How does banking in Germany work?
Banking in Germany is made up of traditional banks which offer services in branches and online banking as well as so-called direct banks or digital banks. These have no branches. Account use and communication will only take place over the phone or online.
Digital transformation has finally shifted the focus of banking in Germany towards digital services. Below is a look at the how banking and finance works in Germany.
- Which banks (banking groups) operate in Germany?
- Banking in Germany: The current account
- Banking in Germany: Cash
- German account number
Which banks (banking groups) operate in Germany?
Savings banks (Sparkasse)
German savings banks mostly belong to cities and municipalities. In the past, every city had its own savings bank. In the last 20 years, many savings banks have merged due to the competitive situation.
Although the savings banks have been losing customers for years, they are still among the best-known banks. Accounts are often opened there because the Sparkasse is “on site”. Later, when you are more concerned with finances, you often have to switch to another bank, which is usually cheaper or offers better services.
There are several hundred different savings banks. They belong to the “public banks”.
Volksbanken / Raiffeisenbanken (cooperative banks)
This is the next best known banking organization in Germany. VR banks – this is how they are abbreviated – are cooperative banks. They are organized in a similar way to associations and belong to their members. Members are only allowed to acquire very few shares in the bank, so that no individual has too much influence over the bank’s business.
Just like the savings banks, the Volksbanks are struggling with customer churn. Although they have many branches, they cannot keep up with modern direct banks in terms of price or service.
There are several hundred different VR banks in Germany. They are among the “cooperative banks”.
The best known and largest is Deutsche Bank. Deutsche Bank is regularly involved in scandals: There are investigations, house searches and court cases. Nevertheless, it has an enormous customer base. Above all, immigrants from abroad are drawn to Deutsche Bank – presumably because of the name.
In terms of fees, Deutsche Bank is rather expensive, but in contrast to the next larger German private bank, Commerzbank, it offers account openings in the branch in English and online banking is also completely bilingual: German and English.
There are still a number of medium and small private banks in Germany. The private banks belong to their shareholders. Shares in these banks can be bought on the stock exchanges and you have a financial stake in the success (or failure) of the bank.
There are a few foreign banks active on the German markets that advertise for customers in German. In the simplest case, the banks are licensed in another EU country and serve customers directly via online banking and telephone banking or have their own branches in Germany.
The branches were mostly acquired in the course of a takeover. The Spanish Santander Bank has some in Germany.
Banking in Germany: Direct banks
Direct banking in Germany can have different ownership structures.
A number of direct banks have been established in Germany, the majority of which are subsidiaries of larger banks or banking groups (figures in brackets). But there are also independent banks among them.
- 1822 direct (Frankfurter Sparkasse)
- Bank of Scotland (stand-alone)
- Comdirect (Commerzbank)
- Consorsbank (BNP Paribas)
- DKB (BayernLB)
- Edekabank AG (Edeka Group)
- EthikBank (Volksbank Eisenberg)
- Fidor Bank (Groupe BPCE)
- ING (Dutch ING Groep)
- MLP Banking (MLP SE)
- Netbank (Augsburger Aktienbank)
- Norisbank (Deutsche Bank)
- N26 (standalone)
- RaboDirect (Rabobank)
- S Broker (Sparkassen-Finanzgruppe)
- SWK Bank (independent)
- Environmental bank (independent)
- Volkswagen Bank (Volkswagen Financial Services)
- VTB (Russian VTB Group)
- Wüstenrotdirect (Wüstenrot & Württembergische)
Banking in Germany: The current account
The current account is a personal bank account for daily payment transactions. It is common in Germany to receive salary payments once a month by bank transfer to the current account.
From here, transfers for rent, electricity, telephone are made – either by transfer or standing order.
A standing order is a transfer that is carried out regularly in the same amount. This makes sense when paying rent, for example! Once set up at the bank, you save yourself the individual transfer every month.
In Germany, debiting (called direct debit) is also popular. For example, the telephone provider is given permission to debit the telephone bill from the current account on a monthly basis. This saves the transfer and the provider receives his money on time.
Another fond used function is the date transfer. The appointment transfer differs from the normal transfer only in the point that an execution date is set in the future. This is useful if you have a payment deadline and don’t want to pay too early or too late. You enter the transfer and have it carried out on the “appointment”. That saves interest and nerves.
These systems have been around for many years. They have proven themselves very well due to their efficiency. At the direct banks that we present on this portal, all transfers, appointment transfers, standing orders and direct debit withdrawals in euros are free!
Cards associated with the current account
A bank card usually belongs to a checking account. This is often called the “girocard”. Depending on the card provider, you will also find other terms.
Direct banks like to issue Visa or Mastercard type credit cards because they earn higher fees with card payments than with payment by girocard. The fees amount to a maximum of 0.3 percent of sales (EU law) and are borne by the payee (= payment in euros is always free of charge for you).
There is also the option of getting credit cards without a checking account.
Requirements, account opening and online banking
The account opening takes place either in person in the bank branch (e.g. Sparkasse, Volksbank, Deutsche Bank) or online with legitimation via Deutsche Post (PostIdent procedure) or via a video camera at direct banks.
It is legally stipulated that each time an account is opened; the personal data must be clearly identified, and in the case of minors (under 18 years of age in Germany) also the personal data of the parents. Not all banks offer a checking account for minors.
Bank account for children possible
At the Comdirect Bank , young people from the age of 7 can get a free current account with a Giro and Visa card as well as online banking.
At the DKB it is possible to open an account from birth. There is a Visa card, but no online banking for children.
Online banking is considered particularly secure in Germany because the technical systems are very well developed. Most damage is caused by incorrect or reckless user behavior. Nevertheless, in the past, many bank customers were generously compensated by their bank. But not always! Be sure to familiarize yourself with your bank’s security rules.
Most Germans do online banking. Only the older generation mostly still goes to a bank branch to submit transfers on a form. This is generally associated with processing costs.
Online banking is only available in German at almost all traditional banks. Digital banks offer account opening services in both English and German; like in the case of N26 and Revolut where account opening, online banking and customer service are available here in both German and English.
Banking in Germany: Cash
When it comes to banking in Germany, cash plays a major role. More than half of all transactions are still carried out with money made from coins and bills. You could say that Germans love cash!
There are always discussions about restricting or even banning cash, but as it currently looks, there will be cash in Germany for a long time to come.
When choosing a new checking account, many people value a variety of ways to withdraw cash from their account free of charge. With branch banks this is usually only possible free of charge at their own branches or at partner banks outside of counter hours.
Digital banks such as Revolut, N26 and DKB have condition models where cash withdrawals via credit card are free (under fair-usage conditions).
German account number
You can recognize a German bank account by the fact that the IBAN begins with “DE” and is then followed by twenty digits. A German IBAN is always 22 characters long. In other countries the IBAN can be longer (e.g. Poland: 28 characters) or shorter (e.g. Austria: 20 characters).
This is how a German IBAN is structured:
The national account number and the national bank code (BLZ) are included in the IBAN. For transfers in Germany and in the SEPA area, it is sufficient to specify the IBAN. For transfers to other countries, the BIC (sometimes called the SWIFT code) is also specified as the international bank code .