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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