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contracts and identity management. In this context, it is evident that different distributed networks occur, where it is of crucial importance to establish a standards strategy. The complexity rooted in blockchain involves valuable attributes with the potential to improve efficiency, security and transparency of existing banking processes and systems.
Contribution from the empirical findings and analysis
From the findings, the examination of the consistency between the banks’ strategic logic behind cross-border payments and retail customer demand, have uncovered several interesting aspects. Banks are faithful to the traditional SWIFT payment infrastructure utilised for international payments, however they also evaluate other potential solutions. The banks have acknowledged that digitalisation and globalisation have resulted in a shift, where customer value creation is an important prioritisation to reduce switching costs. Thus, customer expectations have changed considerably due to higher bargaining power, in which they expect the banks to adapt to the rapid technological changes. When it comes to uncover customers’ need and align diverse customer demand there is still further potential for the banks to utilise customer information, even though regulations could make it more difficult.
The new competition has put pressure on the market and alternative solutions are becoming visible, but the prioritisation of it can be questioned based on the availability of resources and capabilities.
New market entrants seem to be a bigger threat than what the incumbent banks realise, specifically in the market for cross-border payments because they target niche areas in payment processes.
However, it is strategic of the banks to rather view them as potential opportunities in terms of partnerships in order to reduce the threat to some extent. Since FinTech companies will be a part of the natural evolution, strategic partnerships would be an opportunity to offer better terms for cross-border payments. Thus, the banks that enter strategic partnerships effectively and with customer demand in focus will have a better chance at success. Furthermore, the banks seem to pursue a follower strategy to technological innovation, specifically in the market for international payments, because they currently do not see a clear demand for improvement from their retail customers.
Pursuing a differentiation strategy appears to be superior to cost focus based on the structural changes in the banking industry. The complexity embedded in blockchain technology is valuable in the pursuit
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of a product differentiation strategy. Even though DLT has attributes with potential, it is evident that blockchain is still an immature technology, and thus cross-border payments are not the most prominent use case today. In addition, it seems that blockchain technology does not exist as a strategic innovation for product improvement in the Norwegian banking sector. Thus, the technology encounters many barriers that need to be properly solved before DLT can be utilised in payment processes and implemented in the market for international payments. Moreover, the emergence of blockchain has fostered competition, which has accelerated developments of existing and new providers. Thus, new payment ecosystems will arise based on different requirements, where the obstacles surrounding establishment of standards have to be determined.
It is evident that the banks operating in the Norwegian market have a customer focus, which they attempt to prioritise to some extent in accordance with customer experience and preferences.
However, it seems like some of the banks are better at this than others. In other words, some areas require improvement in order to achieve a competitive advantage and strategically position themselves more successfully in the market for cross-border payments. It is safe to say that incumbent banks are to some degree aware of the industry landscape, and thus a step in the right direction.
Nevertheless, the long-term strategies for international payments are seemingly vague in general amongst the traditional banks. Hence, it is critical that they sharpen their focus on core strengths and characteristics in line with a customer-oriented strategy, rather than follow a “me-too” approach to innovation.
Overall, the banks can sometimes underestimate what customers’ need, whereas they in some areas have a strategic logic in line with customer demand. However, traditional banks in the Norwegian market do not see the necessity to prioritise cross-border payments for retail customers, although customers indicate some efficiency demand for international payments. Thus, it is evident that improvement of international payments is more valuable for both the corporate customer segment and the banks, either with or without the utilisation of blockchain technology. Conclusively, the researchers answer the main research question of this thesis by suggesting that there is consistency between the banks’ strategic logic behind cross-border payments and retail customer demand.
However, the strategic rationale behind international payments is not fully consistent with customer demand in Norway. Nevertheless, it should be noted that the findings developed within this research
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study require cautious interpretation due to the many limitations outlined in chapter 7. The overall impression of the thesis results was confirmed during a discussion with a corporate strategy expert at Nets.
107
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117 APPENDICES
Appendix A: Survey Questions
1. What is your age?
Age Response Percentage
18-25 65 46 %
26-35 30 21 %
36-45 8 6 %
46-55 23 16 %
56-65 11 8 %
66-75 5 4%
2. What is your occupation?
Occupation Response Percentage
Between studies 2 1 %
Early Start-up 2 1 %
Freelancer 1 1 %
Full-time worker in Norway 57 40 %
Full-time worker in Norway and/or international 12 8 %
Graduate 3 2 %
International student 17 12 %
Investor 1 1 %
Part time USA 1 1 %
Retired 2 1 %
Student in Norway 43 30 %
Unemployed 1 1%
3. Which of the following banks are you a customer of?
Bank Response Percentage
DNB 76 53,52%
Sparebank1 32 22,54%
Nordea 29 20,42%
Danske Bank 17 11,97%
Handelsbanken 15 10,56%
Haugesund Sparebank 4 2,82%
SEB 5 3,52%
S-Banken 5 3,52%
Other banks2 13 9,15%
2 Other banks include local Norwegian banks, for example: Sparebanken Øst, Sparebanken Møre, Sparebank1 Nordvest,
Komplett Bank, Eika Alliansen and BN Bank to mention some.
118
4. What product/service would you prefer to be more efficient?
Product Response Percentage
Insurance 9 6 %
International payments 34 24 %
Loan/mortgage 28 20 %
Retail payments 17 12 %
Savings (e.g. pension, real estate, education etc.) 32 23 % Trading platform (e.g. shares, funds etc.) 22 15 %
5. What product/service would you prefer to be second more efficient?
Product Response Percentage
Insurance 20 14 %
International payments 13 9 %
Loan/mortgage 41 29 %
Retail payments 22 16 %
Savings (e.g. pension, real estate, education etc.) 30 21 % Trading platform (e.g. shares, funds etc.) 14 10 %
6. Would you prefer more efficient cross-border payments with lower fees and faster transaction delivery?
Answer Response Percentage
I don't know 17 12 %
I seldom transfer internationally 36 25 %
No 3 2 %
Yes 86 61 %
7. How important is it that cross-border transaction fees are low?
Answer Response Percentage
Important, but not crucial 77 54 %
Indifferent 15 11 %
Not important 11 8 %
Very important 39 27 %
8. How important is the efficiency of transaction delivery in cross-border payments? (i.e., almost real-time transaction delivery as opposed to 2-3 business days)
Answer Response Percentage
Important, but not crucial 71 50 %
Indifferent 20 14 %
Not important 6 4 %
Very important 45 32 %
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9. If cross-border payments could be more efficient using blockchain technology, would you be more sceptical due to the technology behind it?
Answers Response Percentage
I don't care 9 6 %
I don't know what blockchain technology is 37 26 %
No 57 40 %
Yes 39 27 %
10. If yes, what is the reason?
Answer Response Percentage
Because the technology is quite new and I do not know much about it, which makes it hard to trust
1 2 %
High Security Level 1 2 %
I don`t know if it is safe 1 2 %
I dont know enough about blockchain tech 1 2 %
Immature technology (i.e. too early to know) 20 40 %
Implementation 1 2 %
It is only a news hype 1 2 %
The security behind is questionable 22 44 %
I know to little about the technology 1 2 %
I do not know 1 2 %
11. Would you consider switching bank if another bank offers a more efficient international payment process with lower or close to zero additional fees?
Answer Response Percentage
I don't know 45 32 %
No 57 40 %
Yes 40 28%
12. Do you use online banking or other digital banking products/services?
Answer Response Percentage
Both 8 6 %
No, I prefer interacting with the bank in person 3 2 %
Yes 131 92 %
13. Have you ever question the security of your banks product?
Answer Response Percentage
No 109 23 %
Yes 33 77 %
120 14. If yes, please specify how often?
Answer Response Percentage
Once a month 7 18 %
Once a week 4 10 %
Once a year 21 54 %
Once every half year 7 18%
15. If so, in relation to what product?
Answer Response Percentage
Insurance 2 5 %
International payments 4 10 %
Loan/mortgage 8 20 %
Retail payments 11 27 %
Savings (e.g. pension, real estate, education etc.) 12 29 % Trading platform (e.g. shares, funds etc.) 4 10%
16. Overall, are you satisfied with your bank and its services?
Answer Response Percentage
Dissatisfied 4 3 %
Neither satisfied nor dissatisfied 19 13 %
Satisfied 88 62 %
Very satisfied 31 22 %
Appendix B: Interview guide Strategy
- What is the bank’s current strategic position in relation to technology, and how does the bank position itself in the Norwegian market?
o What product strategy do the bank follow? E.g. Low-cost strategy, differentiation strategy etc.
- What is the bank’s long-term strategy in relation to innovation?
o Market leader, follower etc.
- How does the bank strategically determine product improvement?
- To what extent does the bank consider new market entrants, such as FinTech companies and non-banks, as a competitive threat?
121 Product Strategy - International Payments
- How do the bank value the importance of international payments as a product offering?
- What is the long-term strategy for the product?
Customer data and analytics
- How does the bank use customer information and data when undertaking strategic decisions regarding product offerings and strategic innovation?
- Which product does the banks think is the most preferred by its retail customers?
Blockchain technology
- What is the bank’s perspective on blockchain applications with regards to product efficiency?
- Which blockchain use-cases do they believe is the most prominent within financial services in terms of implementation?
- Would your bank utilise blockchain applications to improve international payments or other products if it is in line with customer demand? Why?
- How would you rate your bank’s security regarding its products? Could it be improved? If yes with blockchain or other innovations?
Appendix C: Overview of the Interview participants
Lars Madsen - IT architect within Digital Platform at Sparebanken Vest. Former Senior IT consultant at Sparebanken Vest. Education: BA in Computing Science, Management Science at University of Stirling. One year study in foundation business management at Norwegian Business School.
Thor R. Klevstuen - Business Developer Payments at SpareBank1. He has the responsibility for innovation and idea-work, coordination inside payment areas and other business analysis for payment solutions. Former experience as Head of Digital Accelerator and Business Developer in EVRY.
Education: BA at Molde University College, MSc in Economics at Norwegian Business School.
Jesper W. Hamann – Chief Consultant at Danske Bank with responsibility of personal banking, business development and products & pricing. Works primarily with payments and payment strategy (blockchain). Former experience as project manager, business developer and branch manager in Danske Bank. Education: HD Management and Organisation at Copenhagen Business School.
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Anders Ahlgren – Product Development Specialist at SEB. Deputy product manager for international/cross-border payments, SEPA payments and direct Debit. Former experience as Market Specialist at SEB, Securities Broker and Backoffice in Croztrade and Backoffice in E. Ôhman J:or Fondkomission AB.
Lasse Meholm – Head of Blockchain & DLT Strategy IT at DNB. He is a director in Seed Forum.
Former experience as IT business developer partner within digitalisation and wealth Management at DNB. He has been a member of the Blockchain team in Nordea in addition to Chief Expert in Nordea.
Education: BA in International Finance at the Norwegian Business School BI. BA in Software Engineer, Information Science at the Oslo and Akershus University of College of applied sciences.
Stig Gran – Manager within Cash Management Sales at Handelsbanken. Former experience as Senior Cash Manager Advisor at Handelsbanken, in addition to Liquidity Manager and Assistant Cash Manager at Telenor ASA. Education: BA in Bank and Finance. Certification within International Cash Management from the Association of Corporate Treasures. Master of Management Program and Project Management. Certificated Financial Analyst from the Norwegians Financial Analyst Association.
Appendix D: Interview transcriptions Transcription of interview with SEB Interviewee: Anders Ahlgren
Date: 01.03.2018
Time and duration: 11.00.am - 22.27 minutes
Interviewer: Since SEB only has private banking for families and private individuals in Norway, how do you characterise private customers?
Interviewee: Private individuals/retail customers are only in Sweden. In all countries we only have merchant banks or what we call corporate customer/corporate banking. We of course have, in Denmark and Norway as well, what we call wealth management (private banking), in which you have to have a certain amount of money/fortune. Wealth management more or less, that’s what we call it in Norway and Denmark. I don’t want to say that wealthy consumer are private individuals, but that is mainly what they are, because we have set a quite high cap for how much money you have to have to be a customer of SEB.
Strategy
Interviewer: What is SEB’s current strategic position, and how does the bank position itself in the Norwegian market? (Also in Sweden since you have your main customer base there in terms of private individuals).
Interviewee: In general, we have a vision to be the best world-class service provider for our customers, so wherever they want to be, we want to support them. We want to support entrepreneurial mind-sets and so forth, and help corporations achieve their goals. So what we do is that we try to base