Online-brokerage in Germany 2002: strategy changes and market shakeout
- Germany’s online brokerage market is mired in crisis. The providers are operating at a loss. Staff is being made redundant; some brokers are pulling out of the market; others are filing for bankruptcy.
- The declines in the equity markets have severely curbed the trading activities of these investors, eroding the online brokers’ chief source of income.
- Two fundamental trends are likely to reinvigorate the online brokerage sector in the medium term. First, broad sections of the population in Germany have developed a rising interest in equities. Second, internet technologies are continuing to spread steadily throughout society.
- In the medium term the online brokerage market is expected to undergo considerable consolidation and the strategies of the providers will become more differentiated than to date. In the competition to woo the second wave of customers who use the internet for their securities online and offline business will converge. Multi-channelling will emerge as the dominant strategy.
- Niches for discount brokers will remain nevertheless, but the competition to seize them will be aggressive. Regardless of strategy online brokers are predicted to expand internationally.
- At the political level it is imperative to achieve harmonisation of the European legal framework for online financial services, especially in the area of consumer protection.The fragmented legal framework impedes the expansion of online brokers and currently prohibits a pan-European range of financial products.
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For in-depth analysis on e-commerce, see Deutsche Bank