With just under 52.5m internet users, Germany has nearly the biggest online audience of any European country, second only to Russia in unique internet users. Ellie Chambers spoke to Postbank, Deutsche Bank and the German Savings Banks and Giro Association about how banks are fighting to produce stand-out digital offerings

The 2013 Digital Future in Focus report by ComScore placed Germany seventh out of 19 European countries in terms of internet banking penetration.

With 48% of Germans visiting online banking sites, the country is behind the Netherlands, France, Finland, the UK, Sweden and Poland, but ahead of the European average of 39%.

According to this survey, over half of Germans have yet to take up digital banking and as internet penetration in Germany is still growing, going up by 3% last year, banks would be wise to ensure their digital offering will appeal to customers new to the platform.

The banking environment

The German banking industry differs from that of many other European countries in that rather than a few huge centralised banks dominating the market, there is a network of regional savings banks scattered across the country.

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The "Sparkassen", as they are known, are each independently managed but are often referred to collectively as the "Sparkassen Finanzgruppe".

The collective interests of the more than 400 savings banks are represented by the German Savings Banks and Giro Association (DSGV).

As the Sparkassen Finanzgruppe is made up of hundreds of smaller savings bank, it largely dominates the industry in terms of branches, with over 15,000 physical locations.

By comparison Postbank has only 1,100 branches and Deutsche Bank has only 750 branches in Germany, although it has a total of 2,800 worldwide.

Stefan Brinkmann, senior consultant for multi-channel technology and electronic banking at DSGV says: "Currently the German savings banks operate about 15,295 branches.

"Of course, the number of branches has reduced in recent years, but we have still the densest branch network in Germany."

In view of this, it is even more important for banks operating on a national level to have an excellent digital offering – they are unlikely to be able to compete with the Sparkassen Finanzgruppe in terms of branch network.

Online banking

Postbank, 93.7% owned by Deutsche Bank, exemplifies a strategy of aggressive growth in the digital channels.

With around 14m customers in total, the bank has a focus on extending online and mobile banking to all its clients and being the biggest and best online bank.

Philip Laucks, head of direct banking at Postbank, tells RBI: "Our strategy is directed towards growth in direct banking and being the biggest online bank for retail customers in Germany.

"85% of our customers use our internet platform, therefore we constantly upgrade our website to strengthen our sales orientation and customer services."

This high internet banking penetration amongst Postbank customers has made its website the fourth most visited banking website in the country.

Deutsche Bank is the most internationally well known of the large German banks and has an impressive 24m customers in Germany and another 5m outside.

However, like Postbank, its branch network is dwarfed by that of the Sparkassen Finanzgruppe, leading it to focus on modernisation and investing in its digital strategy.

Heinz Beeck, head of direct banking in the private and business clients division of Deutsche Bank, tells RBI: "Online Banking is an integral part of the product and service offering and the best way for multi-channel.

"Primarily the clients use online banking to contact the bank independently from opening times and to execute financial transactions and service requests.

"More than 50% of our clients use the Deutsche Bank online banking service."

Despite their domination of the branch channel, the Sparkassen have not lapsed into complacency or left the other channels to the national banks.

Brinkmann says: "The German savings banks are pursuing a multi-channel strategy."

"That means that the customer is free to decide, in which way he wants to get in touch with his Sparkasse, for example: the conventional branch, self-service branch, mobile-sales-service, by post, via telephone or the digital channels such as online or mobile."

However, the savings banks are still falling behind in terms of online banking penetration, perhaps a result of the independent nature of each bank, which makes an overarching digital strategy difficult to achieve.

Only 40% of customers use their Sparkasse’s online platform, although, as Brinkmann points out, this still amounts to 35m, making the Sparkassen Finanzgruppe website the second most visited banking website in the country and the fourth in Europe.

He says: "The development of our online platform is an ongoing process, in particular in service and safety."

Stepping up mobile banking

Mobile banking is another area where the banks are ramping up their operations, although in this case they have taken very different approaches.

Laucks says that at Postbank, mobile comes first and that the bank’s strategy is understanding mobile customer needs and offering the best mobile banking service in class.

He adds that 30% of Postbank customers are already using their mobile banking platform.

Deutsche Bank’s mobile offering has seen similar success over the last few months.

Beeck says: "The number of customers using mobile devices is increasing (up to 30%), and correspondingly the demand for additional services is too.

"The number of Deutsche Bank mobile logins has doubled in comparison to the previous year."

Both banks say they have received positive feedback on their mobile platforms.

Beeck says: "We see a high acceptance of mobile banking services from our clients and are receiving positive client feedback.

"For example, since the launch of the Deutsche Bank App "Meine Bank" the application has been downloaded about 550,000 times."

In comparison, the Sparkassen do not have such a focus on mobile, seeing it as complementing their other channels.

Brinkmann explains: "From our perspective, the mobile channel is a supplement to the online channel and thus part of our multi-channel strategy.

"We define the digital channels as a distribution channel for simple products and supply routes to the expert advice."

Take-up of mobile services is also lower as a proportion of customers, with Brinkmann putting the figure at around 10%.

However, again, the sheer number of customers means that the Sparkassen apps are probably amongst the most used banking apps in the country.

Brinkmann says: "Our apps have now been downloaded over 6m times and we also offer solutions for the mobile browser."

The future is digital

Looking towards the future, the banks are planning to venture further into digital channels with the development of tablet platforms.

Postbank already has tablet banking services for iPad and Android and is planning to launch the application for Windows.

Deutsche Bank is in a similar position with tablet apps for Android and iPad.

Brinkmann says the Sparkassen are planning launches of tablet apps for this year and predicts that the rise of tablets will contribute to the importance of digital channels.

He says: "We believe that digital services will be used even more in the future – especially in the light of the further proliferation of tablets and smartphones."

Meanwhile Laucks says that the appeal of banking any where, any time, will see mobile banking overtake the online channel.

He says: "Mobile banking usage will pass online banking usage in the next two years."

One thing is for certain – no one single bank can compete with the vast Sparkassen Finanzegruppe in terms of branch network, so market share of the digital channels will remain hotly contested ground.

Centralised banks like Postbank and Deutsche Bank will have to keep up their efforts in the digital channels to remain contenders in the Germany banking industry.

Mobile banking in Germany

RBI: What mobile banking services do you currently offer?
Heinz Beeck (HB), head of direct banking in the private and business clients division of Deutsche Bank:
The mobile banking offers all important functions and services of the Deutsche Bank Online Banking, like: financial overview, account balance, transaction turnovers, domestic transfer orders, orderbook functionality (e.g. buy/sell orders) and search of the nearest branch or ATM.

RBI: What mobile platforms are you currently operating on, for example, iPhone, Android, Blackberry?
HB: iPhone, iPad, Android-Smartphone, Android-Tablet, Windows Phone

RBI: Is the bank currently offering a tablet banking service for iPads, Android devices?
HB: Yes, for both.

RBI: Can you summarise the Postbank mobile banking offering?
Philip Laucks, head of direct banking at Postbank (PL):
We offer the following services:account statement, money transfer, standing orders,
Personal Finance Management (Budget Planning, Forecast, Recommendations, saving goals, categories); ATM and Branch Finder,Call Back Services and web based Mobile Banking and Brokerage

RBI: Across which platforms?
PL: iPhone and iPad App. We also have apps on the Android smartphone and tablet. Apps on the Windows Smartphone and Tablet are being planned. Services that we offer include an
exchange rates service as well as a Q&A facility.

RBI: Can you summarise your mobile banking service
Stefan Brinkmann, senior consultant for multi-channel technology and electronic banking at DSGV:
We offer brokerage and Transaction Services (for example SEPA credit transfers, standing orders, etc.), online product sales, branch locator, ATM Locator, Card blocking-Services (for example "Geoblocking"), Finance-Management and other value-added-services.
We are already operating on the iPhone, Android, Blackberry and Windows Phones.