There are about 7,370 Aldi and Lidl discount supermarkets in Germany, in which people shop several times a week. Compare this to the country’s 28,000 bank branches, visited just once a quarter at most, and it’s clear to see there’s a problem: Germany is chronically overbanked.
According to analysts, the market is too crowded with savings banks, cooperative banks, public and private sector banks. Too many cooks are spoiling the broth, they add. it seems that the banks are now taking heed.
While it’s true that Germany has more banking companies than any other country in the euro zone — 1,888 in 2016 according to the Bundesbank, Germany’s central bank — there has been a veritable cull since 1990, with over 2,800 banks shutting down.
And in the last 15 years, the number of bank branches has fallen by a quarter to 3.5 per 10,000 inhabitants, putting Germany slightly below the EU average of 3.7, according to KfW, a state development bank. Rural areas are being hardest hit. The figures underscore the upheaval the banking sector is going through as customers switch to online banking and grow increasingly disloyal. Gone are the days when people’s relationships with their bank manager outlasted the average marriage.
“The consolidation trend is likely to continue in the coming years both across Europe and in Germany,” KfW said in a statement. “Digital banking services are a decisive factor in this, alongside cost pressures and the reduction in surplus capacities.”
One in five customers never visits their branch, and a further 49 percent only do so rarely.
The surge in online banking has made trips to bank branches unnecessary. Banks have responded by cutting staff and shuttering branches to save costs. A Handelsblatt survey of thousands of bank customers conducted by consultancy Emotion Banking underlines the trend. One in five customers never visits their branch, and a further 49 percent only do so rarely, it found. When it came to loyalty, the survey found that more than half of customers no longer see any advantage to sticking with their bank over the long-term.
The big banks are unsure what to do about their branch networks. HypoVereinsbank, Germany’s fifth-largest bank, has closed half of its 580 branches and Deutsche Bank, the country’s largest, is in the process of shutting a quarter, reducing its network to 535. But Germany’s second-biggest lender, Commerzbank, has said it plans to maintain its branch network of around 1,000.
Any cuts to branch numbers usually result in dips in customer satisfaction levels, a truth borne out in the survey. The average satisfaction score was 67.8 percent, with a quarter of respondents saying they had recently been annoyed with their bank, in most cases due to fee hikes or worsening terms. This is an indirect result of the European Central Bank’s ultra-easy monetary policy, which has prompted banks to increase fees for accounts and other services to offset declines in interest income.
Several big name banks rated poorly. Deutsche Bank, which has been beset by scandals, lawsuits and restructuring problems, came bottom for customer satisfaction. Overall, customers did not recommend it or its retail arm Postbank. “The dissatisfaction with Deutsche Bank is linked to the past scandals,” said Christian Rausch, managing director of Emotion Banking. “In our study we found a clear correlation between the image of the bank and customer confidence.”
A Deutsche Bank spokesman said the bank took the results of the survey seriously and would study them and make improvements if needed.
But it wasn’t all bad news for the established players – the competition didn’t do very well either. Dissatisfaction with big banks and waning loyalty is a big opportunity for the fintech sector, where technology firms offering financial services have been stealing market share from traditional lenders. But according to the survey, they’re yet to make major inroads. Only 2.7 percent of respondents said they banked with a fintech firm and 57 percent said they couldn’t even name one.
Roman Tyborski is a trainee journalist at handelsblatt. Michael Maisch is the deputy chief of Handelsblatt’s finance desk. To contact the authors: firstname.lastname@example.org