Chart the trends and media buzzwords in the financial industry over the last few years, and you will very quickly come up with an array of terms: from PSP to blockchain or instant payments to digital banking superstores. However, the single word that brings these trends and terms together – and in some ways the one that started the hype – is infrequently used today in comparison to two or three years ago – digitalisation.
The heady days of 2014 promised that digitalisation, driven by new regulation, changing customer demands built on fast-advancing technology and the mushrooming of fintechs and innovative third parties, would transform the banking industry. Finance was ripe for disruption and the fintechs would sound the death knell for banks.
The hypothesis went something along the lines that fintechs were more agile, more creative, quicker to market and were brimming with bright young digital natives attuned to changing consumer demands. Banks were toast. But fast-forward a few years and the industry began to realise that banks still had millions of customers, were adept at compliance, had significant financial clout and were not going down without a fight. Appreciating what the fintechs and the banks had to offer were complementary strengths, the idea of collaboration and cross-facilitation between the old and new guard became a realistic and prevalent viewpoint in the industry of how finance might evolve.
However, this cosy clique constructed on collaboration and co-creation contains certain underlying assumptions – firstly, that banks have simplified, adaptable and up-to-date technology to work with new entrants; and secondly, that the culture – attitude, mindset, flexibility and skills – within banks is ready for the path ahead. The financial clout of many banks means investment in technology and the upgrading of systems should not be a hurdle as long as the willingness is there and the correct investment decisions are made in time. Regulation, such as PSD2, and the requirement for Open API banking, should also ensure banks are ready from the technology side.
For many banks, culture is the biggest challenge – what good is investing in a Tesla if habit dictates that you drive it like a Volvo 240 from the 1980s? It is an easy trap for fall into and to avoid it, banks must adopt the culture (habits and mindset) of digitally native companies, develop internal skillsets and pursue agile development methods, such as startup accelerators, hackathons, and innovation labs.
Customers do not need banks – they need banking. And the future banking ecosystem being created right now to meet their needs is being created by APIs, blockchain, instant payments or, in short, by digitalisation.
About Erik Zingmark
Erik Zingmark, Co-Head of Transaction Banking, Head of Cash Management, is the driver of Nordea’s future payments strategy and acts as Nordea’s sponsor for the FinTech Startup Accelerator. He leads the company’s blockchain initiatives, including R3 and DLG participation. Erik is a board member of BGC (Sweden’s largest clearinghouse) and was previously global head of cash management at two other Scandinavian banks.
Nordea is a big financial services group in the Nordic and Baltic region and one of the few European banks with an AA- rating. It is also one of the ten largest full-service banks in Europe, based on market capitalisation development, as well as a member of the Global list of Systemically Important Banks (G-SIB). Nordea's customer base is the largest of any financial services group in the region with approximately 11 million household customers and around 0.6 million corporate customers. Nordea is a leading European bank for Nordic corporates and takes the lead in the development of payment infrastructure and future banking in each market.
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