Where savings banks and Volksbanks use their price oligopoly

Von Christian Kirchner

Cologne and Frankfurt are only an hour’s train apart, and apart from that there isn’t much between the two. Here the city of millions. There the 3/4 million city. Here are the major insurers. There the big banks. Here the FC that has reached Europe. There the unity, which has even conquered Europe (purely sporty, of course).

In short: Cologne and Frankfurt are comparable cities. A pound of butter should not be priced much differently on the Rhine than on the Main, and a bottle of Kölsch probably costs about the same as a bottle of Binding or Henninger.

It is all the more astonishing that the comparability ends where our small niche begins here, namely the banking business. Because what would you estimate, dear readers, to have a current account at a local Frankfurt bank? Answer: on average 2.10 euros per month. On the other hand, at a local bank in Cologne? On average 8.60 euros, i.e. four times as much.

A few weeks ago, the partner podcast with pricing expert Peter Klenk gave us the idea of ​​simply making a comparison. His observation: In many market areas, the local players orient themselves very closely to each other in terms of price. If one goes up with the account fee, the others can also afford it. On the other hand, if a local player (such as the Frankfurter Volksbank) pursues an aggressive pricing strategy, this also limits the scope for local competition.

Question: Does that apply always and everywhere? And how does it actually look out there? To find out, we did the following: 1.) We took the 20 largest cities in Germany in terms of population (although we only found usable results for 17); 2.) We looked at which savings banks, VR banks, PSD banks, Sparda banks and other retail-heavy local institutions are located in these cities and also do a significant part of their business in the respective metropolitan region; and 3.) We have examined what the price is for the cheapest current account model with flat-rate billing (i.e. including the main current account posting items).

Here are the four types of regional price clusters we’ve identified*:

1.) The price war cities: Frankfurt, Munich, Essen, Dortmund, Berlin

Here the local institutes do not, or only just, manage to achieve the average 4 to 5 euros per month for a flat-rate remunerated checking account that is generally considered necessary to at least cover the fixed costs (and thus also as an approximate national average). It is exciting that with Frankfurt and Munich (!) two cities that are economically prospering fit into this cluster. Even the largest local banks such as Stadtsparkasse München or Frankfurter Sparkasse charge less than 3 euros for a flat-rate current account that covers all postings.

In the case of Frankfurt, this could be due to the fact that the Frankfurter Volksbank has not increased its prices for more than ten years (3.50 euros/month, see also here) and with Sparda Hessen there is even a player in the city who is on free account – both together with branch service and presence.

Also noticeable: where the general price level seems to be anchored low, it is obviously very difficult to enforce a high flat rate as an outlier. While in other cities several institutes easily call 8 or 9 euros per month for the cheapest flat-rate current account, in the five places mentioned here only one institute is on the move with more than seven euros, namely the one with 1.3 billion. EUR balance sheet total rather small Raiffeisenbank Munich-South.

Frankfurt (⌀ 2,13 Euro)

Munich (⌀ 3.58 euros)

Food (⌀ 3.97 euros)

Dortmund (⌀ 4.30 euros)

Berlin (⌀ 4.69 euros)

2.) The average cities: Bochum, Stuttgart, Leipzig, Dresden, Hanover

In these cities, the banks largely succeed in pushing through the 4 to 5 euros, which is economically obvious and the national average – whereby it is striking that there are no outliers, either upwards or downwards. No “0-euro bank” that generates high pricing pressure, such as in Munich or Frankfurt. Conversely, top prices are also difficult to enforce. The formation of pairs in cities with apparently little local competitive pressure is striking: the Volksbank Bochum Witten and the Sparkasse Bochum are only 40 cents apart in the flat-rate account, the two houses in Leipzig only around 1 euro.

Bochum (⌀ 4.70 Euros)

Stuttgart (⌀ 4,90 Euro)

Leipzig (⌀ 5.47 euros)

Dresden (⌀ 5.60 euros)

Hannover (⌀ 4,83 Euro)

3.) The “everyone does their thing” cities: Nuremberg, Düsseldorf, Bremen, Bielefeld

Not all cities or metropolitan regions provided a clear picture. In Nuremberg, for example, you can find the complete range from the free account (PSD Bank Nuremberg) to the premium price (Raiffeisenbank Knoblauchsland eG, Nuremberg-Buch, 9.90 euros/month).

Pricing is also volatile in Düsseldorf (3 to 9 euros/month), while in Bremen – not exactly known as the economic powerhouse among Germany’s major cities – the banks can charge between 5.90 and 8 euros per current account.

Nuremberg (⌀ 5,22 Euro)

Düsseldorf (⌀ 5,61 Euro)

Bremen (⌀ 6,60 Euro)

Bielefeld (⌀ 6.70 euros)

4.) The three oligopoly price cities: Hamburg, Cologne, Duisburg

According to our small sample, the banks have real pricing power above all in Hamburg, Cologne and Duisburg. In Hamburg, the Sparda Bank with its free account pulls the average down; the large local institutes Hamburger Volksbank and Hamburger Sparkasse charge EUR 9.95/month and EUR 7.95/month respectively, and Sparkasse Harburg-Buxtehude also charges EUR 9.90/month.

The situation in Cologne is similar, and across the board: most institutes there don’t charge less than 9 euros/month (!) for a flat-rate account. The Kreissparkasse Köln has recently reached double digits.

In Duisburg, on the other hand, the two players from the savings banks and cooperative camps do not have to face too much competition. Apparently, they make good use of this: 7.90 euros/month is the highest minimum price in any major city.

Hamburg (⌀ 6,95 Euro)

Cologne (⌀ 8.61 euros)

Duisburg (⌀ 8,69 Euro)

*Disclaimer:

• The data are only to be understood as roughly indicative.
• The basic populations sometimes differ drastically. In some cities like Nuremberg, seven banks can be identified, but in others like Duisburg only two. Smaller populations and extreme values ​​(0-euro accounts) also make statistical outliers more likely.
• The pricing of giro cards was left out; occasionally it is included, in other models it costs extra
• The values ​​are not weighted, which means that the size of the banks does not play a role, and subtleties such as card pricing are ignored.
• No information on pricing made on their website: Raiffeisenbank Munich North, PSD Bank Hanover.
• There is not a sufficiently large population of local banks in Bonn, Münster and Wuppertal.

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