Incumbents Must See Digitalisation as a Silver Lining

Fintech initiatives and customer expectations of digital offerings will challenge any established financial institution over the next three to five years. To tackle the transformation, banks and insurers need help before it is too late. With vast experience from both the banking and technology sector, NOR Associates are equipped to help institutions through this process with a hybrid approach.

Incumbent banks and insurers are often operating on ageing technology stacks and legacy systems. However, they have now realised that they can derive value by leveraging technology to streamline operations, increase efficiency and generate revenue. Customers – especially in the Nordic region – demand a fully digitised and real-time service, that supports the latest new trends. Composed of hybrid technology- and banking specialists, the consultancy firm NOR Associates specialises in guiding banks and insurers to leverage digital initiatives in the battle royale between fintechs and incumbents.

“We’re focused on the whole process of digital transformation in financial services – having the end-to-end perspective. Our people are hybrids with years of experience from the financial industry and deep technical background, and this is unique in the Nordic market. We are experts in digital transformation, and we stay with the clients throughout the entire process until the initiatives are rolled out,” says Lars Elmegaard-Fessel, CEO and co-founder of NOR Associates.

Old fears that fintech companies will completely take over financial services have been replaced by a belief that the future will include partnerships between incumbent institutions and fintechs. Most institutions have established innovation divisions responsible for driving digital change and transformation. Additionally, engineers are developing new digital products and features in collaboration with digital hubs.

Although innovation initiatives are important additions to the traditional business, many don’t perceive them as new business areas. “This is contrary to other geographical areas, such as Germany where an API platform has received a banking license and now offers a banking-as-a-platform service to digital companies,” says Elmegaard-Fessel.

Open banks will thrive

Regulations have brought new business models to the financial industry. Neobanks emerge and big tech firms are entering financial services through the launch of their initiatives in payments and through partnerships to offer other products. According to Vincens Riber Mink, Partner and co-founder at NOR Associates, established financial institutions must explore new business opportunities in ‘platformification’.

“With Open Banking, monetising large parts of the technology platforms is now a race where the winner takes all. Any Nordic bank willing to identify itself as a fintech and shaping its strategy accordingly is well underway and could make the decision to expand its business with a banking-as-a-platform service, thereby making it possible for digital companies to distribute the services like portfolio calculations, trading algorithms and bulk payments to a broader range of customers,” says Riber Mink.

Making a Move

Nordic banks are generally technologically advanced and can attract talented people. In other words, banks can take the next step. According to Elmegaard-Fessel, it’s not an either-or situation. Traditional banking can co-exist with open APIs, as long as a suitable customer service model is in place.

“Ultimately, it is a strategic choice. If one bank moves first, others will follow. Nordic banks will then adapt to a reality where holistic customer service must be balanced against the ability to efficiently customise and operationalise the technology platforms built over the last 30 years and make them accessible to the outside world. This is a task which needs to be structured carefully,” says Elmegaard-Fessel. Whether institutions have decided to pursue full digital transformation or are simply optimising selected areas, NOR Associates specialises in guiding them through the journey “A digital journey is not solely a technological exercise. It is also a matter of change with an entire organisational journey which includes: culture, organisation, processes, people, operations. Secondly, the technology part of the journey is highly complicated and significant, and to do the technology right; you need to understand the organisational part. You will fail if you have technology people in one corner and business people in the other. Ideally, you have people with both competencies and experience. The people at NOR are this rare combination,” says Kenneth Steengaard, chairman of the board at NOR Associates.