In picture: Ewan John MacLeod, Chief Digital Officer at Nordea, Lars Malmberg, Group Head of Commercial Excellence at Danske Bank and Kim Fournais, CEO and owner of Saxo Bank.

Banks Were Not Made to Be Open – Until Digitalisation Became Mainstream

Digitisation and new technology presents banks with new challenges and opportunities. Although most stakeholders tend to focus on the challenges, banks have opportunities to grow and prosper, if they anticipate and strategically navigate change management.

In the 1990s, it was claimed that fintechs delivering a razor-sharp digital customer experience made banks look dusty and lumbering. Now, tech giants are rapidly penetrating areas that had traditionally been home to financial institutions.

It is an open secret in the banking industry that they are weighted by legacy infrastructure. Research shows that a typical bank in Europe uses up to 80 per cent of its information technology budget on maintaining old systems – i.e. getting the same old engine to start again every day. With such a large portion of the bank’s resources dedicated to maintenance costs, there is little room left to develop new solutions to meet the ever-changing demands of clients.

The question becomes: what will the banks of the future look like?

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Ewan John MacLeod, Chief Digital Officer at Nordea.

How has the digital development ­impacted the financial sector?

“It’s bringing a lot more choice to the sector. I remember just 10 years ago, ‘in-house’ was the only way development was done in big companies. You made your resource allocation once a year and stuck to it. I can recall sitting in budget meetings wondering ‘isn’t there another way – isn’t there a way we can do some internal development and leverage the capabilities of external partners too’?

In the past it was genuinely incredibly difficult to deliver services at banking scale. But the introduction of cloud technology has made such a difference. Today, a quick glance at the services being offered across the financial sector demonstrates the power of partnership.”

Why is this agenda important to Nordea?

“The financial sector was amongst one of the first industries to jump aboard the computing revolution, so it’s an industry that already recognises the power of technology. The challenge is selecting the right technologies, at the right time, to bring the very best experience to the end customer. 15 years ago, I might have experienced that sitting in a branch and marvelling as the advisor was able to create an account for me – right then and there – by typing into a Unix green-screen system. Now, the customer expectations are somewhat different. So it’s exceptionally important to carefully track those changing expectations and adjust accordingly.”

How do you see the market for Banking as a Service develop in the future?

“The massive advances in technology make it possible and enable companies to specialise on specific parts of the value chain extending to the customer. I think we’ll increasingly see more specialisation across the financial sector, with companies doubling down on their areas of expertise. It’s becoming so much easier, from a technical standpoint, to integrate. There remain some specific requirements for the financial sector when it comes to partnerships, especially in the context of security and data management.

I think banking-as-a-service is already happening in the context of changing customer behaviours and increasing technological capability. In the past, partnerships or the use of third-party services, was in the minority. That’s changing now, and I can foresee an exciting future for the finance sector in perhaps 5 or 10 years. In some cases, regulation could impact the trend towards banking-as-a-service – both positively and negatively.”

How is the development of automation impacting Nordea’s core business and processes?

“We’ve been heavily active in the automation field. Just last quarter, our CEO Casper von Koskull reported that we’ve ‘robotised’ 38 processes using a mix of AI and robotic process automation techniques. Here’s another example: Our Nova Chatbot in Finland has reached roughly 25% instant resolution rate for incoming customer queries. In terms of quantifying what we’ve managed to achieve so far, our robots have the same capacity as 1,500 employees. It’s an area we will continue to focus on.”

Lars Malmberg, Group Head of Commercial Excellence at Danske Bank.

How has digital development impacted the financial sector?

“When talking about banks of the future, regulation and technology must go hand-in-hand. The focus must be on solutions that are in the interests of customers. There is no doubt that when organisations gain access to customer data, they can create tailored products and services that are targeted to their needs, not to mention provide better advise. Regulations enable organisations to accelerate the open and digitised banking infrastructure, but what I really like about the legislation is that customers today have the right to protect their data. You must convince the consumer that you are creating something valuable to them – and that’s what technology can do. If technology does not succeed, the customer can withdraw his or her data. It is the combination of legislation and technology that is quite interesting in this context. Free access to technology and free access to data will not end up in a good place.”

Why is this agenda important to Danske Bank?

“This agenda has created better solutions for customers. It has, in a very practical way, created a development in mobile banking, where we provide more services and flexible solutions than we were able to 5 years ago. It has done a lot for us internally. The rise of digitisation has made us more open to partnerships and external innovations. This benefits the customer as well, even if you simply digitise the back-end processes or all that is involved in administration. Most documents today are digitised, so you can sign some documents. You can also do it through your mobile bank with a digital signature. In everyday life we ​​do not think about this, but it is a minor revolution in the way we interact with banks.”

What will drive the agenda for Banking as a Service forward?

“The crucial external factor is what customers are demanding and their stage of digitised development. We cannot be technically ahead of our customers, but we also cannot afford to lag behind. When the surrounding society is digitised to a very high degree, the customer expects the same experience when using banking services or any other digital service. It doesn’t matter if the platform is Netflix or a mobile bank. The customer expects it to be a fully digital, functional, and seamless user experience. For me, it’s about creating an experience – even if the customer turns up at a branch. Strategically, we will enter into more and more partnerships and develop new customer solutions outside the bank’s traditional financial market. That is because the technology makes it easier to integrate external solutions with our own solutions and drive new business models from open API’s.”

How is the development of automation impacting Danske Bank’s core business and processes?

“Much automation takes place through our back-office processes, and we work daily with robots and automation to make processes leaner. We applied artificial intelligence (AI) in developing the June app, creating investment profiles, and it also affects our models for credit, loans, and pricing. It will only affect the industry to a greater extent in the future, as the technology becomes cheaper and more sophisticated. It is no longer a question of ‘being ahead,’ but a matter of living up to a requirement from the users to the experience they expect.”

Kim Fournais, CEO and owner of Saxo Bank.

How has digital development impacted the financial sector?

“Technology partnerships and more collaboration are the solutions to these challenges that banks are facing today. It is very costly and time consuming for any bank or fintech to develop and maintain for example a global capital markets engine which is the area we operate in, and that is why we see the trend of partnerships spreading much more broadly these years. Today, technology is so flexible that through open APIs, for example, it is much easier to deliver an offering specifically tailored to the partners’ or clients’ needs. The bank of the future does not develop much technology itself. It helps clients navigate through the increasingly complex world of apps and smart fintech solutions by handpicking the best solutions and packaging them effectively.”

Why is this agenda important to Saxo Bank?

“Technology and innovation have been integral to our development since I founded Saxo Bank close to 27 years ago. Saxo was in fact the first bank to realise that it is fundamentally a technology business. And our vision is clear, we exist to democratise trading and investment and for us to truly deliver on that vision we must stay ahead of the curve and leverage technology to give a wide range of clients’ better investment opportunities, better platforms, better services, more transparency, and much sharper prices.”
How do you see the market for Banking as a Service develop in the future?

“From our perspective, it is clear that “banking-as-a-service” will be one of the defining themes in the years to come. The financial industry is complex and highly regulated and software providers might not always be able to navigate the system in a fast and efficient way. That is why entering into partnerships with other financial institutions that can deliver their core competency as “banking-as-a-service” is a very relevant solution. Partnerships will become one of the most disruptive factors in the financial sector in the coming years and become the foundation for a significant step forward in the sector’s use of technology. When banks no longer have to develop their own systems, significant resources can be unleashed to deliver better services and products for clients.”

How is the development of automation impacting Saxo Bank’s core business and processes?

“We are moving our entire technology stack to the Cloud to becoming a truly cloud native business. Part of the rationale is to fully capture and utilise the enormous potential of automation and AI-based solutions. With AI we can enhance the client experience by delivering even more timely and relevant content tailored for the individual client; from answering queries through advanced bots to notifying clients about events and opportunities in the markets relevant to the individual client.”

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