18 October 2018
What did early adopter Nordea learn about opening up customer data?
Nordea was the first bank in the Nordics that stepped into the new world of Open Banking. The 200-year-old Nordic bank – which is headquartered in Finland since this month and has approximately eleven million customers – has been offering third parties access to real customer data since December 2017, after several pilot activities earlier that year. The result was an enormous amount of interest from external developers. Liisa Kanniainen, Senior Strategic Advisor at Nordea, explains why Nordea took the lead in the Open Banking era, why PSD2-compliance is not the only reason for change and how she and Nordea see the banking future.
More than 2.600 developers registered on the portal
“These changes don't happen overnight”, says Kanniainen about opening up customer data to third parties, “but Nordea wants to build more and more partnerships, for example with fintech companies. The main focus is to deliver value to our customers.” This is one of the reasons why the Nordic bank responded early to future developments such as the PSD2. The first step was taken in early 2017 when Nordea opened an Open Banking Portal with limited functionality that served as a pilot, as a first move towards a fully-functioning developer portal and community hub. Within 72 hours, more than 300 developers had already signed up. After 3 weeks and more than 700 registrations, the portal had to be closed because of the overwhelming interest. Kanniainen: “We had only hoped for this enthusiasm, to be honest.”
After this pilot, a fully functional developer portal went live in December 2017, where select third parties have access to customer data. More than 2.600 developers have registered on the portal. The apps that have already been created are now being tested, but not yet on the market, because the Regulatory Technical Standards (RTS), which are part of PSD2, still need to be examined and implemented. These standards are a set of criteria for the security of access to payment accounts.
PSD2-compliance is only one of the triggers
With so many contributions and apps in the making, it’s already a success according to Kanniainen. Especially because Nordea did not only open up their interface to adapt to the new requirements of PSD2 (EU legislation that allows third parties to access customer account-information) but also for other reasons. Kanniainen: “For us, PDS2-compliance was only one of the triggers. There is a radical shift in the world of payments underway. The rise of e-commerce and new technologies and the change of customer behavior, for example.”
The speed of the change was the reason why Nordea started working with a group of developers immediately after opening the pilot portal (early 2017). Not only to create new applications and apps, but also to exchange information. “This is a great opportunity for us to learn,” explains Kanniainen. “We don't see Open Banking and collaboration with fintech companies as a threat at all.”
Nordea soon saw that, by anticipating the developments of Open Banking at an early stage, they would take a head start in the future. The bank is now in the middle of changing its core banking system (CBS) and renewing the back-end. Kanniainen: “In the beginning it was not so much about creating products or channels, it’s more about embracing a new dynamic: one in which co-creation and customer needs are key. Together with fintech companies and other external developers, we aim to create new products and services for our customers at a faster pace than we could do by ourselves. Meanwhile, the customer keeps control over the data he or she wishes to expose and over the products he or she uses.”
Keep the options open for the unknown future
According to Kanniainen, the back-end simplification and collaboration with fintech companies is a proof that both the infrastructure and the mind-set of the bank is becoming very flexible. “The bank needs to be agile. That is the most important thing we have learned so far; we need to easily respond to future trends. During my career I have never seen before that the strategy of banks differs so much from each other. Some banks want to remain purely compliant, others explore new markets. So, nobody knows what the banking world will look like in three years, nor do we. Then it's better to be agile, so that you can respond quickly to new developments. This way, we keep our options open.”
One of the options could be platformisation, where a bank’s platform is used to distribute both bank and third party APIs. Another option is to create ecosystems, where parties can act in different roles to simplify service experience for the bank’s customers. “We can work together with various partners in this process. Let’s take an example: we already have a partnership with a fintech company with whom we offer a financial app. With this app a company or private individual can pay the salary of an employee within a minute via mobile payment. All side costs are automatically taken care of, for example the deduction of tax, because we work directly with the tax authorities through APIs. This way, we make life easier for our customers because we have the knowledge, act as a trusted partner and give advice.”
It is just one of the options, because as said, Nordea does not know exactly what the future will bring for banks. This is why Nordea is preparing itself as much as possible for the uncertain future. “I see it like this: if a storm is coming and everyone has to go through it, it's better to be the first to jump in, then you're still ahead of the rest”, Kanniainen refers to the Open Banking era. “We started learning early, we currently have a lot of interaction with our developer community. Some banks might be nervous about the future, but we have a different opinion: we find the future rather exciting.”
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