In the ever-changing world of digitization, businesses in Germany are faced with a challenge: they need to digitize their processes in order to remain competitive. In this article, you will discover what digitization means for businesses, what the digital environment currently looks like in Germany, the advantages of embracing digital processes, and our top practical tips for implementing digitization in your business. Stripe offers innovative solutions to support businesses on their digitization journey.

What’s in this article?

• What does digitization mean for businesses?
  
• The current state of digitization in Germany
  
• Digitization in the financial and payment industries
  
• Advantages of digital processes
  
• Steps to digitize your business
  
• Key technologies and security considerations
  
• Internet of Things and sustainability
  
• An overview of best practices
  
• Digital paths: A glimpse into the future
  

What does digitization mean for businesses?

Digitization refers to the introduction and usage of digital technologies across all areas of a business. This digital transformation allows businesses to optimize their processes, increase efficiency, and develop new business models. Digitization can take place in various forms, from automating simple tasks to implementing complex data management and customer interaction systems.

The current state of digitization in Germany

Despite its strong economy and technological capabilities, Germany still has some catching up to do when it comes to equipping its businesses for the digital age. According to the European Commission’s 2022 Digital Economy and Society Index (DESI), Germany ranks average against other European Union countries in several key areas of digitization, such as the integration of digital technology and digital public services.

According to a 2023 Bitkom survey, although 87% of businesses in Germany recognized the importance of digitization, only 53% were willing to invest in a comprehensive digital strategy that year.

Legal frameworks

Germany’s legal frameworks offer support and challenges for businesses looking to digitize. The Federal Ministry for Economic Affairs and Energy (BMWi) has launched a variety of initiatives aimed at promoting the digitization of small- and medium-sized businesses. These include the “Digital Now – Investment Support for SMEs” program. This program offers financial grants to support digitizing processes and enabling employees to undergo training in digital technologies.

Furthermore, businesses in Germany are regulated by the General Data Protection Regulation (GDPR), which outlines strict requirements for the processing of personally identifiable information. This regulation is particularly relevant for digital business models that rely on data processing and analysis.

Digitization in the financial and payment industries

Digitization in the financial and payment industries marks a significant step forward for Germany. This transformation enables businesses and customers to complete financial transactions in a safer, faster, and more efficient way.

In Germany, 57% of the population used online banking services in 2023—a clear indication that the country accepts digital financial services. Mobile payment methods are also becoming increasingly popular, although a significant proportion of Germans still prefer traditional payment types. This suggests that digital transformation in the financial sector is progressing, but that there is scope for even greater adoption of digital payment solutions.

Germany’s fintech industry was experiencing significant growth, with billions being invested into the sector. However, investments in Germany dropped to $1.11 billion USD in 2023. This funding primarily flows into startups that specialize in developing digital payment systems, blockchain technology, and artificial intelligence (AI). These technologies offer new opportunities for financial services, and they also help make transactions more transparent and secure.

The enormous potential of AI in the financial sector

The role of AI is particularly noteworthy. More than a third of German banks are investing in AI solutions to improve services such as fraud detection and personalized advice. These investments highlight the potential of AI to drive efficiency in the financial sector and to help optimize customer service.

Despite making significant progress, Germany still faces the challenge of finding enough skilled workers with the necessary digital skills. Businesses in the financial sector struggle to recruit suitable candidates. These challenges highlight the importance of investing in education and training programs to successfully drive digital transformation.

Advantages of digital processes

Implementing digital technologies in business processes can result in significant increases in efficiency. By automating routine processes and manual tasks, businesses can speed up their workflows and ensure resources are used more effectively. In particular, enterprise resource planning (ERP) and similar systems help ensure that business responsibilities, the coordination of employees, resources, finances, facilities, materials, along with information and communication technologies are better organized, better controlled, and more efficiently managed in line with the business’s goals.

Digital tools also play a key role in data analysis. These tools enable businesses to collate and evaluate large volumes of data, which forms the basis for making informed decisions. By improving its insights, a digitized business is able to make more precise predictions of market trends and enable greater personalization of offers. This, in turn, can lead to a significant increase in customer satisfaction and loyalty, which plays an important role in the long-term success of the business.

Increased efficiency and customer loyalty through digital transformation

Another important element of digitization is the increased flexibility and scalability offered by digital solutions. Digitized businesses can react to market changes in a more agile manner, adapting their business models accordingly. Cloud-based services play a central role in this, enabling businesses to scale effectively in line with growth. Alongside this, digital channels such as social media, apps, and websites help improve communication with customers and promote stronger loyalty through direct and personalized engagement.

Steps to digitize your business

Any successful digitization strategy begins with a thorough review and analysis of existing processes, systems, and technologies. This step is key, since it helps the business to identify areas with high digitization potential. This requires a detailed examination of workflows, IT infrastructure, and employee capabilities. By undertaking this exercise, businesses can define clear digitization goals and develop a comprehensive strategy that comprises both short- and long-term measures. It is important to ensure that the plan also includes a strategy to upskill the workforce in how to use the new technologies effectively. This gives the best chance of ensuring a smooth integration and successful rollout of the digital tools.

Selecting and implementing digital technologies

The next step focuses on selecting and implementing technologies that meet the business’s needs and objectives, which were identified in the previous step. The flexibility and scalability of the solutions are of utmost importance to support long-term adaptability and growth. Implementing a gradual rollout of new technologies helps to minimize any possible disruptions to operations and enables ongoing adjustments to be made to the new ways of working.

When it comes to digitization, the importance of data protection and security should not be overlooked. It is key that the business complies with relevant laws such as the GDPR in order to ensure the protection of sensitive data. Therefore, businesses should invest in comprehensive security measures, and ensure that employees undertake regular training in dealing with data protection regulations. Digitization is an ongoing process. In order to keep pace with technological developments and market changes, digital systems require regular review and adjustments. By following these steps, businesses can enjoy the many advantages of digitization and strengthen their position in the market.

Key technologies and security considerations

Digitization in Germany is a double-edged sword. It offers enormous opportunities, but it also comes with significant challenges. Currently, there is a large focus on innovative key technologies that have the potential to fundamentally change our economy and society. AI, the Internet of Things (IoT), cloud computing, blockchain, and robotics are just some of the technologies used by businesses in Germany to optimize processes, develop new business models, and increase efficiency. The technologies enable large volumes of data to be analyzed in-depth, and they also allow the automation of complex processes, which can result in significant productivity increases.

Cybersecurity and legal frameworks

However, increased networking and exchanging of sensitive data can also present risks, particularly when it comes to cybersecurity. Businesses and government institutions are faced with the challenge of taking appropriate measures to protect digital information and ensure the privacy of customers. The Online Access Act (OZG) and the GDPR are examples of legal frameworks developed in Germany to help manage digital transformation while ensuring security and data protection.

Despite advances in digital infrastructure and the introduction of laws to promote digitization, Germany still faces the challenge of further improving the digital literacy of its population and the flexibility of its businesses. Promoting digital skills and raising awareness of the importance of cybersecurity are key to fully realizing the potential of digitization while also minimizing risks. In order to establish itself as a leading digital nation and ensure the competitiveness of its economy, it is important that Germany can successfully overcome these challenges.

Internet of Things and sustainability

The integration of the Internet of Things (IoT) into the financial and payment industries presents a range of innovative opportunities to increase efficiency and develop new services. IoT devices enable businesses to gather and analyze data in real time, resulting in better decisions and optimized processes. For example, banks can use IoT technologies to increase their understanding of customer behavior and preferences, enabling them to offer tailored financial products.

A further example is the use of IoT in supply chain finance, where sensors monitor the condition and location of goods in real time. This enables payments to be processed faster and more securely, since financial institutions can use the data to confirm delivery of goods before releasing payments. Such use cases improve transparency and security, and they also help reduce fraud and support increased liquidity for small- and medium-sized businesses.

The sustainability of digitization in financial services and payments is another important element that is attracting increased attention. Digital technologies have the potential to reduce the environmental impact of the financial sector. For example, digitization can support the reduction of paper consumption in banks and other financial institutions. Furthermore, digital payment systems and peer-to-peer lending platforms promote financial inclusion by providing access to financial services for people in remote or underserved areas.

The link between sustainability and digitization is exemplified by the development of “green financial products.” These include green bonds and sustainable investment funds, which use digital platforms to connect investors with projects that have a focus on environmental protection and social responsibility. These projects provide capital for sustainable projects, and they also enhance transparency and traceability when it comes to use of funds and the overall environmental impact of the project.

An overview of best practices

The following businesses are prime examples of how digitization in financial services and payments can lead to increased efficiency and customer satisfaction.

• Comdirect Bank: Comdirect Bank is one of Germany’s leading online banks. The bank has expanded its services by embracing innovative technologies. These include mobile banking via a user-friendly app, robo-advisors to assist with automated investment strategies, video verification of new customers via video calls, and chatbots to answer queries and improve service levels.

• Panasonic: This multinational electronics giant has taken the following steps in the financial sector: automation of accounting through the use of ERP systems and automated accounting processes, cash management tools to avoid liquidity shortages, and the implementation of blockchain technology to support secure and transparent transactions.

• IKEA: The world’s largest furniture retailer has successfully embraced digitization in its financial processes with online orders and payments. With digital wallets such as Apple Pay and Google Pay, or automated invoice processing such as optical character recognition technology (OCR), invoices are automatically recorded and processed.

Digital paths: A glimpse into the future

With Stripe, it is easier than ever to run your business in an agile way by including your revenue, engineering, finance, and data teams on an all-in-one platform designed to boost your productivity. Stripe allows you to implement new pricing models without engineering effort, automate the tedious elements of sales reporting and reconciliation, and open up opportunities for expansion by providing better insights into your business. Sign up today and explore how Stripe can help accelerate your journey toward digitization.