now into how AI might help us in renovating old legacy systems. There are apart from the from the marketing gags where suddenly the IBM stock price drops by 20% when anthropic announces a new model, which is clearly a funny anecdote at the end. But there is there is a certain there is music in that game right now, and and we’re going to play that music. And we do a lot of investigation on how AI might help us in modernizing legacy stuff and then bringing together the new world and the old World across harmonized systems.

Philipp Koenigs 00:30:59  Yeah, just go off on a really quick tangent on that, because, I mean, the cobalt thing is blowing my mind. When I was in university, which is a long time ago, I was thinking, I’m not going to learn cobalt. This is a thing of the past. So, and I’m trying to get here is you mentioned your ATM. Yeah. pillar as well. And that you’re supporting ATMs. I think the last time I heard this was, like ten years ago that a lot of ATMs still run on.

Philipp Koenigs 00:31:22  I think it was either windows NT or windows XP. have we finally moved off that? How have we modernized at least the ATM text?

Jens Seidl 00:31:29  I finally moved off that, but there is still a certain level of windows operating systems in the ATM. That’s true. Not NT anymore. More recent versions. But yeah, that’s true. Basically an ATM runs a windows PC. Yeah. Unfortunately COBOL not so much. No, no we have. Sure we have a classic. DPS has a system called SMS, which is a control layer for ATMs. Basically doing nothing else than bringing all the the. There is a huge amount of different hardware on the ATMs and cash recyclers and self-serve. Different vendors, different architectures. And then you have the legacy world and the payments world of the bank and the authentication systems. And what our software does is, is basically mitigating between those different endpoints, okay. And controlling it. That’s what we do. So do we do not maintain ATMs directly. That is others doing that.

Jens Seidl 00:32:19  But we control the machines and we definitely wish there there was a bit more modern, controllable application operating systems on the ATMs because that would give us, again, more opportunities in terms of using the ATM as a as a way of communicating with the end user, but unfortunately it’s not. It’s a relatively old technology behind it.

Philipp Koenigs 00:32:43  Yeah. Yeah. Interesting. Yeah. Sorry for that. No, no, I’m.

Jens Seidl 00:32:47  Happy to go.

Philipp Koenigs 00:32:47  There. I’ll take us back to two tokenization now. and specifically about tokenization and cross-border. Another Banca d’Italia. They published a report recently where they did some mystery shopping, looking at how does cross-border actually work with stablecoins and the, the, what they found was that as long as you have this stablecoin sandwich, so you’re onboarding from fiat onto a stablecoin and then off ramping again, to fiat, then it doesn’t really, save a lot of money. it can be a lot faster if you have faster payment systems already in place and allow the off ramping and on ramping on both sides.

Philipp Koenigs 00:33:33  So again, coming back to your crystal bowl, is there also a point here that retail payments need to start adopting? Tokenize and digital Euro is probably one way of achieving that. Using tokenized money to to make payments to stay within a tokenized ecosystem and not always have to on an off ramp, of course.

Jens Seidl 00:33:54  I mean, this is the only way where it might make any sense if you transfer it back and forth between fear and any token. It is a funny. Yes. Then. Then you might be able to have a bit more options at the point of sale to to pay with something that you currently have at hand. It’s a bit like if you are in a foreign country and your Revolut accounts already offers you the foreign foreign currency when you do not have to exchange it. But that’s not at the end. You exchange it somewhere and you pay for the exchange. And that is the same in the in the tokenized world. If it is end to end tokenized like being a bit. future minded, getting paid, tokenized and then buying something tokenized, that would be a huge step forward in my perspective in terms of flexibility, sovereignty and also security.

Jens Seidl 00:34:44  At the end of the day, so that would be the the ultimate goal. Yeah, clearly again, crystal ball and betting. Man I don’t know if we’re getting there in the next ten years. But it will be nice to see. Yeah.

Philipp Koenigs 00:34:55  And do you think that the.

Jens Seidl 00:34:57  Digital euro is clearly one of the, the aspects where that might become reality in the fastest possible way?

Philipp Koenigs 00:35:04  That’s exactly what I wanted to ask. Do you think the digital euro is going to be a game changer in that?

Jens Seidl 00:35:10  I hope so. I hope that all these, these these negative badmouthing people that now stands against the digital euro as the one tool of controlling the population and whatever doing it is not at the end. It’s your money. You’re getting paid digital. You paid digital and you, you have a a a European way of of paying your debts, your loans, your, your payments, whatever you want to do. And it isn’t that isn’t that a goal that we all want to achieve? I’m a big supporter, fan of the digital euro.

Jens Seidl 00:35:41  I must admit. I confess and I’d love to see it. It happened and and became reality. Yeah, clearly.

Philipp Koenigs 00:35:48  Music to my ears. And I say that both as a professional in the payments industry, but also as a European citizen, I think it can only be a good thing to have this new infrastructure. Right. Because it’s not just an app, it’s a whole infrastructure that’s going to be provided. And I think it will be hopefully game changing.

Jens Seidl 00:36:05  And Europeans and especially Germans, we are a bit reluctant of of being patronised in a certain way. Of patriots. Patriots is the right word and and clearly all good. I don’t need to have a German flag in every in every garden, but a bit more proud of what we are able to achieve and a bit more being being outspoken on what we could. I think it wouldn’t harm us in a ways, and that, at the end of the day, gives us a broader back in international relationships and in international negotiations. And and the euro is a strong currency.

Jens Seidl 00:36:41  Why not use it in every, every possible aspect? I don’t see any reason not doing it. Yeah, right.

Philipp Koenigs 00:36:47  Absolutely. Yeah. Okay. Interesting. Yeah. well, again, we talked about stablecoins, tokenization, digital euro. We haven’t talked so much about your third pillar yet.

Jens Seidl 00:36:58  The the capital markets.

Philipp Koenigs 00:36:59  The capital market side because they’re coming together. Right.

Jens Seidl 00:37:05  That is that is where we see our future as the convergence between capital markets and payments when it comes to tokenized assets. As we just discussed, when it is end to end tokenized. Then there is no change between euro and tokens and the security I buy or anything I do. And there are so many Bridge is right now when when security’s changed the owner from a from a technical perspective. So much to do on converting and transferring. If that would be eased out, then we come there. We are now one of the big topics is T plus one of course. So the the trading settlement that has to happen in 24 hours.

Jens Seidl 00:37:46  Yes it soon becomes t0. So instant trading and if you want to make that happen, you need to have more convergence between the different systems. And you need to ax out a couple of interfaces and intermediate systems that are just there to basically praise the the past times and not the future. And as such, I’m constantly baptizing and trying to not baptizing, not the right word. What is it? trying to convince people in terms of think about, more streamlining of your your internal systems and getting it done. Yeah, Yeah. And that is where we as DPS are our best set, because we have the knowledge of how security trading and trades are done. We know about payments and therefore we know where the limitations are. And we can perfectly help our clients to, to get rid of it. Yeah. And harmonize the systems.

Philipp Koenigs 00:38:41  Yeah. I’m again asking the same question, I guess, as I did before when comparing instant payment cross-border payments versus tokenized. Yeah. I think especially the Bank of England, they have been working on synchronization initiatives, synchronizing RPGs systems to the securities world and to tokenized assets, and had some good success with that.

Philipp Koenigs 00:39:03  So do you think that everything needs to become tokenized, or do you think that synchronization projects like that could also lead into the future, and that we get the best of both worlds, perhaps?

Jens Seidl 00:39:15  Well, it’s basically the same answer I gave you before. I think the the ultimate goal should be a total harmonization to tokenized assets. but it takes time to get there. It takes time to cover the legacy systems and as such, synchronizing and and and parallelizing things. Parallelizing things is the name of the game for the next ten years. But you always have to have your North Star where you want to go and where the industry wants to go. And clearly, again, also here, the community aspect comes into play. It’s not the one company, the one bank, the one regulator deciding where the North Star is, that that we all have to have to define and basically make happen. But the the easier it gets and the less intermediate systems are into play, the more reliable, the more secure, and the more data rich it will get for all of us.

Jens Seidl 00:40:04  And that offers new, whole new industries. I mean, thinking of a genetic commerce today. This is an experimental phase, right? You can you can if you want to buy something. we had the discussion of a tent for a holiday trip. You you want to buy a tent? You give your agent the the command. Buy me a tent. It has to have waterproof three people. Sighs. Whatever. clearly. Then agents talk to each other and the way they are defined into their legacy systems and into their programming, directs what you get at the end. You might get a pavilion instead of a tent. Whose fault is that, then? Clearly not. Not the agent, clearly not the the provider of the pavilion nor the tent. It’s basically there are too many systems evolved to making a clear conversation possible. And and the more you streamline it, the more you go into one standard, the easier it gets to define this. And then the industry of a generic commerce might become reality one day.

Philipp Koenigs 00:41:00  Absolutely. And I guess what we’re seeing is that the big players, I mean, just take Mastercard and visa that both already are not only experimenting, but defining standards in that space, etc..

Jens Seidl 00:41:10  And that’s what it’s their their right to play. Right? If they if they lose the, the data standard or the standardization power, then they are useless. Yeah. And that’s. That’s the point. And I do not want to make Visa and Mastercard useless. And nor do I want to take them out of the market. That’s not my that’s not my my my my my point. But becoming less reliant on it again, a data sovereignty perspective. That is something we need to think of. And the more the more, challenges in the markets, the better is for all of us to do.

Philipp Koenigs 00:41:48  And maybe just just one more thought on the overall aspect of new technologies, tokenization, new platforms. Do do you think there’s enough work to be done to standardize things as well? Because when the internet is successful as it is now, because someone defined an IP standard, an HTTP protocol, and so on and so on.

Philipp Koenigs 00:42:09  That doesn’t seem to be happening so much in this new technology space. There’s a lot of experimentation, a lot of different things. Feels a bit more like the for those old enough to remember videotapes at the time where you had Betamax and video 2000 and VHS, and we’ll see which one will prevail.

Jens Seidl 00:42:31  Let’s take these two examples. So the video player example is clearly where one standard just, won the race. Well, that’s a, that’s a classical. I get you out of the business because I have something that my marketing work better and my technology work better, whatever it was I don’t know. Video players not my not my main topic. I, I was more born in the already in the in the CD and DVD world. But other topic but but that is a classical. Let’s say one wins the race looking to the internet. It is what we spoke about, the community that decides where the play goes. There came social media and and back in my days at IBM, my I wrote a together with the University of East Anglia in the EBS.

Jens Seidl 00:43:15  And here in that space an article about the adoption of web 2.0 in the industries. And there we spoke a lot about data standards and the harmonization, and it was an intrinsic motivation of the community to have standards that helped them all do their what they started to do as a fund and then identified it as a major business. Like all this content creation, video format, streaming services and all that stuff. I don’t see that in the in the financial services industry. There seems to be a lot more independent players who decide what they what they do. There is no community as such defining where do we all want to go and what do we want to use? And if we were to see more community thoughts, we were to see more data, data harmonization and message type harmonization and investing more into streamlining these these systems. But that, I must admit, will take us some time to get there from my perspective.

Philipp Koenigs 00:44:17  Yeah. And I guess in the interim, we will have to provide the glue between the different standards.

Jens Seidl 00:44:23  That’s our right to play, right? There you go. Providing the glue and the tape and the duct tape here. And whatever we do to to make those legacy systems run for another 30 years.

Philipp Koenigs 00:44:32  Yeah. Well, I don’t want to make that your final word in this podcast, but I think we need to wrap up soon. We’re running out of time. So, I’ll let me hand over to you. Really? And any parting thoughts, any outlook that you want to share with us? Are you optimistic? Are you saying.

Jens Seidl 00:44:52  By nature I’m optimistic? Right. I’m totally optimistic, man. And I cannot hold myself to to look very positive in the future. for me, going into the payments bubble a bit more than ten years ago was a major step. I started very classical. I wanted to understand how it all works. So I went to Frankfurt Business School and the payments expert curriculum two weeks, two weeks course to understand. And and there was there was everything around payments from from other standards, the different systems, the the central bank’s rolls for me, super interesting.

Jens Seidl 00:45:27  but also and that’s basically the the threat that we have in our conversation. The fragmentation of the industry is just huge. And, I think removing this fragmentation, aligning more on common goals, being a bit more in the payment bubble, which feels a bit like a, like a family. I mean, if you go to the conference like Sybase or EBA days or whatever. Everybody knows everybody and they all do their business. They all talk about the same standards, regulations, release dates or whatever. But we are not yet that technical community. Like for example, the social media bloggers are with their standards and means and let us get there. Let us try to harmonize more, work more together. And then I think the payments industry has a very good future in the near future. Yeah.

Philipp Koenigs 00:46:15  So yeah, sounds good. And it also sounds like you’ve got your work cut out with the DPS with that.

Jens Seidl 00:46:22  I couldn’t be happier than being here and working in that space. Yeah, absolutely.

Philipp Koenigs 00:46:26  Great.

Philipp Koenigs 00:46:26  Excellent. Well, Philip, thank you so much for taking the time. Thank you. And it’s been a pleasure also doing this in person. It’s always nicer than on a team’s call. Yeah. Really cool.

Jens Seidl 00:46:36  Thank you.

Philipp Koenigs 00:46:36  Very much.

Jens Seidl 00:46:36  Thank you. Thank you.

Philipp Koenigs 00:46:38  All right, well, that concludes our episode today. I forgot to mention at the beginning. My name is Ian Seidel. Currency research was a pleasure being here with Philip Koenig today. And please, like, follow, do whatever you need to do on your podcast platform to miss or make sure you don’t miss any of the future episodes. Thank you. Thank you. Thanks very much.

Jens Seidl 00:46:57  Thank you.