In the same way that Ikea revolutionised interiors, the Nordics’ financial services see open banking as a ‘flatpack moment’ for their industry. Georg Olav Ramstad, Nets’ Head of Sales and Business Development for Open Banking, and Paul Walvik-Joynt, Senior Vice President of Payments International, discuss what it is about the Nordics that makes them so good at knocking digital pegs into the right holes.
It’s been with us for more than two years and we’d talked about it for a decade before that, but when it comes to describing the progress of open banking, Georg Olav Ramstad reaches for a wartime simile: “To paraphrase Churchill, I’d say we are just at the beginning of the beginning of the journey.”
While open banking remains a live topic that is regularly touched upon at conferences, he says its potential is still not being fully exploited by most banks in Europe.
Instead, as head of sales and business development for open banking at the Nordics’ leading payment solutions provider, Nets, Ramstad observes that they are primarily focussed on complying with the revised Payment Services Directive (PSD2). While an important step on the journey towards open banking, it isn’t the destination, he says. And, even then, there’s no sense of urgency. PSD2 required regulated institutions to have application programming interfaces (APIs) ready to connect with third parties by September 2019. “But when we arrived at September, very few banks had them – and by February of this year a lot of banks still weren’t ready. It demonstrates we are only at the start.”
Open banking is about creating an ecosystem that connects all the dots – be they in the retail, travel, health, public or any other sector – to where they intersect with our financial lives. In doing so, it readdresses the relationship individuals have with their money. And, compared to most in Europe, Ramstad believes the Nordics are a long way down that open road. There is a particular hunger to innovate here – for very good reason. (And, yes, flatpack furniture is one manifestation of it).
“Some of the most efficient companies in the world come from the Nordics, like Ikea. What I think drives these forces is that we have a society in which inclusion is important. If you look at the sprawling geographies of some Nordic countries, if you can do something more efficiently with technology, it’s adopted very fast,” says Paul Walvik-Joynt, senior VP of payments international at Nets.
Mobile banking and digital payments are both examples of the Nordic lust for simplicity and inclusion. Homegrown instant payment platforms, including Vipps, Swish, iZettle and MobilePay, are all ubiquitous. Mobile wallets, contactless cards and real-time clearing have gained remarkable traction, so that today, the share of cash used for payments in the Nordics is down to 27 per cent, and the share among consumers aged 30-39 is just 15 per cent. Card payments are two-and-a-half to four times higher than the European average. Local person-to-person (P2P) mobile payment apps top the app download charts.
Maybe one of the reasons cash use is nose-diving is that here digital has proved just as good.
“Instant payments allow you to transact just as fast as you could by taking a note from your pocket and giving it to someone. We’ve removed all the friction and, if you put open banking and PSD2 on top of that, the world is your oyster,” says Walvik-Joynt.
Norwegian regional bank Sparebanken Vest is one example of a legacy bank hoping to prize that pearl free by contextualising a customer’s journey through their data.
“Sparebanken Vest are now launching the first fully mobile nationwide bank in Norway – Bulder Bank – by taking the opportunities presented by PSD2 and open banking,” says Ramstad. “So, for example, in addition to having account aggregation, they will also adjust your interest rate according to how your financial situation develops over time.”
The Nordic infrastructure deliberately ties the financial services community together, enabling Nets to develop initiatives that are geared toward contextualisation of data, says Walvik-Joynt.
“We like to participate in the ecosystem, but we also like to be a catalyst for great ideas. So, we see a lot of different elements, since we work on different parts of the infrastructure: services and applications that I think are going to be able to both provide services, and have a good dialogue with larger, smaller, incumbent banks and fintechs, to understand how they can create the services that are going to be relevant, not only today, but three, four or five years from now.”
A case in point is digital receipts.
“We’ve built one application programming interface (API) that connects to all the digital receipt providers in Norway, such as Zeipt, and banks, like Sparebanken Vest. It is the first bank we have partnered with in this area, to get access to receipts through that API, so they don’t have to connect to all the providers by themselves,” says Ramstad.
Zeipt, a young company that struggled to get its concept of a world without paper receipts taken seriously, credits Nets with having the foresight and market influence to jumpstart its business.
Banks at the centre
Digitised receipts are just one example of the kinds of innovations that have begun when it comes to streamlining a customer’s journey with their financial data.
Walvik-Joynt expands on the idea: “There are a lot of technologies that help us in doing that. We have authentication methods that are becoming biometric, we have artificial intelligence that will help us in terms of contextualising where you are, what you’re currently doing, and how you fit the payments technology into that, so that it becomes completely seamless for you. That’s going to be the most exciting thing that happens in the next couple of years.”
Ramstad and Walvik-Joynt both see a future that moves beyond open banking to a world of open data, where control rests with individuals but all kinds of services, not just financial, are created around them. Payments are just the start.
“These days, you have two to three bank relationships, four to six credit cards, loans in different places, assets in different places. So, all in all, it’s almost impossible for anybody to have full control,” says Ramstad.
But banks are missing a trick if they don’t position themselves as the key touch point that unifies and simplifies all these separate financial activities and more. Walvik-Joynt believes banks should be actively building themselves a place from which to dominate a landscape where more and more people are dependent on applications on their phones and other devices.
“All of us spend a large amount of time on our mobile phones, but, in general, we use only 10 to 15 apps per day. And how many of those are banking or financial apps? Not that many,” he says.
For a bank app to become the lodestar for consumers, dependably guiding them through a confusing galaxy of choices, innovation in connectivity is key. And when you put instant payments alongside instant messaging and mobile banking, you raise the bar of what is possible, he adds.
“You’re not only removing friction from a customer journey, but you are enabling businesses to act, and react, just in time. You can create processes that are more seamless, and the customers will enjoy that much more because there will be a journey in which the steps that might have previously taken time are now done instantly, and you are able to move on to the next task.”
Nets is inviting more people to contribute, innovate and create processes that continue to energise innovation, as it enables the payments ecosystem in the Nordics.
“The force of the wind that will blow us into the future is so strong that you’d better be there, because it’s going to be really exciting how this pans out,” says Walvik-Joynt. As the man said, the journey’s only just beginning.