Skip directly to search

Skip directly to content

 

The future of banking in the Nordics – being digital and personal

 
 

Banking | Francis Hellawell |
16 November 2022

The future of banking in the Nordics – being digital and personal

Data, customer experience, sustainability and ESG were omnipresent themes at MoneyLIVE Nordic Banking 2022. Just as noticeable though was not hearing from the heritage players about their challenges. But although banks may own the balance sheet and the regulation keeping, they don’t necessarily deal with the end customer, they enable the end service provider. Which brings us to the overall theme that emerged - collaboration.

News from the digital front line

The Nordic FinTech/Neobank market is as alive and kicking as everywhere else. DreamPlan helps users save for their dreams, Bill Kill, out of the box billing and payments platform, MakeImpact, sustainable investing platform, Doconomy, finance and environmental impact combo, and Neobank cloud native, Northmill, targeting the underserved small business sector. All solve a customer need with agility.

Northmill identified that AI hasn’t delivered good human interactions. Chat bots don’t provide a good customer experience and do nothing to help build the necessary trust. Their motto ‘Digital but Personal’ is a good one as we’ve seen too many go too digital, accelerated by Covid with much High Street presence lost.

But what of the heritage bankers take? It was quiet. Although one approach used by Nordic-Baltic banking group, Swedbank, is their standalone innovation brand SEBx. This keeping the innovation brand at arm’s length helps ensure it isn’t crushed by the sheer weight of the heritage banking model. Digital banking in the Nordics is possibly a couple of years behind the world leaders, so it will be interesting to see how the digital natives weave themselves into the financial services landscape. But we see a consolidation coming, because large banks have the advantage of economy of scale and liquidity.

Data and the Customer Experience

Digital natives ask the data questions from day one. But it’s a lot easier to start from a blank sheet of paper. Banks have been nervous and reluctant to deal with the data at their disposal - there is so much of it it’s hard to know where to start. Then there’s the underlying negatives and complexities of some customers not liking banks using it, and data ownership rights.

What is meant by wanting to be customer focused? To be excellent you need to know your customers and which groups you’re targeting, what’s important to them and how you’ll deliver. As an example of understanding extremes, a bank might spend two months analysing data, whereas Google use real time data to nudge customers along.

Gareth Miller, Delivery Partner, Banking & FinTech, Endava, points out, “Heritage banks are set up to be regulation focused, financial focused, risk focused. To be customer focused they have to reengineer.” Innovators, in turn, may not remain as innovative and flexible though when they get big enough to pop up on the regulators’ radar.

How to create a safe and trustworthy AI

How do you ensure a chat bot doesn’t become racist? What are the unintended consequences of AI when making robotized decisions or providing advice? In a world where discriminate has a lower-case ‘d’ when does the robot realise that ethically it can’t do something? It might be a statistically demonstrated fact that some areas have more crime, but postcode red lining is strictly not allowed in banking.

Pierre Kovacs, Senior Vice President, Banking & Capital Markets, Endava, comments, “We must adopt a risk-based approach with AI. The EU is regulating now. Operational guidelines must be embedded in the AI lifecycle.”

Privacy vs Transparency

The Euro CBDC (Central Bank Digital Currency) question highlighted the precipitous balancing act between privacy and transparency. Privacy is a fundamental right, but transparency is needed for AML/CFT (Anti-money Laundering/Combating the Financing of Terrorism).

As Pierre Kovacs says, “It brings with it concerns for financial stability. The Digital Euro is designed as a means of payment, not storage of value. But with this there’s a limit on individual holding, on conversion, and the technical challenge around EU payment standardisation.”

Crypto Maturity Model

The 2022 Global Cryptocurrency Adoption Index - Chainanalysis shows low adoption in Nordics because the current fiat system works well.

Comments Pierre Kovacs, “Unlike fiat currency, crypto transactions are on a public ledger where all the transaction information is public. Money flow is transparent, but identities aren’t always.”

As another layer to this you have Austrian Crypto Unicorn Bitpanda that provides a retail investment solution where you can invest 24/7 and hold fractional shares in all asset classes.

Risk management

The strong presence of the KYC Fraud, AML and fraud detection providers reminds us that even though you can give a loan to almost anyone as long as they’re not a criminal, there’s no profit if they don’t pay you back. But neither can you spend days checking as you won’t convert many customers.

There’s a difference between risk avoidance and risk management. Proper banking is about risk management and factoring in bad debt. If you just lend to everyone at the point of sale as quickly as possible, you’ll have repayment issues. But can you credit check someone in internet shopping timescales? Being realistic that’s currently about 15-20 minutes, is that acceptable? If you do it in 2-3 minutes, where’s your risk management?

It’s clear that embedded finance is easier in some value chains than others. With new central heating boilers/solar panels you know where people live, it’s not such an aggressive set up. It’s a good model. But if you’re lending against the latest MacBook, you can’t take two or three days deciding. It comes back to the same thing – data security and risk – in essence risk management.

Digitalisation and sustainability

Digital banking is designed digitally native whereas, some might argue, that digitalisation is putting lipstick on a pig. But how has that moved the digitalised forward and what’s next?

There’s also confusion about sustainability. With crypto currency, if it’s all humming away on cloud servers and you’re perpetuating copies how green is that? And ESG is not just about reporting but should drive business decisions. It’s often pushed by stakeholders rather than regulation. Allocation of capital is a way to pressure firms, as is including an ESG questionnaire in RFI/RFP (Request for Information/Request for Proposal) but there’s a need for a standard framework and taxonomy and a definition of ‘being sustainable.’

What can banks do to create new business models that offer behind-the-scenes Banking as a Service (BaaS)? The financial services needed in loans and money transactions, insurance, savings, and investments.

As Gareth Miller points out, “If you’ve got lots of small players offering brilliant solutions using open banking delivered as a seamless package what’s the relevance of the universal banking model? It’s not the big shark competitors you need to worry about anymore, it’s being nibbled by the piranhas.” And regulators are making it easier for consumers to go with smaller providers if they’re providing the desired services.

Traditionally it was all about ‘share of wallet’. Which goes back to understanding your customers. If they want AB and C and you can’t deliver it, they’ll find someone who can. BNPL (Buy Now Pay Later) embedded loan providers, like Swedish FinTech Klarna, provide the classic example. As Gareth Miller says, “Generation X might well be stuck in big bank inertia but the generations coming through won’t be. They’ll be on the open banking bridge. You can’t rely on backward data; you must look forward and that’s very difficult.”

Which brings us back to Northmill’s killer motto ‘digital but personal’. It’s not bits and bytes, it’s how you make something digital personalised and relevant to meeting the customer needs. That’s the challenge.

Francis Hellawell

Principal Consultant, Banking & Fintech

Francis is a digital agilist and business architect within the Financial Services industry with 30+ years’ experience working for major financial services institutions. An articulate banking consultant with deep knowledge of the operational and regulatory requirements, he specialises in strategy, analysis, design and implementation of services and processes within the banking arena. Outside of work, Francis is a Rugby Union referee, owns a classic mini which he keeps on the road as a daily driver, and enjoys adventures with his teenage sons Alex and George and their Dachshund Arthur.

 

Related Articles

  • 11 October 2022

    Buy vs. Build in Banking: Which Option is Right for You?

  • 23 August 2022

    5 Ways to Fix Your Data Spine in Banking

  • 31 August 2021

    Personalised Banking: How to Get Ahead of Ever-Changing Client Value Propositions

  • 13 July 2021

    The Transformation Trifecta: Cloud, Digital and Open Banking

  • 05 May 2021

    Artificial Intelligence: Where Does The Real Value Lie?

 

From This Author

  • 12 April 2022

    How Do Banks Embrace Embedded Finance – Have the Fintechs Already Won?

Most Popular Articles

Current Challenges in the Transportation & Logistics Industry
 

Transportation & Logistics Insights | Brian Estep | 22 March 2022

Current Challenges in the Transportation & Logistics Industry

4 Buy Now Pay Later Trends Set to Disrupt the Industry
 

Payments | Annmarie Mahabir | 22 February 2022

4 Buy Now Pay Later Trends Set to Disrupt the Industry

How Tech is Changing Sports Betting for the Better
 

Innovation | Andy Davies | 18 November 2022

How Tech is Changing Sports Betting for the Better

5 Things We Learned at World Aviation Festival 2022
 

Mobility | Vojin Rakonjac | 23 November 2022

5 Things We Learned at World Aviation Festival 2022

Cyber Security Incidents in Australia Highlight the Need for a Balance Between Risk and Innovation
 

Payments | David Marsh | 23 November 2022

Cyber Security Incidents in Australia Highlight the Need for a Balance Between Risk and Innovation

The Era of Ecosystems and the Rise of Open Insurance
 

Insurance Insights | Robert Anderson | 22 November 2022

The Era of Ecosystems and the Rise of Open Insurance

Top Challenges in Warehouse and Distribution Centers
 

Transportation & Logistics Insights | Brian Estep | 01 March 2022

Top Challenges in Warehouse and Distribution Centers

Staying relevant in the buoyant cross-border payments market
 

Payments | Peter Theunis | 15 November 2022

Staying relevant in the buoyant cross-border payments market

How the Board Game Catan Conquered the Digital World
 

Innovation | Moritz Hampel | 27 July 2021

How the Board Game Catan Conquered the Digital World

 

Archive

  • 23 November 2022

    5 Things We Learned at World Aviation Festival 2022

  • 23 November 2022

    Cyber Security Incidents in Australia Highlight the Need for a Balance Between Risk and Innovation

  • 22 November 2022

    The Era of Ecosystems and the Rise of Open Insurance

  • 18 November 2022

    How Tech is Changing Sports Betting for the Better

  • 16 November 2022

    4 Ways Insurers Can Leverage Technology to Differentiate Themselves

  • 16 November 2022

    The future of banking in the Nordics – being digital and personal

  • 15 November 2022

    Staying relevant in the buoyant cross-border payments market

  • 15 November 2022

    3 Experts’ Insights on the Complicated Relationship Between Fintechs and Banks

  • 09 November 2022

    How Can Banks Create a Secure, Optimised Cloud-Enabled Architecture?

  • 08 November 2022

    Tech is Good for You: How Wearable Edge Devices Changed Healthcare

  • 01 November 2022

    How Microservices Can Upgrade the Customer Experience

  • 25 October 2022

    How Technology Can Help Monitor the Circular Economy

  • 18 October 2022

    Why it’s time for banks to let go of legacy IT

  • 11 October 2022

    Buy vs. Build in Banking: Which Option is Right for You?

  • 04 October 2022

    The Rise of Super Apps: How Banks Can Compete

  • 27 September 2022

    AI Art in Game Production – an XDS 2022 Table Discussion

  • 20 September 2022

    Payments Data Monetisation is Key to Driving Sustainable Growth

  • 13 September 2022

    Navigating the Healthcare Ecosystem

  • 30 August 2022

    hey y’all! I’m Ashley Grant

  • 23 August 2022

    5 Ways to Fix Your Data Spine in Banking

  • 16 August 2022

    De-risking Digitalisation

  • 09 August 2022

    hi, I’m Brian Estep

  • 02 August 2022

    hey! I’m Lia Rollman

  • 19 July 2022

    The New Ways of Issuing Cards

  • 12 July 2022

    Scores on the Door: Rating Autonomous Vehicles

  • 06 July 2022

    Data-Driven Impact: Don’t Settle for Less

  • 06 July 2022

    We’re in Nottingham – a Q&A on Endava’s New Delivery Centre in the UK

  • 05 July 2022

    hey, I’m Chris Hart

  • 28 June 2022

    Platforms: a Blessing or a Curse?

  • 23 June 2022

    A Payments View on Marketplaces – How to Be(come) Successful

  • 21 June 2022

    Intelligent Commercial Underwriting

  • 14 June 2022

    The Future of Supply Chain: What’s Next?

  • 31 May 2022

    The Future of Autonomous Vehicles in T&L

  • 26 May 2022

    hello! I’m Hannah McCarthy

  • 24 May 2022

    Going Native: Why Cloud-Native Services are Essential

  • 19 May 2022

    How to Tackle Legacy – Breaking Down Walls Between Change and Run

  • 17 May 2022

    Advantages of a Yard Management System

  • 12 May 2022

    Are Phones About to Become the New POS Terminals?

  • 10 May 2022

    The Digital Economy is an Upgrade of Smart Cities and Communities

  • 05 May 2022

    hello! I’m Sumita Davé

  • 03 May 2022

    Physical Automation in the T&L Industry

  • 28 April 2022

    zdravo! I’m Andrej Kotar

  • 26 April 2022

    Open Banking in the US

  • 20 April 2022

    hello! I’m Paul Maguire

  • 19 April 2022

    Digital Automation in the T&L Industry

  • 12 April 2022

    How Do Banks Embrace Embedded Finance – Have the Fintechs Already Won?

  • 06 April 2022

    ESG Data Architecture is a Business Imperative – How to Get Started

  • 05 April 2022

    hi! I am Roy Murphy

  • 05 April 2022

    Modernizing the Shipping and Cargo Process

  • 30 March 2022

    The Metaverse Evolution and Learning from the Games Industry

  • 29 March 2022

    Do Androids Dream of Trading Electric Sheep for Digital Wood? An Introduction to Automated Game Design

  • 23 March 2022

    Real-Time Payments in Australia – Why Corporates Should Get on Board

  • 22 March 2022

    Current Challenges in the Transportation & Logistics Industry

  • 16 March 2022

    bok! I’m Sanja Cvetkovic

  • 15 March 2022

    Rapidly Transforming: Healthtech Trends in 2022

  • 08 March 2022

    How to Digitize Warehouses and Distribution Centers

  • 01 March 2022

    Top Challenges in Warehouse and Distribution Centers

  • 28 February 2022

    Tackling CIB Legacy at its Core

  • 23 February 2022

    salut! I am Isabela Buhai

  • 22 February 2022

    4 Buy Now Pay Later Trends Set to Disrupt the Industry

  • 15 February 2022

    salut! I’m Natalia Ciobanu

  • 14 February 2022

    Product-Led Innovation – a Q&A with Joe Dunleavy

  • 01 February 2022

    Buy Now Pay Later: Will Regulation Burst the Bubble?

  • 31 January 2022

    Innovation Will Spur Ireland’s Race to the Top

  • 28 January 2022

    The Value of Digital and Automation in the Product Returns Process

  • 26 January 2022

    Virtually Disrupted? Keeping Pace with Accelerating Customer Expectations

  • 19 January 2022

    The 3 Big Ps in Modern Insurance: Personalisation, Prediction and Prevention

  • 18 January 2022

    An Introduction to Mobility as a Service in the US

  • 12 January 2022

    Buy or Build? A Game-Changing Question in Insurance

  • 12 January 2022

    hello! I’m Paul Willoughby

  • 11 January 2022

    Payment Service Providers 2.0

  • $name

We are listening

How would you rate your experience with Endava so far?

We would appreciate talking to you about your feedback. Could you share with us your contact details?