Allfinanz, bancassurance and the future of banking

Abstract

SUMMARYThe purpose with this paper is first to analyse the strategies of Allfinanz (Bancassurance) in Germany and then to investigate if the German banks have become more efficient during the period since Allfinanz was introduced. Two methods are used to analyse efficiency: 'financial ratio analysis' (FRA) and 'data envelopment analysis' (DEA). FRA is useful in studying the change in productivity. DEA generates, efficiency scores and alternative and more efficient combinations of banks.KEY WORDS cross-selling; data envelopment analysis (DEA); efficiency analysis; financial ratio analysis (FRA); joint demand; standardization FROM TAILOR-MADE PRODUCTS TO STANDARDIZED SERVICESIn the eighties the financial markets were characterized by developments that concerned deregulation, securitization, computerization and telecommunication. A lot of depositing and lending was channelled from low-yield bank accounts to the money markets. As a consequence there was a substantial reduction of commercial deposits in banks. At the same time, a lot of private customers required a higher yield on their accounts. Consequently, savings deposits have been replaced to a large extent by investments in fixed-rate bonds and in life insurance policies (see e.g. OECD 1992, p. 50).' An effect of these consumer reactions came to the banks in terms of lower revenues from ordinary banking products like saving deposits, time deposits and business lending. Simultaneously, the cost of intermediation expanded. Both the banking sector and the insurance sector had been for a long time labour intensive in a way that has few similarities in the private sector of our economy. By tradition, these sectors were identified by paper work and tailor-made services in order to meet the needs of the customers. Then in the eighties the cost of manual transactions expanded faster than the cost of computation and telecommunication services. However, in many banks and insurance firms the computerization and the development in telecommunication may not have been strong enough to reduce costs substantially. The notion of a 'cost explosion' is said to have hit the industries of banking and insurance (see Krumnow and Biischgen, 1992).2 The effect has been an overflow from manual banking routines to automatized systems. But even after such an overflow, there are still signs of insufficient interest rate margins ('product margins') to cover the costs of administration. Thus, the combined effect of a relative reduction in savings deposits and an insufficient cost reduction has been visualized in terms of a squeeze in product margins (see Krumnow and Biischgen, 1992)2 that has led to a growing interest in cost accounting and cost control for many bank and insurance managers.

Evaluating the performance of Swedish savings banks according to service efficiency

“…In the first category we find studies like Yue (1992), Fried et al (1993), Bergendahl (1995Bergendahl ( , 1998, Grifell-Tatjé andLovell (1996), Lozano Vivas et al (2002). In the second category we find papers like Sherman and Gold (1985), Hjalmarsson et al (1991), Hartman et al (2001).…”

“…Even though we will in this paper follow the third route, we will make use of the experience obtained in previous studies and, particularly, in Bergendahl (1995Bergendahl ( , 1998. Bergendahl (1995) used DEA to analyze the efficiency of five different banking groups in Germany [1987][1988][1989][1990][1991][1992].…”

“…The savings banks as a group with other banking groups. That route was taken by Bergendahl (1995). 2.…”

“…Bergendahl (1995) used DEA to analyze the efficiency of five different banking groups in Germany [1987][1988][1989][1990][1991][1992]. He studied outputs in terms of loans, floating rate deposits, fixed-rate deposits, interbank placements, and net margins.…”

“…For an introduction to the use of the DEA technique on banking firms, see e.g. Sherman and Gold (1985), Charnes et al (1990), Yue (1992), Bergendahl (1995Bergendahl ( , 1998, Favero and Papi (1995), Berger and Humphrey (1997), Grifell-Tatjé and Lovell (1996), Resti (1997Resti ( , 2000, Hartman et al (2001), Weill (2004). With the exception of the study by Grifell-Tatjé and Lovell (1996), which is focusing on the efficiency of Spanish savings banks within a production approach, savings banks are not treated differently to other banks.…”