When it comes to some things, Germans are undisputed whizzes – their prowess for quality engineering and public transportation, for instance, is legendary. But in the world of online banking, the country is a stand-out laggard. A survey of more than 15,000 people in 17 countries by Legg Mason, a global asset manager, shows only a slight majority of Germans use the internet to sort out their personal finances, say, by accessing their bank account, a broker, or fund manager. The worldwide figure is somewhat higher, at around 60 percent.
Germans also seem fairly oblivious to financial apps: Only one in five residents bother with them, compared to about one-third globally. These findings are echoed in a study of 1,400 German adults by EY, a management consultancy. While around 80 percent of Germans own a smartphone, only 20 percent use it to conduct banking transactions.
What is going on? Advisers interpret Germans’ lack of interest as a wake-up call for online financial service providers to come up with better products.
“User behavior (of Germans) is ambivalent: We communicate online, we shop online – but when it comes to money, we lose confidence in digital technology,” said Joachim Spill, a partner at EY. Experts have identified many reasons for this, most of which relate to German concerns about digital security, a tendency to cling to old habits and – perhaps most tellingly – a general lack of interest in financial matters.
That makes for sobering reading for droves of financial technology providers, or fintechs, that target the German market with online business models. They automate processes, offer reasonably-priced investment products (such as funds that track security indexes), and charge cut-rate fees to lure pint-sized investors, often with assets of €10,000 ($11,800) or less. Sensing potential, the country’s established financial service providers have already invested millions in digital services.
“Oftentimes, we Germans need more time than others to change,” said Friederike Stradtmann, an expert in digital business models for banks at Accenture Strategy, a management consultancy. “Look at the debate about the end of cash.” In many countries, such as France, Norway and India, people pay even the tiniest of purchases by credit card or smartphone, she noted. Not so in Germany.
“Behavioral patterns that have become established over years take a long time to change – and as a result, investors in Germany are cautious in opening up to new technologies,” said Klaus Dahmann, head of Legg Mason in Germany. “Germans are not satisfied with the digital financial products and services currently available.”
Ms. Stradtmann makes a distinction between investment and typical day-to-day transactions, such as online banking. She believes there’s a simple way to encourage more people to take up online banking: offer financial incentives. If it costs money to make a transfer on paper, but not to do it online, more account holders will probably use their computer for banking, Ms. Stradtmann added.
Fees for robo-advisers tend to be far higher in Europe than in the United States.
The issue of investment, however, is more complicated. A wide range of financial products is available in Germany from diverse sources. Providers of automated advice – better known as robo-advisers – have shaken up the market and attracted new digital-savvy customers. But these “early adopters” represent a limited number of Germans, and most them have already been reached. Roughly 30 robo-advisers operate in Germany, and manage an estimated three-figure sum in the millions of euros – a modest amount, given the gargantuan assets under robo-management elsewhere. Comdirect Bank, a unit of Germany’s Commerzbank, recently launched a robo-adviser, while Deutsche Bank’s fund management arm, Deutsche Asset Management, operates two.
The Legg Mason survey suggests that people are more open to robo-advisement in other countries. In the United States, which has been a pioneer in this field, robo-advisers are managing about $0.5 trillion, according to estimates by KPMG, an auditing firm. Part of the problem may also be related to cost: Deutsche Bank in a research note said fees for robo-advisers tend to be far higher in Europe (around 0.8 percent) than in the United States (0.4 percent).
To draw more Germans into digital finance, advisers agree that that online asset-management products need not only to be better tailored to individual customer groups such as older investors, but reliably come up with handsome returns – and not just when security prices are buoyant.
Anke Rezmer covers investment topics for Handelsblatt out of Frankfurt. To contact the author: firstname.lastname@example.org