Big Data Analytics and the Discovery of the Hidden Data Treasure From Savings Banks in Germany

Introduction

First, a look at the German banking system will be provided. The banking system in Germany is characterized by three pillars. Pillar I contains the private sector banks, Pillar II contains the savings banks and Pillar III contains the cooperative banks (see Figure 1). This structure makes the German banking system unique (Behr & Schmidt, 2015; Komorowski, 2020). The focus of this research paper is on the German savings banks (Pillar II).

Figure 1.

“The German Banking System” based on Giebe & Schulz (2021)

The savings banks in Germany are independent commercial enterprises under municipal ownership. Their task is to strengthen competition on the basis of market and competitive requirements, especially in their business area. Their task has many regional aspects. For example, it must ensure an appropriate and sufficient supply of monetary and credit services to all sections of the population, to the business community, especially small and medium-sized enterprises, and to the public sector, also on a regional basis. Savings banks are also responsible for supporting the performance of tasks by municipalities in the economic, regional political, social and cultural spheres. Accordingly, the savings banks promote savings and asset formation among broad sections of the population and the economic education of young people (Savings Banks Act of Baden-Württemberg, §6 (1), 2020).

The individual savings banks are so-called institutions under public law. As a rule, they belong to cities or municipalities and serve the common good. Savings banks thus have a public mission. As of July 2020, there were 377 individual savings banks, which in turn are incorporated into twelve individual regional savings bank associations. In this respect, each individual region of the Federal Republic of Germany is assigned to a specific savings bank and marked on the map shown (see Figure 2). Here, the savings bank associations are marked with a dark red outlined line, for example SVB for Sparkassenverband Bayern (aka Savings Banks Association Bavaria) in the south or OSV for Ostdeutscher Sparkassenverband (aka East German Savings Banks Association) in the east of the Federal Republic of Germany. The savings bank associations, in turn, contain the individual savings banks, which are often identical to the district. They are represented in the area with pastel colors.

Figure 2.

“Business areas of the savings banks and savings banks associations (aka Sparkassenverbände) in Germany”.

Source: Dörrbecker, M. (2020) https://upload.wikimedia.org/wikipedia/commons/6/6e/Karte_Gesch%C3%A4ftsgebiete_der_Sparkassen_und_Sparkassenverb%C3%A4nde_in_Deutschland.png

For some years now, the banking sector has been undergoing the greatest structural upheaval the industry has ever seen. This structural change is being driven massively by technological progress. As a result, banks are being forced to reposition themselves strategically. Until now, banks have been able to achieve high market penetration with standard products.

However, innovative product ideas are now necessary because banks are appearing on the market with almost identical products. As a result, banks and savings banks are being forced to provide highly efficient banking services. Large personnel and material expenses are putting increasing cost pressure on the institutions (Moormann, 2000).

Digital transformation is now a reality. Many banks and savings banks in Germany could miss the boat in the age of digital transformation. On the one hand, external influences such as customer behavior, customer expectations, technological change, willingness to pay, and product life cycles are gaining in importance. On the other hand, internal expectations of employees, e.g., acceptance of new technological solutions and processes, are rather sluggish. According to a study by consulting firm McKinsey, traditional banks could lose 29-35% of their revenue due to competition from FinTech companies (Drummer et al., 2016; Giebe, 2019; Komorowski, 2020).