Digital banking
services like liquidity management forecasting and we’re working with fintechs with expertise in artificial intelligence to do document checking in trade finance processes,” Kam continues. “It’s all about continuously understanding your customers. We’re using data for our customers – and we have a lot of data.”
All that data gives incumbents certain advantages over smaller competitors, but it’s also tied in with their extra responsibilities. Nordea’s status as the largest bank in Scandinavia is inextricable from its 200-year history as a physical and social component of countless communities. It’s harder to explain or quantify the value that brings than it is to squander it. Incumbents have relationships with places, people and organisations that challenger banks can’t replicate. Where the latter group can take risks, the former holds trust.
Kam uses this as the basis for a productive and value-driving attitude to regulation, which can be easy to treat as a drain that stops incumbents keeping up with fintech. He points to the P27 initiative for creating an instant cross-border payment infrastructure for the Nordics. In one respect, it’s a way to implement the latest ISO standards, giving banks better data to work with and improving their payment transparency, transaction monitoring and AML checking capabilities. “But then there’s also an opportunity to use the infrastructure to further improve our ability to reduce fraud or money laundering by looking at it across borders, where most of those incidents might happen,” Kam explains. “That’s obviously going beyond pure regulation, but it’s also working with the regulators to see if we can use the infrastructure to support better AML tools.” Then, of course, there are the advantages of simplifying cross-border payments for Kam’s corporate customers, who often operate across the entire region. Incumbents can either stick to a compliance mindset or use regulation to balance customer demands for convenience and trust. “There’s always a customer lens to regulatory developments and requirements,” continues Kam. “That’s what we try to do at Nordea – make sure that we understand why we do this. It’s not just about satisfying the regulators, it’s that we continue to be seen as a trusted party, because that is one of the differences between a very regulated bank and a small fintech. Trust is a value for our customers, so we try to ensure that we continue to have their trust.”
Opportunity cost In this way, framing data monetisation as an opportunity in the same way that fintech does could be disastrous for an incumbent like Nordea. Data isn’t just a window on risk, but a factor
Future Banking /
www.nsbanking.com
contributing to it. “Of course, there are areas where we are piloting and trying to understand what we can do with data monetisation, but we are a bit conservative and careful there,” says Kam. “In a good way, I think – you don’t want to lose the trust.” That’s something Nordea prides itself on explaining to fintechs. Particularly given how much of their resources are tied up in complying with regulation, incumbents rarely have the time, spare funds or expertise to build the best AI apps for customers, let alone bust their own silos and remake their infrastructures. Engaging smaller, more specialised fintechs is often the only option – and it’s here that Nordea’s story has the most relevance to the rest of the industry. “In anything we do, we need to understand if we can partner before we buy or before we build,” explains Kam. “Maybe we can find the fintechs who can provide value-added services immediately, who have a given capability that would be great to integrate in our offering, but the journey starts there. Just scanning the market, you can find good solutions, but the challenge is trying to see if you are culturally suited to work together, if they are financially sound and if they can adjust to the complex way banks work.”
66% €1bn
Fall in Nordea’s operating profits between Q1 and Q2 2020.
Nordea
Increase in Nordea’s operating profits between Q2 2020 and Q2 2021.
“E-commerce was already experiencing almost double-digit growth every year, but because of Covid, that has obviously accelerated – in B2B as well as B2C.”
Indeed, for all that digitalisation does to spare humans the quirks and annoyances of dealing with each other, it won’t change the fact that banking is a cultural phenomenon. As their high street histories imply, the complexities of incumbent banks differ depending on where they are. Nordea is careful not to stake its reputation and relationships on a too-hasty digital transformation, but its geography has enabled it to move much faster than many similarly sized institutions. In contrast with much of Europe, Nordic governments and their citizens have wholeheartedly embraced digital identity services. Bank IDs, for instance, are used for tax submissions as well as online payment authorisations. In Denmark, where Kam lives, the public received their Covid-19 vaccine invites in the same ‘e-Boks’ as their bank statements. “That’s a big, big benefit in the Nordics,” stresses Kam. “We have the infrastructure already.” As part of its payment strategy, the EU Commission is trying to extend similar standards across the rest of Europe, but aligning 27 heterogeneous states across a whole continent is a challenge of a different order. Trust isn’t viral. ●
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