andreas dombret : digitalisation – repercussions for banks and their supervisors speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the 16th norddeutscher bankentag “ digitalisation – ( r ) evolution in the banking industry ” at leuphana university luneburg, lundeburg, 8 june 2016. * * * professor baxmann ladies and gentlemen people love simple stories. there is evidence to show that we find it easier to follow a speech and memorise its contents if we quickly pick up the thread and the message that is being conveyed. the picture isn ’ t much different where the digitalisation of the financial sector is concerned. digitalisation is often portrayed as a huge opportunity, as a grave threat, as the first step into a world without banks or as a decades - long gradual process of evolution. but if you ask me, we need to suppress the urge to only ever want to tell, or have ears for, just one of these narratives. we will only be able to grasp what digitalisation means for the banking sector if we are willing to view it with very different sets of eyes and acknowledge the existence of highly disparate aspects. bearing this in mind, my speech today here at leuphana university will seek to paint a nuanced picture that does justice to the genesis and growth of digitalisation and how it will impact on banks and their supervisors. 1. general digitalisation trends ladies and gentlemen, technical innovation isn ’ t exactly a novelty in the banking sector. as you will know, credit institutions were often among the early adopters of information technology in their administrative operations, at the customer interface or in trading. hardly a day goes by without digitalisation grabbing the headlines, and that ’ s probably because it ’ s come to be seen as a force that will shake the structure and internal functional make - up of the banking industry to its core, just as it has done in other industries. but it ’ s not just the technical capabilities of digitalisation that make it so special ; the social upheaval it is expected to trigger – and already has done – also makes it something to be reckoned with. there is already evidence aplenty of this phenomenon worldwide. even in germany, which isn ’ t a pioneer in this regard, most bank customers now usually conduct their banking affairs online, and mobile banking is also on the rise there. there are already some institutions which use

germany is much lower than, say, in the united states. on balance, the ratio of “ number of inhabitants to bank - office staff members ” in germany is below the comparable figure in the united states. moreover, the presentation of the current situation with the aid of simple statistical indicators remains unsatisfactory. qualitative factors, such as the duration of opening hours or the range of services provided by bank offices are disregarded. despite these warranted qualifications of statements about “ overbanking ”, cost - intensive and not always very profitable branch - office operations are sometimes regarded as a reason why german banks, on an international comparison of profitability figures, tend to lie in mid - table. iv ladies and gentlemen, the deployment of new technologies will no doubt also prompt the banks to reconsider the dimensions of their branch networks. but the significance of technology extends well beyond that : it is a main driving force behind change in the banking sector, and in financial markets worldwide. at the moment, we are witnessing the advent of completely new forms • of communication between bank and customer, • of the marketing of financial services, and • of the organisation of banking operations. a very important platform of communication between banks and their customers in the future will unquestionably be the internet. according to recent data, at the end of 1999 - in germany alone - no fewer than over 10 million online accounts were being operated. that represents a growth of as much as 50 % on the previous year. current expansion is so dynamic that the forecasts of future growth, both in germany and in europe, lie far apart, albeit at a high level. the wide range of the forecasts demonstrates, incidentally, that the banking sector in its projects and development has to plan and invest under conditions of great uncertainty, i. e. has to run significant strategic and other risks. that applies to an even greater extent to “ mobile banking ”, e. g. via wap ( wireless application protocol ) mobile phones, which is expected to expand sharply following the introduction of the umts standard. what might the banking business of the future look like under these conditions? many observers assume that in future at least retail banking will constitute a combination of “ click and mortar ”, i. e. will be offered and implemented in the context of multi - channel banking strategies in several different forms, that is to say both through the physical branch network ( “ bricks and mortar banks ” ) and through virtual pc banking