• Technology investment
  
  In a country where technology forms the basis of industry, investment in technology among banks is very high, not only among the top tier players but smaller banks as well. Adoption of technology by customers is high too, as is evident from the popularity of direct banks. At Postbank, for instance, over 65% of its customer base use online banking. The demand for online banking services today is far more than account balance inquiries and transfers. Since
  the launch of Postbank’s online brokerage, at the start of the new millennium, customers have been able to buy or sell shares, bonds and investment funds or subscribe to new issues. SMS alerts when salary payments are received or when chosen thresholds are reached in safe custody accounts complete the service offerings. In 2007, with iBanking, Postbank was the first bank in Germany to make it possible to use the iPhone for banking. An analyst firm estimates that 39% of Germans now bank online. Online banking is expected to grow by about 4% each year with 47% of adults or 32 million Germans banking online by 2012. The main drivers of this trend will be users’ confidence in the channel, banks’ robust security measures, and strong competition for retail banking customers. Broadband connectivity too plays a key role in encouraging online banking usage. By the end of 2007, there were 16 million German broadband households — more than in any other Western European country — but this equated to only 43% of German households. It is also predicted that a further 11 million households will have broadband access by the end of 2013, many of which have dial-up connections today.
  
  German banks are also adopting Web 2.0 technologies and other innovative strategies to attract customers. Last year Wirecard Bank became the first German bank to establish a virtual branch in 3D online universe - Second Life. The bank said that in the virtual world, specially trained Wirecard Bank service personnel represented by avatars in the branches were available to assist customers. In addition, it said that access to Wirecard’s payment services was available via Second Life. Commenting on the move into the virtual world, Burkhard Ley, CFO of Wirecard, said in a press release, “The intelligent link between technology and banking services is an objective that has been pursued by Wirecard Bank from the outset. To reinforce this strategic positioning on the market, the commitment to Second Life represents a logical step as far as we are concerned.”
  
  As with rest of Western European countries, German banks too suffer from legacy platforms, multiple banking systems and siloed architectures. Notably, due to the complexities of German banking regulation, proprietary platforms are prevalent in the country’s banking sector. However, banks are increasingly looking to modernize their platforms and opt for state-of-the-art third party solutions. The main catalyst for change is the need for access to sophisticated banking solutions, customer centricity, efficiency and multi-channel integration – aspects difficult to achieve through proprietary, legacy solutions. The trend for mergers and acquisitions as in the recently announced Commerzbank-Dresdner Bank deal will be another factor influencing core systems transformation as banks realize that tremendous cost savings and process efficiencies can be achieved through IT systems rationalization and through creating a common integrated core system platform.