Weaknesses

Through thorough analysis, this master thesis has identified important weaknesses for the banks. By acknowledging their weaknesses, the banks can adjust their business model and make strategic choices to strengthen their weak-spots and thus approach the consequences of PSD2 by being proactive. The analysis reveals that the benefits of being a first-mover or fast-follower is very situational. It is not always necessary or beneficial to be the first-mover, but to survive the rapid competition it is crucial to avoid getting left behind. Competitors operates at a very fast pace, which highlights the importance of staying sharp and continuously adapt to changes in the market. The analysis has identified the most significant weaknesses to be the banks legacy, methodology, internal resources and that they have a lot of prestige at stake.

Legacy

To cope with the consequences of PSD2, it is compelling for the banks to handle their legacy.

The analysis revealed that except from Collector Bank, all the selected banks struggle with legacy and significant amounts of technical debt. Because traditional banks like DNB, Danske Bank and Nordea have existed for many years, the banks have extremely high technical debt and thus a lot of legacy. This is a weakness because these existing systems may not be compatible with technology in order to offer innovative solutions that relate to innovative systems. Thus, the legacy and technical debt makes it challenging for the banks to drive innovation at the same pace as TPPs such as Fintech companies or other start-ups because it requires more effort, time and money. However, the banks are constantly working to get rid of technical debt and to acquire newer coding technology, but it takes time. In addition, many banks will seek opportunities in partnership and collaborations with TPP, by outsourcing parts of their innovation process or retrieving TPP's technology solutions. In doing so, they must have platforms that accommodate TPP technology. However, if the banks' systems are too outdated and slow, it can be very challenging to plug TPP technology back onto the banks’

platform. In which makes it difficult to conduct collaboration between the parties.

Methodology

The second weakness identified within the bigger banks organization is the methodology. As determined in the analysis, all the selected banks are today characterized by the methodology of waterfalls. This kind of organizational structure creates hierarchy and inefficient allocation of employees, which results in slow decision-making processes in the bigger banks. In smaller banks like Collector Bank, such a methodology may be desired because as a smaller bank it has a smaller waterfall. However, in bigger banks like Danske Bank, DNB and Nordea the methodology of waterfall in innovation process involves many unnecessary steps. This is an inconvenience because the digitalization which led to PSD2 opens doors for companies that develop and launch products and services at an extremely fast pace. This means that processes within the payments service industry will evolve at higher pace once the implementation of PSD2 is completed. With the methodology of waterfalls, the internal innovation process in the bigger banks are at risk of being inhibited. To cope with this weakness, the banks must learn more effective and agile organizational models. That seems to be the only way to face the

Corporate Culture and Internal Resources

The third weakness identified in the analysis is the corporate culture and internal resources of the banks. Outsourcing of projects works if the project is time-limited, such as a system upgrade. However, with the implementation of PSD2 the focus should be on continually learning and the ability to quickly respond to changes in the industry, and this creates the need for having the right people with the right skills and experience internally. Furthermore, the culture of the selected banks is still characterized by leadership at the top and fear of failing. It is challenging to change a business model and mindset which have been well-implemented in the company culture for a really long time. In order to succeed with innovation, it must be allowed to make mistakes, as long as the employee learn from them. The management have to get rid of the fear to failure and dare to give responsibility further down in the hierarchy.

A lot of prestige at stake

The fourth identified weakness of the bigger banks is that they have a lot of prestige at stake and thus become risk-averse. Due to the methodology innovation processes costs a lot of time and money, and the risk is that the innovation gets killed in the process. This is because the banks fear they have too much to lose if they release incomplete services or products, both in prestige, resources and money. The banks must be willing to make tough choices. Hence, they must relinquish the prestige and this is closely connected with the corporate culture. The management must show willingness to sacrifice the income they have today in order to have resources to invest in new projects. Furthermore, the banks have to take the risk of investing heavily today in order to earn money in the long run. And lastly, the top management must be more open minded towards their employees. The employees must have the allowance to fail and learn from it without damaging their future career.