Vision for banking: How will changes to retail banking impact Nordic financial services?

Our research into 600 technology and banking leaders reveals the decade ahead could see retail banking break away decisively from the certainties and assumptions of the past.

Innovate with technology to keep the pace

Nordic leaders trust traditional banks, with 85 percent of those we spoke to believing traditional banks will maintain or increase presence in the industry. At the same time, leaders consider technology firms a threat to the dominance of traditional banks. At least two-thirds of leaders agreed traditional banks risk losing market share unless they keep the pace of tech innovations seen in other types of organisations.

Currently, the three most common technology investment areas for banks are apps, fraud and security systems, and cyber security. And half of the Nordic leaders involved in our research believe technology and Artificial Intelligence (AI) will play a greater role in the operation of banks in the next five years. So, it’s noteworthy that only a small minority of Nordic organisations currently invest in AI, cloud, and big data technologies.

Create frictionless experiences to improve customer outcomes

Delivering good outcomes for customers is viewed as the most important factor in financial services business strategies over the next five years. To deliver this for customers, technological solutions are considered a necessity, with more than 50 percent of Nordic countries prioritising creating frictionless, automated digital experiences for the customer over human connection. But they agreed as online banking becomes more predominant, there is a risk of digital disengagement amongst non-tech-savvy customers.

Despite customer trust being high for both traditional banks and new entry financial services organisations including BigTechs and FinTechs, it’s thought this trust varies across different groups. The younger generations typically believe in new ways of delivering financial services, for instance, through proactive use of technology. Older generations, on the other hand, generally hold a greater trust in traditional banks due to their established presence in the market. The implementation of technological solutions when interacting with customers puts organisations at risk of excluding certain groups. For example, non tech-savvy customers such as the elderly without smart phones may struggle to perform banking operations such as bank transfers as branches close. Similarly, the visually impaired population may find text size or contrasts a challenge when navigating digital banking applications.

Advanced data management requires new regulations

It’s expected that data management will become a greater priority alongside the rise in tech innovations. More than half of our research respondents across the Nordics agree that customers are increasingly concerned with how their data is being used as banking technology becomes more advanced.

New regulation needs to be implemented to reflect how banks are using technology and data. Increased regulation that protects customers and their assets is considered a necessity as organisations innovate and implement new technological systems.

Societal and climate impact

Leaders across the Nordics generally agree on the importance of green financing to support sustainable investments and providing data on the sustainability of the financial services industry. Norwegian and Danish respondents ranked green financing as the most impactful way the financial services industry can address climate change. However, Swedish leaders ranked partnership with tech companies as the most impactful way.

Most leaders expressed however, they do not think customers care about how their finances impact global sustainability. Less than a third believe customers consider a financial services provider’s commitment to sustainability before joining or switching from another provider.

Nordic leaders also agree, less than those from the UK and the Netherlands, on the following statements on the financial services industry’s purpose:

• Financial services companies have the power to shape a resilient future by helping people manage their finances more sustainably
• I believe that the financial services sector can have a positive impact on achieving global sustainability targets
• I believe that my organisation can have a positive impact on achieving global sustainability targets.

And less than half of Swedish respondents agreed with the above statements. Banks’ approaches to sustainability may serve as a differentiator in the market. While leaders believe that the financial services industry can have a positive impact on addressing climate change, the ways retail banks will embed sustainability concerns will likely materialise differently, and customer groups will identify stronger with some retail banks than others.

Maintaining equilibrium is key to driving growth

Nordic retail banks will continue to invest in technology to maintain their relative dominance. However, the areas of investment may shift based on changing priorities and competitive dynamics. As Nordic banks invest in digital and frictionless user journeys, they may need to reconsider the balance between online self-service solutions and human connection to reduce the risk of exclusion.

Another consideration that needs to be carefully monitored is the potential trade-off between increased personalisation of services and customers’ concerns about personal data use.

In conclusion, Nordic banks are strongly positioned to retain their dominance in the financial services market. However, as their BigTech and FinTech rivals continuously innovate to capture the most attractive areas of the financial services industry, banks must keep the pace of new innovations and customer expectations.