Germany Retail Banking Review, Forecasts, and Future Opportunities

Published: November 17, 2021 |

GlobalData | 35 Pages | Delivery time: 1-2 business days

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This report explores the key trends in the German retail banking sector and offers insight into consumer preferences and changes in behavior regarding financial service providers. It also examines channel preferences and covers overall satisfaction and importance levels of the main banking attributes provided by banks. Furthermore, the report analyzes cross-selling opportunities by comparing the differences between overall product holding versus actual product holding with a customer's main provider.

The German property market is expected to grow during 2020-25 at a positive compound annual growth rate (CAGR) of 5.2% and credit cards by a CAGR of 3.9% (significantly higher than Germany's comparable countries), but the latter's growth is set to be slower than the 2015-20 CAGR of 6.1%, albeit due to disruption caused by the COVID-19 pandemic. The slower forecast growth has been impacted by government restrictions and the hesitancy to use credit cards, with many German consumers now shifting to new spending behavior and saving much more rather than spending. Overall, the efficiency of German banks is declining, as shown by rising average cost-to-income ratios (CIRs). The profitability of German banks declined in 2020 due to increasing COVID-19-related costs, but this trend was already in effect before the pandemic due to poor revenues. As a result, German banks' CIRs have shown significant increases between 2015 and 2020.

Scope

German attitudes towards alternative banking show that consumers are showing more willingness to trust alternative providers. Still, at the same time, Germany has recorded the smallest shift in Europe in terms of movement to alternative providers.
Younger German customers prefer alternative providers, with the most significant driving factors being around rates/rewards, security, and better digital functionality. Conversely, the two areas with the lowest respondent choices were an appealing brand image and environmental, social, and governance (ESG) alignment (6% and 5%, respectively).
The younger German cohort uses the branch more than those aged 35 and above. Of those 18-34, the top ranked activities for branch visitation among German respondents are account opening, applying for a mortgage, and conducting frequent banking tasks.

Reasons to Buy

Understand and analyze trends in the German housing, deposit, and unsecured market through past and forecasted growth up to 2025 through the sector's performance compared to other markets.
Uncover in-depth analysis of market shares across the leading German players while looking at the winners and losers of CIR maintenance.
Analyze 2021 Financial Services Consumer Survey data by looking at new consumer preferences and behaviors that have emerged while analyzing the key survey highlights.
Assess critical data points for customer retention and future customer acquisition through three core areas in banking: financial services provider preference and movements, digital and alternative channel preferences, and cross-selling opportunities based on tenure and satisfaction levels.

Product Code: GDFS0548CI

1. Executive Summary

1.1 Market overview
1.2 Key findings
1.3 Critical success factors

2. Key Findings

3. Market Environment

3.1 Market balances

4. Macroeconomic Environment

4.1 GDP and unemployment

5. Competitor Environment

5.1 Benchmarking the main players
5.2 German banks saw increased CIRs in 2020

6. Germany Survey Insights

6.1 There is a higher preference for alternative providers in 2021, but the preference for digital banks is low
6.2 Movements in the digital space
6.3 Cross-selling

7. Disruptors

7.1 N26
7.2 Klarna

8. Appendix

8.1 Methodology
8.2 Secondary sources
8.3 Further reading
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List of Figures

Figure 1: Residential mortgage and retail deposit balances have increased over one year (2019-20)
Figure 2: Credit cards in Germany are set to record a higher CAGR than comparable countries
Figure 3: The CAGR for personal loans in Germany is forecasted to be much weaker than its comparable countries
Figure 4: The product CAGR growth for 2020-25 in Germany is mid-ranged vs. other Western countries
Figure 5: Annual GDP to show recovery in 2021 and 2022 before reaching similar levels to 2018 (pre-pandemic)
Figure 6: Wage growth and inflation have been directly proportional for the past few years
Figure 7: Retail deposits quarterly market shares showed minimal movement from 2019 to 2020
Figure 8: Residential mortgages quarterly market shares are set for small movement in 2021
Figure 9: Credit card quarterly market shares will see marginal change in FY2021
Figure 10: Personal loans quarterly market share has declined at Sparkassen
Figure 11: Three of the main players in Germany have CIRs above the 2020 average of 76%
Figure 12: Preference for traditional providers has declined in 2021 by 4pp
Figure 13: German consumers have shown the least change in attitude towards traditional banks than other markets
Figure 14: Younger respondents prefer alternative providers for their main savings/transaction account
Figure 15: Better rates and rewards is the top reason for preferring an alternative provider compared to traditional providers
Figure 16: Satisfaction levels vs. importance shows that consumers are generally satisfied with what they find most important from their primary current account provider
Figure 17: Younger customers use the branch more frequently than older respondents
Figure 18: Those with a lower tenure visit the branch more frequently
Figure 19: Both frequent and non-frequent branch users place similar importance on areas for digital banking improvement
Figure 20: In comparison to other European markets, German respondents (aged 18-44) have a high preference for using a branch to open an account
Figure 21: Germany has the joint-highest branch preference for conducting frequent banking tasks among younger respondents
Figure 22: The branch as a preference for research methods for financial products and services is higher in Germany in comparison to other markets
Figure 23: More younger respondents in Germany have been with their main banking provider for less than five years in comparison to the older cohorts
Figure 24: German banks are struggling to cross-sell more than two products
Figure 25: There are lower levels of satisfaction among those who have been cross-sold less
Figure 26: Only 7% of German respondents have a credit card with their primary provider
Figure 27: Out of the 16% of respondents who hold a mortgage, only 10% are likely to go with their primary provider*
Figure 28: Experience, brand, and branches are among the top reasons for choosing a mortgage provider