By Lars Sjögren, Global Head of Transaction Banking
Let us face it: Change is about to take place in the European financial sector.
In the years to come, European Union member states are required to carry out the intentions in the second payment services directive, PSD2.
For a bank such as Danske Bank, it means that we must allow other companies to access the account information of our customers. Naturally not without specific customer consent.
Perhaps even more wide-reaching, banks like Danske Bank will be required to allow other companies to initiate payments on behalf of our customers upon customers’ approval.
This is all part of the much bigger trend Open Banking, which goes further than the requirements set by lawmakers. In our view, Open Banking is about letting third parties build applications and services around the platforms of the financial institutions.
These changes are bound to bring new competitors to the table. Fintech companies may try to position themselves between banks and customers, offering for example analysis of customers’ spending behaviour.
This has led some industry analysts to predict that banks will suffer big time and no longer be relevant aside from providing the account infrastructure. However, this is not how we view the competitive landscape going forward.
Most importantly, some observers seem to fail to realise that the new rules will also provide Danske Bank with an array of exciting opportunities to not only stay but also become even more relevant to our customers.
Open Banking will enable Danske Bank to collaborate with fintechs and to integrate data from a number of additional sources with our own solutions, allowing for the creation of new products that will create even more customer value. It will also make it easier to reach new clients and new markets.
We see three reasons why partnering with fintechs and startups makes great sense:
- Startups and fintechs excel at focusing on customers in their work. They have no other goals than to look for pains or frictions that they could remove for customers.
- Their way of working is beneficial as they work with speed and continuous customer validation. Consequently, we are forced to become much more agile.
- They can help us build the long tail of solutions that we would not ourselves prioritise, but which will help our customers.
Altogether this will mean more innovation without increased spending, improved customer experiences, a broader reach and revenue from new business models and in the end higher growth among customers in our core markets.
Our customers must be and feel safe along the way. Of course, we are not going to let everyone onto our interface. As Danske Bank, we have a responsibility to make sure that whatever content made available to customers on our platforms has a high quality, is relevant and secure. And that customer data remains safe.
“Some observers seem to fail to realise that the new rules will also provide Danske Bank with an array of exciting opportunities.”
Lars Sjögren, Global Head of Transaction Banking
However, if a new fintech company or another type of player is better at providing some specialised type of service, we should welcome them. That is why we are also working actively to explore potential new partners to cooperate with in this field.
As part of this endeavour, we launched earlier this year a new Open Banking initiative, in which we invite innovators, fintechs and start-ups to co-create. You will find more information on this website.
We have already started. The power of PSD2 and Open Banking has manifested itself. Already two years ago we initiated the first projects aiming at providing new solutions to our customers.
It will be a more complex world. However, with our holistic offering and insight we believe that we will be able to help our customers in the de-bundled new world.
Going forward, we will pursue a case by case approach. When selecting where to begin, we will take customer needs as our starting point. In choosing new partners, we will look for the ones that also seek a type of cooperation that benefits both them, us and our customers.
Our approach will be explorative as we will adhere to the startup way of working: build, measure and learn. We would much rather launch a minimally viable product (MVP) to be adjusted according to customer needs than we would spend years developing products out of sync with customers.
It still remains to be seen how much of an impact Open Banking will have upon the industry, and it is likely to take some years before customers start noticing really.
However, Open Banking enables Danske Bank to develop new products that will be more relevant for customers, and consequently we see it as a huge opportunity.