PA PERSPECTIVES ON NORDIC FINANCIAL SERVICES Autumn Edition 2017 CONTENTS The personal banking market 3 Interview with Jesper Nielsen, Head of Personal Banking at Danske bank Platform thinking 8 Why platform business models represent a double-edged sword for big banks What is a Neobank – really? 11 The term 'neobanking' gains increasing attention in the media – but what is a neobank? Is BankID positioned for the 14future? Interview with Jan Bjerved, CEO of the Norwegian identity scheme BankID The dance around the GAFA 16God Quarterly performance development 18 Latest trends in the Nordics Value map for financial institutions 21 Nordic Q2 2017 financial highlights 22 Factsheet 24 Contact us Chief editors and Nordic financial services experts Knut Erlend Vik Thomas Bjørnstad [email protected] [email protected] +47 913 61 525 +47 917 91 052 Nordic financial services experts Göran Engvall Magnus Krusberg [email protected] [email protected] +46 721 936 109 +46 721 936 110 Martin Tillisch Olaf Kjaer [email protected] [email protected] +45 409 94 642 +45 222 02 362 2 PA PERSPECTIVES ON NORDIC FINANCIAL SERVICES The personal BANKING MARKET We sat down with Jesper Nielsen, Head of Personal Banking at Danske Bank to hear his views on how the personal banking market is developing and what he forsees will be happening over the next few years. AUTHOR: REIAR NESS PA: To start with the personal banking market: losses are at an all time low. As interest rates rise, Banking has historically been a traditional industry, loss rates may change, and have to be watched. but many believe that fundamental changes will happen in the years to come. How do you see I think the markets we’re in may be benign for some the market and the customers, their needs and years. Growth rates seem to be converging, with behaviours? How do you see that changing? Sweden a little down, Norway and Denmark getting there and the Finnish market appears to be starting Jesper Nielsen: I don’t know if there’s going to be to grow. more change than before, but there will be lots of change. We recently found a statement made by One thing that we particularly watch out for is the the CEO of the bank in 1971. I think the headline risk of bubbles, especially in Norway and Sweden. was: ‘We live in a time of big changes’. Change has There’s a lot of political attention on this as well, been a topic for many years. also in Denmark. The trick for us now is to make sure we watch the areas where bubbles may be We usually look at the market through five lenses – latent, and make sure the tail risk in our portfolio the five forces of change. If you look at these forces, is limited. When things are changing, that’s always the market and the economy set certain boundaries. where you get the big losses. Otherwise it’s a We live in a low interest rate environment so it’s pretty stable environment with low interest rates hard to increase profitability, and it’s difficult to and a benign credit market. And we’ll probably see increase your top line because you’re constrained in interest rates starting to trend upwards in a year or how much margin you can get. On the other hand, two. We hope this will happen fairly slowly. There that also leaves a very benign credit environment so are many imbalances in the economy now, and as PA PERSPECTIVES ON NORDIC FINANCIAL SERVICES 3 “Everybody is trying to win the battle for the digital customer. Who will be successful remains to be seen.” JESPER NIELSEN HEAD OF PERSONAL BANKING DANSKE BANK the price of money rises, it will need time to settle. what the bank can do to meet them where they So for the next couple of years, we don’t see any want to meet, know their requirements, know what alarm bells going off anywhere. they’ve done and know their transactions. PA: How is the personal banking customer PA: Some think that organisations like Amazon, changing, with respect to banking needs, actions Google or Apple may become significant players in and behaviour? the financial services industry. Do you think so? Jesper Nielsen: When we look at the five forces Jesper Nielsen: They, at least have the potential of change, one of these is that customers are to do so, and if banks don’t watch out, they’ll becoming much more digital. They are becoming enter their markets. If you look at the competitive much less dependent on an advisor, and they are picture, all banks are ramping up in this space. They becoming much less dependent on a bank branch. understand that the banks cannot just lay down in the face of new competitors. So there are a lot of Physical transactions, giro payments and so on have digital initiatives and not least a will to partner up dropped 30 per cent per year for the last four or with new digital players. five years. In Sweden, 65 per cent of our advisory contact is non-physical. You may want to meet face PA: Such as your MobilePay? to face for a mortgage, but the advice on the small stuff is by phone, e-meetings, chats and so on. And Jesper Nielsen: MobilePay is one example. We for travel currency, you use your credit cards or have just launched our robo advisor, which is an pick up cash at the airport. Customers are changing online investment tool, and in Denmark we’ve rapidly and their expectations are changing as to introduced a digital mortgage experience. We are 4 PA PERSPECTIVES ON NORDIC FINANCIAL SERVICES also constantly improving our mobile bank, adding Jesper Nielsen: Yes, you compete with somebody both basic banking functionality, wow-features and who has a different logic, and that means that you catering to customers’ increased desire to interact have to be much more adaptable – you have to with us via mobile devices. Public sector initiatives change faster. It’s like when you go to the gym. It’s on digitalisation have been good for us, paving annoying when you need to get there, but you have the way for broad digitalisation of society. I think to, and you feel better afterwards because you’re the Nordics may be a bit ahead on digitalisation. progressing. Blockchain is also a very exciting technology. PA: What about the power and impact of PA: Do you think the major banks in Scandinavia regulation? There seems to be more and more today will all remain strong in the customer regulation, and it’s getting more and more difficult interface, or will there be changes in the role they for the players to comply. What’s your view of the play? future, will the regulatory forces become even more important than today? Jesper Nielsen: I think everybody’s trying to win the battle for the digital customer. Whether they’ll Jesper Nielsen: Yes. There’s no way around it. be successful remains to be seen. But, if I look I think it’s also a matter of honour for us as a sector at the Nordic banking landscape, competition is to have very high standards around these things, very strong. For instance, DNB has made fantastic and I think we should see it as an opportunity. progress with Vipps, and just launched a new savings app. If you look at the push for transparency, that’s great. What’s important for us is that there’s a The question of whether everyone will succeed level playing field here. But I think it will improve will only be answered in a few years’ time. as things mature, and initiatives like regulatory sandboxing are excellent ideas for how to move on. PA: What do you think of the challenger banks, the small ones being set up by other organisations? Do we need more transparency for our consumers? Definitely. I think moves in this area will continue. Jesper Nielsen: Like Bank Norwegian? We’d obviously like a pace of regulation that makes it possible to meet the requirements. Instead of PA: Yes, Bank Norwegian is an example. It’s now everybody scrambling to get to the finish line, you more valuable than the airline, and it’s grown should have a chance to do it properly. very fast over a very short time. Do you believe organisations like this are likely to be significant Is there anything in Mifid2 we don't understand? players in the financial services market? Anything in new consumer regulation that we think is wildly unfair? No. Do we need transparency? Yes. Jesper Nielsen: I think Bank Norwegian is a Is that good for competition? Yes significant player already, at least in part of the banking market. They’re ‘in there’ and they’ve done PA: So even though it creates a challenge for the very well. I obviously don’t like anybody to take players, it’s something that we need for the good business from Danske Bank, but I think overall that of the system? competition is good – bringing new angles, new ways of doing parts of the banking industry. That Jesper Nielsen: Yes, we need to think differently sharpens the banks up as well, and I think you can about regulation and it needs to be in our business see much more customer-oriented, agile banks now model. It forces us to think differently. GDPR is a than we did just five years ago.