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Innovation – Finance – Technology
Greatness requires focus
By Christoffer O. Hernæs
October 23, 2017 0 Comments Banking, Fintech
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Ever since I started analyzing how technology and new business models would significantly impact financial services, I’ve been eager to put that knowledge into action. Now that I’m in position that enables me to do that I need to focus mye time accordingly.
In my time focusing on fintech I have transitioned from a management consultant, to VP of innovation of strategy at SpareBank 1 to now been responsible for business development, innovation and IT as Chief Digital Officer at Skandiabanken. Going forward my focus will be:
Attract, recruit and retain top digital talent. A vital component to survive in a digital age, is having the right competence. According to a survey conducted by CapGemini, 90 percent of responding companies were lacking necessary digital skills. We are already well positioned, but we are seeking to strengthen ourselves across all areas, and we are actively looking for the best digital comptence. In short: We are hiring!
Open banking will define the financial service industry in the future, and we will do our part. This development emerges out of a perfect storm of shifting customer behavior, regulatory changes, the threat from digital ecosystems such as Google, Apple, Facebook and Amazon, and the quest for new business models are driving banks towards the inevitability of open banking or banking as a platform. APIs are at the heart of open banking. If executed correctly propose to increase innovation, foster collaboration, extend customer reach and lower costs compared to existing legacy systems. Key concepts in open banking is to use open source technologies to enable third-party developers to build financial applications on top of the banks’ existing infrastructure as well as integrating third party data in the digital services available at the bank.
At Skandiabanken we are exploring both ends of the scale. When we allowed our customers to integrate their cryptocurrency holdings through Coinbase to our online banking platform, it was to take the first step towards exposing third party data in the digital banking experience. Soon we will launch our developer portal at https://utvikler.skandiabanken.no/, where customers can develop their own front-end applications based on their own data. Make sure to sign up to get early access.
Democratizing wealth creation. Through our stake in Quantfolio we aim to build and launch the frst and leading robo advisory platform in Norway, while at the same time leverage this success story to accelerate Quantfolio as the leading vendor of turnkey AI investments components for banks and wealth managers across Europe. Through machine learning algorithms, Quantfolios solution provide automated, sophisticated AI advice to a wide range of banking customers. As chair of the board in Quantfolio I look forward to participate in this journey. Download our savings app to get access to our robo advisor as soon as it launches.
SMEs have long been an underserved segment, lacking good digital solutions, access to capital and attention from banks. In the second quarter of 2018, Skandiabanken will exoand our reach to launch a digital only offering for SMEs of the future. Make sure to sign up to get early access here.
The landscape for payments is constantly evolving. In order to base decisions on facts and qualified assumptions, it is important to have a map that matches the terrain. Will the endgame be a fragmentation or a consolidation? How and when will non-banking players enter the playing field, and what is the end game for payments? From a banking perspective, payments is a central component in the customer relationship, where a significant share of the customer interaction is through payments and transactions.
A core banking solution rigged for the future is crucial to stay competitive in a digital banking world. Utilizing a cost efficient national digital infrastructure and standard solutions for commoditized areas is key to keeping IT cost low. This requires a constant focus on re-evaluating previous strategic choices as yesterday’s differentiator is the commodity of tomorrow. In addition to scale and cost efficiency, it is equally important to maintain a flexible architecture that acts as a catalyst for innovation and enables short time to market for new solutions and services.
Compliance. You cannot work in a bank without dealing with compliance. With PSD2, banks are required to open up their infrastructure. In short, the directive states that banks need to offer payment APIs to third party-providers of financial services, also known as TPPs (Third Party Provider) under the XS2A (Access to account) rule.
Pursuing a traditional compliance approach to PSD2 sets banks at risk of becoming mere utilities, while ownership of the customer relationship shifts to third parties. PSD2 is also expected to increase IT cost as well as reduce retail payment revenues. Despite the concerns, PSD2 acts as a catalyst for open banking, and should be viewed as an opportunity for incumbents.
The wealth and asset management space in Norway will soon have to adopt to MifID II and Retail Distribution Review (RDR). Key takeaways from the UK market shows that the implementation of RDR has led to an advisory gap, leaving 5,5 million banking customer “underadvised”. This strongly favors self-service platforms and players such as Nutmeg has seem tremendous growth following the implementation of RDR in 2013.
GDPR is set to come into effect sometime in 2018 and require all organizations in the EU to comply to strict guidelines when it comes to consumer data and privacy. The rules will strengthen individuals’ property rights over their own data, and hold businesses accountable for the use of data so that digital solutions are designed with privacy as a integral principle. Among the requirements is the “right to be forgotten” – where users always have the right to withdraw his or hers consent to use personal data, and data portability – where the user can export and transfer their data to alternative suppliers of choice. If not compliant to this regulation, companies risk to be faced with fines by up to four percent of a company’s global revenues.
These regulations are set to change the prerequisites for digital banking. At the same time, technology offers new possibilities to stay compliant in areas like AML that previously required a great deal of manual work.
Fintech cluster. Last week we recieved the official news that Finance Innovation is acknwlodged as Norways first industry cluster for fintech. The cluster will act as a catalyst to launch new initiatives in research, education, innovation infrastructure and internationalization, and is the result of a joint effort between more than 20 banks and tech companies in Bergen that have aligned to create a fintech hub to push a global innovation agenda amid growing collaboration between banks and startups in Norway.
These are just some of the areas that take up my time and attention these days. Being a listed company in a competitive environment, I can unfortunately only share what is already official information or insight based on public available sources.
With this in mind, even I have to acknowledge my own limitations and focus my time going forward. As a result I will reduce the frequency and predictability of my blog posts. I will still share my insights and opinions on my blog, but not as often and not as predictable. Make sure to subscribe to my updates in order to get the latest news when I find the time to post news.
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This is the personal blog of Christoffer O. Hernæs. Passionate about innovation and digital disruption. Currently focusing on digital transformation of financial services and fintech.
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