The interview study results reveal that there is a lot of work to do to ensure that there is enough room for technical development in the banking and finance industry. The selected banks have different strategies, but both Nordea and DNB emphasize in building the right culture internally. This is done through their own internal initiatives like Nordea Accelerator and DNBs own internal digital lab. The similarity between these initiatives is that they aim to develop initiatives like lean start-up, design thinking and design sprint to drive the innovation work. As a digital bank, IT is the core of Collector Bank and the IT-department is the largest one in the bank. They have a slogan called “Believe in the idea”, which is incorporated in the company culture.
Deloitte states that the key for the banks is to give as much responsibility as possible down the organization and changing the organization’s risk profile, and that this is one of the greatest challenges the banks face today. Furthermore, the consultancy company stress the fact that innovation is not equal creativity. It is not about providing the most creative ideas, but the ability to implement and execute on it. This means that in order to ensure that there is enough room for technical development in the bank, the bank must also make sure that there is room for agility.
All the interview participants are concerned about the structure of the decision-making process is the banks. The interview study results identify an industry struggling with old-fashioned organizational culture based on leadership at the top. Compared to TPPs the banks possess strict internal hierarchies, which makes the banks decision-making processes way too slow.All the banks approach this issue through restructuring into smaller teams. Through this strategy they aim to push the decision-making power further down the organization and thus become more agile and efficient.
The interviews reveal that all the banks are characterized by a project-based allocation of people.Thus, the banks assign employees to various projects in the very beginning of the year, in which the employee work on the project throughout its lifetime. This classic waterfall model has been successful until now because it makes the employees well prepared for relevant projects, but with the digital transformation of the banking industry, it is no longer sufficient. The banks seem to be well aware of this issue, and aims to change toward a more agile setup. This is closely connected to what can be defined as the banks biggest challenge, namely the struggle of heavy and slow processes. These slow processes are caused by both inefficient allocation of internal resources and the technical architecture of the traditional banks.
During the interview study, it became clear that the banks have different approaches to handling their technical architectures. All the banks have acknowledged that they have to change or adjust their technical architecture in order to meet the challenges of digital
competition in the future. However, their strategic approaches differ. Nordea are doing a great update of the entire core system, which means they will change their entire platform. It
involves complicated processes and extremely high costs. Until now, no banks have found it profitable to make the investment of changing their entire system. Danske Bank and DNB are too concerned whether such a huge investment will be worth it in the long run and states that their approach is upgrading their current IT-systems. DNB will do so bit by bit, and thus aim to pack the old systems in such a way that it will be possible to change it in the long run.
Danske bank has a similar approach, where they intend to build on and modernize the existing platform with APIs.
The biggest challenge identified through the interviews are the legacy and technical debt traditional banks have to cope with. Collector Bank was founded in 1999 and thus has less legacy and technical debt than DNB, Danske Bank and Nordea. Collector Bank have from the beginning focused on being an innovative bank and thus have systems that are up-to-date and less technical debt. Traditional banks have extremely high technical debt because they have existed for many years and thus have old and outdated solutions. Auka highlights this issue because existing solutions may not be compatible with technology needed to offer innovative solutions that relate to innovative systems.
The data collected from the interview study announce that the most important strength of the big, traditional banks is the customer base they possess. Due to huge customer bases, these banks possess enormous amount of data. Indeed, they possess extremely valuable information about their customers that can be used to create other services tailored to their needs.
Furthermore, both Danske Bank, Nordea and Collector Bank address the value of one
platform across the Nordics. Even though the platforms are outdated in some areas, the banks states that this is a strength that brings them closer to their customers and potential partners.
All the banks states that it is difficult to predict which business areas that will be most exposed for increased competition in the future. However, there is consensus to the probability of everything in banking which involves transactional services, as well as payments solutions, which involves currency and interests, will be affected. In addition, the banks believe classic services like loan and deposits will be exposed for increased
competition. However, despite the increasing competition, none of the banks plan to change their strategy or pull out of certain business areas.
The interview study results reveal that all parties which participated in the interviews believes the implementation of PSD2 will contribute to fundamental changes in the financial sector and future of banks. Danske Bank believes that the future of bank will be affected by the combination of new technologies and that the industry is becoming increasingly digitized will affect the perception of bank. Collector Bank emphasize that competition and innovation will result in customers becoming indifferent between whether a bank or non-bank handle their finances. Furthermore, Collector Bank believes that there will be fewer, but larger, banks in the market. DNB believes that the banking brand will survive for a long time, but that there will be more collaboration with players outside the banking industry. DNB states that in addition to a reduced staff, there will also be quite different types of people because everything will be about data and technology programs.