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Many Germans can imagine opening a current account with a digital company – especially customers up to their mid-20s. Will Google, Apple & Co. soon replace commercial banks?
In the USA, the digital group Apple recently pushed ahead with its own savings account – with interest rates of more than 4.1 percent. A revolution in the banking market? The big tech companies still don’t offer their own checking accounts, says Timo Halbe from the online portal Finanztip, at least not in Germany. But more and more Germans can obviously imagine exactly that.
Banking transactions increasingly digital
On the way to work on the bus, just checking whether the salary has arrived, or transferring money quickly from vacation abroad: Banking and financial transactions are increasingly being carried out digitally. Anyone who uses the Internet usually also uses online banking – up to 90 percent, according to the industry association Bitkom, which represents the information and telecommunications industry in this country.
The next step is not far away, it seems: more than 41 percent of Germans could now imagine opening a current account with a digital company such as Apple, Google or Amazon and no longer with a bank, says Bitkom. Among the 16 to 29 year olds it is even 55 percent.
“mobile first”
The beginning of the end of established banks? According to Bitkom, customers now measure the digital quality of their bank based on the digital offers they are familiar with from everyday life: online shopping, for example, or video streaming services.
“If I grow up today as a young teenager, it is very likely that I no longer have my first account with a savings bank or bank or something similar. My first account might be in the Google Play Store or with Apple,” says Kevin Hackl, at Bitkom responsible for Digital Banking & Financial Services.
The current account on the smartphone, in the app, has long been common – even for adults. It is now just as important for financial transactions as the laptop: Bitkom also found this out in its survey. “Mobile first” has become increasingly important in the industry, says Hackl.
“Fast, convenient and mostly free”
And you no longer need a classic bank or online direct bank for the banking app on your smartphone. The market for so-called neo- or smartphone banks, young companies that bring finance and digital technology together, is now very large and very competitive, says financial tip expert Halbe.
Vivid Money from Berlin is such a “smartphone bank”. Founded in 2020, the company now has more than 500,000 customers in Germany, France, Spain and Italy. In addition to a checking account with more than a dozen sub-accounts, the app also offers investments in stocks or cryptocurrencies and loan offers. “Vivid customers,” says company boss Adrain Smiatek, “manage their finances quickly, conveniently and mostly free of charge.”
How about security?
Most of the new banks do not have their own banking license, says Finanztip expert Halbe. They cooperated with an established bank. This is how Apple does it with its savings account in the USA: The digital group works with the long-established bank Goldman Sachs.
Vivid Money from Berlin also started in 2020 with the licensed Berlin Solaris Bank. Therefore, according to the fintech, customer deposits are protected by the “German deposit guarantee system” up to 100,000 euros. The online portal Finanztip recommends that customers should pay attention to this if they decide to open their current account with a “smartphone bank” or neobank: that they have their own banking license or that of a partner bank and that the statutory deposit insurance is in effect.
Symbiosis instead of revolution
The established banks are far from finished. And they are also expanding their digital offerings. “The Sparkasse app is regularly awarded; we don’t need to hide from anyone here,” says Robert Heiduck from the Mittelbrandenburgische Sparkasse.
In the competition for customers, the traditional banks also rely on what they consider to be their unique selling point: trust. “Real customer loyalty comes from trust, regional roots and the ability to help customers deal with their financial affairs,” says Heiduck from Mittelbrandenburgische Sparkasse.
Bitkom’s financial expert Hackl estimates that traditional branch banks will come under increasing pressure. But despite all the digitization, there will always be a need for strong players who run the banking services in the background. And the established banks are well positioned there. Expert Halbe from the online portal Finanztip suspects: “Bank customers value evolution rather than revolution.” Fintechs and digital groups will probably complement the established banks rather than replace them, according to the assessment.