A keynote session at FinTECHTalents’ Virtual Nordics conference will ask if the Nordics’ reputation for innovation is media myth or reality. Danske Bank’s Chief Digital Officer, will be among the speakers. Here, he explores the region’s preference for digital payments and harnessing the power of APIs.
Much of the hype surrounding fintech and disruption in the Nordic region focusses on the tech titans that have their origins there, including Skype and Spotify.
The region is also known for fast-paced payments innovation, with Sweden moving especially fast towards a cashless society. It’s also the birthplace of Klarna, the ‘buy now, pay later’ payment service loved by Europeans, which was valued at $10.65billion in its latest investment round. Native payments authentication provider Zwipe, meanwhile, has just raised $10.5million to prepare for the launch of biometric cards.
While no Nordic cities made it into the first Global Fintech Hub world rankings, put together by Findexable, Sweden, Finland and Denmark were all in the Top 20 country rankings and Norway has been flagged as a nation that could soon rival some of the old guard because of its track record in innovation, ecosystem building and regulatory effort.
If you dig a little deeper into the online world, though – Twitter chats, forums, blogs – some point to a different reality, one of incumbent bank complacency, a reluctance to forge partnerships and a lack of capital for the majority of startups. So, what’s the truth about the northern fintech lights? One session at the upcoming FinTECHTalents Virtual Nordics conference aims to find out.
Innovating through challenge
It asks boldly Is Nordic Innovation a Myth?’ and one of the panellists will be Søren Rode Jain Andreasen, chief digital officer at Danske Bank, Denmark’s largest bank and a major player in the Nordic region with more than five million retail customers. What’s his view?
“On the one hand, Scandinavian countries are very innovative – we have seen some very large companies, global leaders, growing out of the region,” he says. “Within the financial services industry, we have iZettle and Klarna, which are now global leaders within their field.
“At the same time, there are also challenges for startups,” he admits. “Access to capital, for example – it’s harder to get funded in Scandinavia than it is in the US, the UK, or even Asia.”
Despite this, the fintech landscape in the Nordics continues to be one of the most successful at producing unicorns. The increased investments and new initiatives made by local governments are primed to facilitate the continued success of fintech in the coming years. And when it comes to scale-up businesses, the Nordic region certainly punches above its weight. According to Findexable research, 16 per cent of European fintech scale-ups are located in Sweden, Denmark, Norway, Finland, and Iceland. While not as many as in an established financial hub such as the UK (38 per cent), that’s more than Germany, at 13 per cent.
There is also a confidence and a determination to get things done. The European Commission has now finally approved, under the EU Merger Regulation, the proposed acquisition of Nets A/S’ account-to-account payment business, headquartered in Denmark, by Mastercard. The decision is conditional on the transfer of a licence for Nets’ Realtime 24/7 technology for account-to-account core infrastructure services as well as the relevant personnel and other assets.
In terms of payments, what sets the Nordics apart, and is driving much of the innovation there, is people’ s willingness, and governments’ keenness, to dispense
with cash in favour of digital transactions. Facilitating that are a number of infrastructure services, including the soon-to-launch P27 crossborder network. A joint initiative by Danske Bank, Handelsbanken, Nordea, OP Financial Group, SEB and Swedbank, P27 aims to build the world’s first real-time, crossborder payment system in multiple currencies.
Meeting new customer needs
“During the last decade, we’ve not only seen banks trying to make their customers go digital, but also customers wanting to go digital; they actually prefer to use digital solutions, especially in Scandinavia,” says Andreasen. “Most of our branches don’t have transactional services, only advisory, so they don’t even have cash in them anymore. While that means that we don’t see our customers as often as we used to, they still have an expectation that we know them, and the only way we can know them is by using data.
So data becomes a very, very efficient and necessary tool in knowing our customers and being relevant for them, and being proactive; being able to advise them, at the right point in time, so that we can give them the right advice, and the right products, exactly when they need them.” Andreasen is a big advocate of the Cloud, and credits it with a crucial role in his bank’s digital ambitions, working hand-in-hand with application programming interfaces (APIs).
“The scalability and flexibility that the Cloud provides are unparalleled by any other technology,” he says. “What’s really important is to use it efficiently.
So what we try to do is ensure that the technologies that are not running in the Cloud are API-enabled, so that we can efficiently communicate across all of our different capabilities and microservices. When you are a big financial institution, you will have some solutions that are not using the newest technology, simply because you have thousands and thousands of programs and just upgrading them would basically keep the whole company occupied for years. So you’ll always have some legacy, and it really becomes a question of how you manage that legacy and how you make sure that, when you build new solutions, you use new technology.”
Payments innovation in the region is being fuelled by open banking. There is, for example, the open banking platform, Nordic API Gateway, which some of the major Nordic banks, including Danske, are plugged into. It has now extended its partnership with Danske Bank to enable customers to pay from other banks within Danske’s mobile banking app. In this way, Danske Bank is taking an important step towards becoming the region’s preferred banking interface. This deepening digital payments partnership encapsulates Danske’s and others’ strong appetite to innovate through Nordic collaborations.
“We employ around 20,000 people and the sheer size of the company makes some things go slowly. Being in a heavily regulated industry, of course, also imposes some boundaries on what we can do,” says Andreasen. “But we are constantly working on improving it. We are learning from tech giants and startups alike, looking at what works and then trying to implement that in our organisation.
“Working in an agile way is something we have been doing for years, but now we are taking the next step in merging all our change activities – the business change functions will be merged with our IT divisions. Basically, we are implementing a version of the Spotify model.”
Spotify founder Daniel Ek has just said he’ll invest €1billion in deep-tech European moonshot projects. Perhaps that helps answer the panel’s question!