THE “FORTH PILLAR”

For years, the three pillars of the German banking market have been under strong pressure from
foreign banks and new competitors. Increasingly, the distinctions between domestic and foreign
banks, and between banks, FinTechs and global technology companies, are blurring. The result
is a kind of “fourth pillar” in the German banking market, made up by a heterogeneous bundle
of four groups: foreign banks, FinTechs, market infrastructure providers and (mostly) global
technology companies.

Foreign banks:
Large international investment banks have been competing with local German banks for decades
in the areas of securities trading and capital markets. In recent years however, foreign banks
have also gained a foothold in the German retail and commercial banking business: through
the use of their digital operating models; through aggressive growth strategies based on their
global, efficient product platforms; and, increasingly, also through their growing local presence.
The upcoming Brexit will lead to a further increase in the presence of foreign banks in Germany
and thus spur competition for clients and talent – but it will also provide German banks with
the opportunity to review their European footprint for efficiency.

FinTechs:
The initially exaggerated expectations – or fears – about the crowding out of banks by FinTechs
have now been put into perspective. What remains is the noticeable performance of FinTechs
in select specialty disciplines of banking. Building on this, they increasingly influence the
competitive landscape, in particular through cooperation engagements.