The impact of the financial crisis was a challenge for international and German banks and a test for the robustness of their business models. The consequences were stricter financial regulations introduced by Basel III and banks were forced to reduce proprietary trading and to refocus on traditional core banking business. Today supervisory authorities require sufficient and appropriate risk management systems to ensure financial stability and thus the internal operational complexity has increased and generates additional costs. In the aftermath of the financial crisis some banks are still struggling to regain competitiveness in combination with diminishing margins. In particular those banks are challenged with high dependency from interest income by deposit-financed retail banking business.
In recent years financial technology companies, commonly known as FinTech, gained more importance in the financial industry and challenge banks and established business models. Digitisation is advancing in all industries and the music and media industry has already experienced a painful transformation process and a similar development is expected as well for the financial industry. Depending on how revolutionary the technological innovation is the more intense will be the impact on business models and in consequence fast adaptability is essential. The level of activity within FinTech is enormous at the moment in Germany and over one hundred new companies were launched in 2014. As a consequence digital business models are analysed with respect to core competences and how FinTech generates benefits for customers by improving the value with innovative digital solutions.
Contents
1 Introduction
1.1 Abstract
1.2 Research Method and Questions
1.3 Boundary and Limitation of the Study
2 Banking
2.1 Definition of Banking
2.2 German Banking System
2.3 Effects of the Financial Crisis
2.4 Retail Banking in Germany
2.5 Challenges in the current Market Environment
3 Financial Technology
3.1 Impact of Digitisation
3.2 Definition of FinTech
3.3 Impact of FinTech
3.4 FinTech Market in Germany
3.5 FinTech Business Models
3.5.1 Digital Payment Business Model
3.5.2 Digital Investment and Savings Business Models
3.5.3 Digital Lending Business Models
3.6 FinTech Business Models versus Traditional Banking Business Models
3.7 Impact of Licenses and Regulation on FinTech Business Models
4 Research Study and Assessment
4.1 Research Study
4.1.1 Objectives
4.1.2 Participants
4.2 Assessment of the Study
4.2.1 FinTech
4.2.2 German Banking Industry
4.2.3 Strategic Alignment and Outlook
4.3 Strategic Options for the German Banking Industry
5 Conclusion
5.1 Summary of Results
5.2 Outlook and Future Research
Objectives and Core Themes
This work explores how the rise of financial technology (FinTech) companies impacts traditional business models within the German retail banking sector. It examines whether these digital innovations pose an existential threat or provide an opportunity for banks to modernize and improve customer value.
- The evolution of the German banking system in the post-financial crisis environment.
- Definitions and classifications of various digital FinTech business models.
- Qualitative assessment of management perspectives on digital transformation.
- Strategic requirements for banks regarding IT infrastructure and organizational agility.
- The intersection of regulatory frameworks and technological innovation.
Excerpt from the Book
3.1 Impact of Digitisation
Digitisation is gaining ground and thus work as well as private space is getting more and more digitised, starting with smartphones and tablets to connected cars and other devices. But interconnection goes beyond technical dimensions, as it progressively transforms processes, industrial and commercial structures. Digitisation triggers structural and economic change driven by technology and offers business opportunities and benefits for customers, but challenges also traditional business models (Leist & Winter, 2002).
The Internet bundles vast quantities of data and information and makes it supported by data-driven technology in combination with virtual organisations permanently available and accessible to all business models along the value chain and each consumer around the globe. Over the last twenty years the impact of digitisation and in result structural change can be easily studied in the music industry, as traditional business models have been revolutionised (Walker, 2014). This revolution can be traced back to the invention of the mp3 standard in 1987, a technology to compress music into a digital format. However, the disruption of the music industry started with online peer-to-peer technologies like Napster. Napster enabled an online exchange of compressed music files in mp3 format without using physical storage mediums like Compact Discs (CD) and as well without a substantial worsening in quality. A sharp slump in traditional physical media sales due to this technological development challenged the music industry and in consequence the established business model had to be adjusted to limit these losses (Dewan & Ramaprasad, 2014). Furthermore new products and services were introduced and have generated new innovative business models. As an example Apple has been a manufacturer of computers focussing on integrated software solutions, but launched with iTunes a digital business model and adjusted its traditional business model to a platform that operates now in many segments (Osterwalder & Pigneur, 2010).
Chapter Summaries
1 Introduction: Provides an abstract and defines the research methodology based on literature review and qualitative interviews within the German banking sector.
2 Banking: Outlines the German universal banking system, the impact of the financial crisis, and the challenges faced by retail banking due to low interest rates and high operational costs.
3 Financial Technology: Analyzes the impact of digitisation across industries, defines FinTech, and examines specific digital business models in payments, investment, and lending.
4 Research Study and Assessment: Presents the primary empirical findings from expert interviews regarding banks' strategic responses to the FinTech challenge and their assessment of market risks.
5 Conclusion: Summarizes the key insights, confirming that while digitisation is a significant driver of change, banks can utilize it as a chance to modernize and generate new core competences.
Keywords
FinTech, Retail Banking, Digitisation, German Banking System, Financial Crisis, Business Models, Innovation, Regulation, BaFin, Digital Natives, IT Infrastructure, Customer Confidence, Value Innovation, P-2-P Lending, Strategic Alignment.
Frequently Asked Questions
What is the primary focus of this work?
The work investigates the emergence of financial technology (FinTech) companies and analyzes how these new market entrants challenge established business models in the German retail banking industry.
What are the core thematic areas?
The key themes include the evolution of traditional banking, the disruptive impact of digital technologies, the regulatory challenges faced by banks and FinTechs, and strategies for successful digital transformation.
What is the research question driving this study?
The research asks how digital innovation affects the business models of German retail banks and what strategic measures banks must take to maintain competitiveness in a changing financial landscape.
Which methodology was applied?
The research employs a combination of literature analysis and a qualitative approach consisting of twenty-three semi-structured interviews with senior bank managers and industry experts in Germany.
What topics are covered in the main section?
The main part covers the historical development of German banks post-financial crisis, profiles of digital business models (payment, savings, lending), and an empirical assessment of current strategic priorities in banks.
Which keywords best describe the research?
The most important keywords are FinTech, Retail Banking, Digitisation, Innovation, Regulatory Framework, and Digital Transformation.
How does the author define FinTech in this context?
The author defines FinTech as a portmanteau of financial technology, characterizing any procedure where technology is applied to digitize banking, payment, or financial investment services and related processes.
What is the role of regulation in the author's argument?
The author highlights regulation as a significant barrier and a critical factor for market entry, noting that while Germany's BaFin is perceived as conservative, regulatory compliance is essential for the stability of financial markets.
- Quote paper
- Ulrich Sprenzel (Author), 2015, Innovation in Banking, Munich, GRIN Verlag, https://www.grin.com/document/315454
