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May 27, 2011updated 22 Mar 2022 8:39am

Germany’s Sparkassen take on retailers

Heinrich Haasis, president of the German Savings Bank Association, the umbrella organisation compromising 429 autonomous Sparkassen and 192 other institutions, tells Duygu Tavan about the groups investment strategies to maintain its mighty status in Germanys increasingly competitive retail banking space. They have a branch network of 15,700 units across Germany, serve 50 million customers and, with a de-centralised banking approach via 429 autonomous savings banks, are physically closer to their customers than rivals such as Commerzbank and Deutsche Bank.

By Duygu Tavan

Heinrich Haasis, president of the German Savings Bank Association, the umbrella organisation compromising 429 autonomous Sparkassen and 192 other institutions, tells Duygu Tavan about the group’s investment strategies to maintain its mighty status in Germany’s increasingly competitive retail banking space.

Photograph of Heinrich Haasis, GSBAThey have a branch network of 15,700 units across Germany, serve 50 million customers and, with a de-centralised banking approach via 429 autonomous savings banks, are physically closer to their customers than rivals such as Commerzbank and Deutsche Bank.

But this de-centralised model is what has put the mighty Sparkassen at a disadvantage of late.

Retailers such as Metro Group’s Media Markt and Saturn, who specialise in selling electronic devices ranging from freezers to cameras and DVDs, have taken advantage of consumers’ need for convenience and are offering consumer loans at the till.

Media Markt, for instance, has partnerships with Santander Consumer Bank, as well as Commerzbank and Deutsche Bank, which in recent years has led to a change in consumer behaviour.

When advantages turn into disadvantages…

Bar chart showing ATM use, germany vs EU averageInstead of having to go to a branch, consumers can request an instalment loan at the till – and only need to show proof of their household income. Evidently, partnerships with retailers such as between Santander and Media Markt are a lucrative source of income for banks. “But retailers do not want to enter a partnership with over 400 autonomous institutions of course,” acknowledged German Savings Bank Association (DSGV) president Heinrich Haasis.

“Our regional presence, which is usually an advantage for the consumer business, is in this case a disadvantage.”

Although the Sparkassen control half of the German savings market, their market share in consumer loans is only 25%.

Two major product launches in 2011

Haasis admitted the Sparkassen had lost some market share in the consumer loan segment – but with two new products in the pipeline, they are targeting recovery of their dominant position.

Bar chart showing mobile banking, Germany vs EU averageThe first new product will be a new debit card, titled SparkassenCard Plus, which will be introduced in the third quarter of the year, offering card holders access to an individual loan.

This card is in response to the loans offered by the retailers.

According to Haasis, the SparkassenCard Plus is a novelty in the German banking sector.

“We hope the card will be adopted by our customers and that it will help us compete [with the retailers despite] our de-centralised model,” Haasis said.

However, the de-centralised model will be reflected in the interest rate, as each Sparkasse will set the rates autonomously.

With this card, the Sparkassen hope to regain market share in the next two to three years in the consumer loan segment, Haasis said. He argued that such loans from retailers can turn out to be pricier than expected, but vowed that the Sparkassen would offer fair conditions to consumers. In addition, there will be consumer education campaigns, in particular in print and on radio.

The second product investment this year is the launch of a standard loan for all Sparkassen.

In order to compete with the retailers and their banking partners, the Landesbank Berlin and Deutsche Leasing, both part of DSGV, are going to form a new entity, called S-Kreditpartner, to offer retail loans.

Each Sparkasse will be able to choose whether they want to use this platform to offer a loan or whether they want to issue the loan themselves.

“With this product, we are aiming to attract a retail partner,” Haasis said.

“This has been a major problem for the Sparkassen: Those retailers only want to work with one bank and the Sparkassen could so far not offer one central loan service. But we will solve the problem with the launch of the S-Kreditpartner,” Haasis said.

Other investments at the Sparkassen include the push into alternative delivery channels, although Haasis emphasised that the branch network will remain the same.

BranchesBar chart showing branch use, Germany vs EU average

According to the latest European Financial Marketing Association and McKinsey report, Face-to-Face: A €15-€20bn Multichannel Opportunity, retail banking customers in Germany still use the branch more often than their European peers.

Some 87% of people in Germany have visited a branch in the past 12 month, compared with 79% throughout Europe (see table, bottom right), the report noted. The survey predicted purchasing processes would remain in the branch, but highlighted that, conversely, cashless transactions have already begun to take place via alternative delivery channels, although the majority of cash transactions still do take place in-branch as well.

So, for the Sparkassen, branches are an integral part of a multichannel strategy and enable the Sparkassen to pursue their strategy of being close to their customers.

Haasis: “We want the most satisfied customers”

Bar chart showing internet use, Germany vs EU averageIn the past three years, only 150 Sparkassen branches have closed – less than 2% of the accumulated network of all Sparkassen. In the 15,700 branches, the Sparkassen employ about 130,000 customer advisers – many of whom are of Turkish origin so Turkish customers, who often do not speak German fluently, can get the help they need from a native speaker.

“We want the customer to be able to use all technical opportunities for their banking needs, as well as the branch. We want to have the customers who are most satisfied with their bank,” Haasis said. “We see consumers need more advice than ever before – we live in a period where one has to plan ahead for their pension, education etc, thus quality advisory service in-branch will be [even] more important in the future,” Haasis predicted.

Therefore, the DSGV also built a centralised IT platform, which can be used by all Sparkassen; but on-screen, the closeness to the consumer will remain as they will see their local Sparkassen logo.


Pie chart showing DSGV market shares in deposits from householdsOften teased with claims of being a slow-starter in the alternative channels segment, DSGV actually introduced its first mobile apps in July 2009.

The apps are compatible across the whole smartphone range, including iPhones, the operating systems of Windows and Nokia’s Symbian and Google’s Android, as well as the iPod touch and iPad.

One app that Haasis liked to flag up is the property finder app for the iPhone and iPod Touch.

“We expect a lot from this app,” Haasis said, adding: “We hope customers will view a property via the app and then go to their local Sparkasse.”

In addition, the Sparkassen introduced contactless cards less than a year ago, for use at the Bayern Leverkusen football stadium.

“The project is going well,” Haasis said and added that the service has been rolled out to other stadiums. “Now we are planning to roll out contactless cards across Germany – but the retailers need to implement the appropriate touch points for contactless cards [first].”

Confidence in dominance

But, while the Sparkassen are waiting for the roll out to accelerate, Haasis was confident that they have set a trend already. “No other competitor has a contactless card,” he claimed.

For Haasis, contactless cards are the introduction of near field communication (NFC) payment technology.

“We do have a project on this topic, but have no particular dates to roll out NFC payments services yet.” But for now, the battle for customer deposits remains the main challenge in the German retail banking space, according to Haasis.

With Deutsche Bank’s acquisition of Germany’s largest retail bank Postbank at the end of 2010 and Commerzbank’s acquisition of Dresdner (which it finalised in mid-2010) – the private banks are hot on the heels of the DSGV in the retail banking market.

Is this another cause for concern?

Referring to Commerzbank’s campaign to attract more customers by offering a free current account and a €50 ($70) cash incentive in November, Haasis said:

“It is of course annoying when an institution that had to be bailed out is now able to offer conditions which are not fair. But we are very confident thanks to our high market penetration and high customer numbers. We believe our advisory customer service model and multichannel strategy will offer customers attractive and fair prices and options.”

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