But despite such advances, incumbent banks have a weakness compared with their startup counterparts. Mikko Riikkinen, a fintech specialist PhD researcher at the University of Tampere, said that although Nordic banks were early adopters of online banking, they are now weighed down by their legacy IT systems.
“Banks need to let go of some of the old things they have traditionally been good at to reach the next level,” he said. “Banks are used to developing things themselves and now they have to open up their APIs [application programming interfaces].”
The banks are well aware of their legacy challenge. In October 2017, Nordea announced it would be axing 6,000 jobs worldwide, including external IT consultants, citing digital transformation as the key driver. The news followed the launch of its €1bn simplification programme three years earlier, which includes new core banking and payment systems.
In Norway, DNB – which closed 59 retail branches last year because of the growth in digital banking – is preparing to launch a new cloud platform in 2018.
“We are moving from our old-fashioned front and development architecture, which was built in the 1990s, to a completely new, modern cloud-based environment,” said Lande. “It is the foundation for all our new development going forward. As a result, we will launch new products in 2018 built on the cloud and integrated into our back-end systems through our APIs.”
Harri Nummela, vice-president of digital business at OP, outlined similar plans. While OP is experimenting with new digital business models, most of its investment still goes on digitising existing customer and internal work processes.
“If you want to build new value chains and a platform economy, the pieces attached to them will come from our current business and those have to be digital,” said Nummela. “So this is also groundwork for our future business models.”
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Nordic banks have also realised they don’t have to develop these future business models alone. In November, Nordea announced a fintech fund targeted at Nordic startups and made investments in Swedish mobile payment provider Betalo.
In Norway, DNB has put its weight behind the DNB NXT Accelerator programme run by the Norwegian Startup Lab. And in Finland, OP has started up an OP Lab innovation unit to work more closely with its startup partners.
Denmark’s Danske Bank has taken a slightly different approach with The Hub, its online platform. The bank works with local partners in each of the Nordic countries to help startups with recruitment and raising capital.
This type of collaboration will take a new turn this month, when the EU’s revised payment directive, PSD2, comes into force, requiring banks to open up their payment and customer data for third-party providers through APIs.
Nordea made an early start on these new requirements in December with the public launch of its Open Banking developer platform for account and payment APIs. Both OP and Danske have announced similar platforms, but they are yet to open.