Kjetil Sørtun, Head of Banking Services at Sparebanken Vest, describes its journey from legacy institution to mobile trailblazer and banking as a service provider.
Launching first Buffer, an invoice financing solution for small businesses in 2018, and then mobile-only Bulder Bank for retail customers last year, Sparebanken Vest stepped boldly into the open banking arena, pulling all the levers put at its disposal by the revised Payment Services Directive (PSD2).
Until that point, its operations had mainly been confined to the west of the country, but its app for existing account holders had already been rated the best out of all the main banks’ in Norway, according to iTunes and Google android reviewers. The challenge then was to export the idea to the whole of Norway as a standalone, mobile-only bank.
“We immediately saw we couldn’t offer the same kind of product in other parts of the country,” says Kjetil Sørtun, the company’s head of banking services. “So, we looked at what kinds of customers we would like to have there and found there was a group of people who have another view of what a bank is.”
These new mobile customers don’t look to a bank simply to move money around. “They need something different, they are trying to understand the world in a different way,” says Sørtun.
Bulder Bank was therefore conceived not as a new bank, but a ‘new experience’, for which Sparebanken Vest took its cue from Big Tech companies that have constructed their phenomenal customer bases by looking, as Sørtun puts it, ‘from the outside in’. In other words, seeing what the customer sees and listening to what the customer is saying. And what they wanted was a real-time, cross-channel experience, available 24/7, one that was customer-centric, rather than accepting the product-based approach that traditional banks had offered in the past. The conservative aim is to have 20,000 customers for Bulder Bank by the end of 2021.
“Every bank looks the same from the outside. They market themselves in the same way,” says Sørtun. “We looked at what Netflix and Google do and tried to make it just as easy to be a customer of ours. You shouldn’t have to talk to the bank to get something done. We should talk to you.”
Looking at what is useful for consumers and prioritising it over the usual bank offerings, required effort on Sparebanken Vest’s part. But it was also hugely helped by a national infrastructure that favours open and digital transactions across many areas of Norwegian life.
“For a lot of the data, we don’t have to ask the customers” says Sørtun, “it’s available from the government. We use that in the onboarding process, when we look at who the customers are and what they are doing. We also use it to try to understand what kind of product we should be building for them. We enrich our current bank data with government data, and data from open sources, then apply machine learning to understand the products customers want – not just bank products.”
Bulder Bank, which operates under the Sparebanken Vest licence, but operationally stands alone from the bank, also benefited from the regulatory oversight and infrastructure put in place by its parent.
“We have everything: risk management, compliance, back office, onboarding. So, when we started building the new bank, we could just concentrate on the kinds of products we wanted to offer and the kinds of customers we wanted” says Sørtun. “A challenger bank has to think about all these things. It made it possible for us to move faster.”
Sparebanken Vest’s experience of building Bulder Bank is a case study in diversification, which has been helped by the Norwegian banking industry’s approach to doing business. It didn’t need an EU directive to understand the term ‘open’. While it has become a buzzword in the financial services industry, used as shorthand for how companies connected through application programming interfaces (APIs) can offer best-in-breed customer experience by combining the digital services of multiple firms, there were already well-established co-operative relationship between banks in Norway.DNB, the country’s largest financial services group, for instance, was the driving force behind Vipps, the omnipresent Norwegian mobile payment application launched five years ago and now used by 3.2 million of Sørtun’s countrymen. Sparebanken Vest has a stake in Vipps.
“We are using the platform to try to build a new infrastructure based on mobile numbers, not account numbers, for payment transactions,” says Sørtun.“This is a new way for banks to come together to try to build better solutions. It’s learning by doing; trying to understand the customers’ needs and not necessarily having the best solutions individually, but being a part of it and building it with other banks.”
Another example of how embedded such co-opetition is in the Norwegian banking system, is DNB’s early aggregator tool, which gathers information on customer accounts held with other providers. Recently, it went a step further by allowing its customers to make transactions from those accounts within the DNB app. Bulder Bank has plans to introduce a similar aggregator tool.
Strength in numbers
Much of Sparebanken Vest’s digital programme is collaborative by nature.
“We actually use a lot of Nordic vendors,” says Sørtun. Among them is Nets’ Access to Account Services (NAAS) platform, which allows payment initiation and access to account information through a single API, giving banks the freedom to build customer-facing services on top.
“We have an IT department of 150 people, which is small compared to the big banks and the techno vendors,” says Sørtun. “So, we use the best of our partners to build out offerings for the customer.”
Sparebanken Vest is also the banking-as-a-service partner (and investor) to Nordic startup Folio, the standalone invoice financing tool offered by the bank to any customer, regardless of where their account resides. The app connects to an SME’s accounting system and analyses accounts receivable. The liquidity ‘buffer’ is triggered as soon as an invoice is issued. There are no onboarding fees and users pay one per cent interest only on the money they spend from the buffer facility.
Folio itself was launched as ‘the bank that does the accounting for you’. With a linked business payments card and app, it plans a phased release of features during 2020, including the ability to send invoices, run payroll, calculate tax deductions, employer tax and holiday allowance, automatically post expenses charged to the Folio card, generate emails or push notifications when money goes in and out of the account, as well offering day-to-day management assistance and advice.
Another example of Sparebanken Vest making good use of third-party tools is subscription management provided within the Bulder Bank app by Danish white label partner Subaio.
Subaio gives users an overview of their various subscriptions and recurring payments, allowing them to cancel a subscription with a single click. Sparebanken Vest was its first banking customer in Norway. While other countries might not necessarily view subscription management as a ‘must-have’, in the Nordics, which leads the subscription economy with two to three times as many subscriptions per capita as the rest of Europe, such a tool makes absolute sense. It’s a real demonstration of how the bank has looked at what is useful for consumers and prioritised it over the ‘usual bank offerings’.
The rapid adoption of open banking is being driven by multiple evolutions in the industry – new technologies, fintech competition and regulators, especially in Europe. But the latter are now lagging behind the industry, says Sørtun.
“Banks are seeing benefits, on the cost side, on the customer side, on the tech side, of being more open in mindset. I think there will be a PSD3, but I think it will be a different kind of regulator approach. There will be less banking and more customer-centric services.