innovation, as well as implementation processes. In the following, we address the two most 
important areas: 
Departmentalized structure: Large German banks enjoy a large number of different and 
predominantly independent departments. Consequently, friction among different organizational 
units is observable, especially when resources and budgets are allocated. IT investment, e.g., in 
online banking activities, is often confronted with objections of the traditional retail banking 
department. Since the Internet bubble burst, it has been difficult for CIOs to implement new IT 
projects, even when they might be successful or profitable.
Lack of project oriented employees and conservative structure: Due to the rigid and almost 
bureaucratic structure and behavior of bank employees, most of them tend to be inefficient team 
players (Vermeulen, 2001, p. 214). One consequence of these circumstances is the high number 
of outsourcing examples in the past and the extensive use of consulting companies to manage 
internal projects. The conservative culture of bank employees is beginning to change toward a 
more innovative and IT friendly atmosphere.  
A common way to implement innovations in the finance sector is the so called  reverse product 
cycle.  In the first stage, new software or IT equipment is implemented to support existing 
business processes. After the software has proven successful, it is used to transform existing or 
create new products, services or business models (Johne et al., 2000, p. 346). 
Key Environmental and Policy Factors Influencing Diffusion 
German banks need to regard national and European legislation in the field of e commerce. For 
example, the long distance sales law emphasizes the necessity of providing sufficient 
information to customers on the Internet. Banks have to support information about cancellation 
possibilities, general terms and business conditions, information about online products and 
considerations to a variety of laws protecting the rights of customers, such as the customer credit 
law and securities trading act. Financial institutions have to provide paper based liability 
information, which may be replaced by permanently storable electronic data to assure that 
customers have permanent access to it. The submission of e mails stating the liability 
information is allowed but problematic in that the bank has to prove that the customers have 
received and read the information. Due to the lack of an electronic signature infrastructure on the 
customer's end, most banks send paper based information material to acknowledge the receipt.
Diffusion of B2C E Commerce in the Retail Banking Sector 
Aside from the large variety of online e commerce solutions available, e commerce has also 
changed the traditional over the counter business inside bank branches. Since the introduction of 
automated teller machines and the broad consumer acceptance of standardized IT based 
processes, additional services have increased retail banking productivity, such as automatic bank 
transfers using scanner technologies or the current development of installing automatic teller 
machines or computer based agent systems (so called robot or bot systems) deciding 
immediately whether or not to grant small credits without any manual interaction by bank clerks. 

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