Located in Northern Europe, Norway is at a digital crossroad when it comes to finance. Like many of its Nordic neighbors, its people are rapidly adopting new ways to pay for everyday purchases at the local coffee shop and supermarket. Competition is heating up in the mobile payments space, with newcomers MobilePay and Vipps vying for the attention of Norwegian consumers. Also, Norway is home to payment innovators such as the startup Zwipe, which recently partnered with MasterCard to launch a credit card that features a built-in fingerprint scanner to add greater security for contactless card transactions.
How Banks Are Driving Digital Change
Banks in Norway have been leading the digital charge with their foray into the payments space. As previously mentioned, there is fierce competition between mobile payment platforms MobilePay and Vipps, and both of these services are spearheaded by major Norwegian banks, Danske Bank and DNB respectively.
Both MobilePay and Vipps are bank agnostic, allowing customers of any Norwegian bank to use them. After downloading the app, users need to link a payment card, bank account, Norwegian mobile number, and their national identity number to use the service.
“For the first time, Norwegian consumers will be able to pay for items with their mobile phone, irrespective of who they bank with and which smartphone they have,” said Danske Bank's Sten Vidar Ernestussen, who is leading the MobilePay launch in Norway.
However, not all parts of Norway’s financial system have been keeping up with the times.
Banks Have Fallen Behind with Key Infrastructure
Despite all of the progress that Norwegian banks are making with improving access to easier payments using mobile phones, there is still considerable work to be done behind the scenes to support these efforts. Ben Robinson, chief strategy and marketing officer at banking technology company Temenos, points out the need for change within banks.
“Banks can only provide the level of digital experience that the back office system enables,” said Robinson. “Providing the compelling, personalized digital experience that customers expect requires banks to have real-time capabilities such as offers and rich data where every transaction informs the next transaction.”
Like most of the industrialized world, Norway’s banks are lagging behind in terms of their IT infrastructure. Most Norwegian banks have relied on the same core IT platform for several decades. In 2011, a hardware problem with the banking system affected 200,000 transactions, impacting thousands of customers during the busy Easter shopping season. Another similar outage in 2013 resulted in one of Norway’s major banks to sever its long-standing business relationship with its service provider in favor of a different company.
What Lies Ahead for Norway’s Banks
After years of resistance to change, it appears that some banks are finally having a change of heart. Nordea, which operates in eight home markets including Norway, recently announced a partnership with Temenos and consulting firm Accenture to replace its core IT systems in order to ensure that it can meet the present and future needs of its 11 million clients.
“The migration to the new platform will be done gradually over the next four to five years,” said Jukka Salonen, head of group simplification at Nordea. “Along with simplified processes and products, the new platform will provide the framework for an end-to-end digital business model, improving our operational agility and delivering the benefits of scale.”
With a relatively small population of 5 million, banks in Norway can be very agile in terms of making changes. This being said, there will still be a considerable amount of work that lies ahead in order to fully modernize the antiquated systems currently in use. Nonetheless, as consumers demand continues the push for more efficient and personalized financial services, banks cannot afford to stick with the status quo any longer at the risk of losing customers to more digital offerings from their competitors.
What do you think is the best approach to bring banks into the digital age?