Nordic banks target SME customers with fintech services

Large Nordic banks are rapidly moving to a digital delivery model, with redundancies inevitable as they try to fend off smaller competitors – and the SME (small and medium-sized enterprise) business banking sector is becoming a key battleground.

Nordea, OP Financial Group, Danske Bank, Gjensidige, Swedbank, Tryg and DNB are all working on ambitious projects to develop and introduce higher levels of robot-automated customer services as they become more technology-focused to compete with emerging, non-traditional fintech (financial technology) competitors.

Many Nordic banks and financial groups have plans to expand their digital banking services. But shifting products online means some Nordic banks might need to reduce their workforces by thousands. Almost all of them are involved in advanced or preparatory talks with employee groups or unions in the financial sector. Job cuts will hit employees in traditional high-street branches the hardest.

OP Financial’s restructuring plan, which is focused on technology, cost reduction and improved productivity, will affect more than 6,000 employees. It aims to reduce the scale of projected redundancies by retraining and relocating staff to newly created positions.

“Like many banks, we must face the reality of change,” said Timo Ritakallio, OP Financial’s CEO. “We need to transform in a way that best serves the needs of our customers. The wider use of digital and artificial intelligence technologies will cause some job functions to become extinct or change substantially. That said, changing to a more technology-rich environment will also create a significant number of new opportunities.”

The advent of robotic consulting services is also helping to drive change, with many banks, online security brokers and pension fund management companies turning to robot technology specialists for cost-efficient customer service and product delivery.

But it is small Nordic online investment banks such as Avanza and Nordnet that are acting as a real catalyst for change by challenging the market dominance of the leading high-street banks.

Nordnet and Avanza have both been investing in machine learning technologies since 2016. This has resulted in the introduction of “robot advisers” to guide bank customers through the often complicated maze of savings and investment products.

In Sweden, the growing army of interactive robot advisers now includes the Avanza Auto, Nordea Nora, Nordnet Robosave and Sigmastock.

The niche Nordic online banks pose a very real threat to the traditional banks, who find themselves in a battle to retain customers and market share. New disrupters, such as Apple Pay and Google Pay, also pose a threat.

The main target for these challenger banks is to win more business from SMEs. 

Faced with this unprecedented competitive challenge, and fearing a migration of SME businesses to the generally lower-cost online banks, the big Nordic finance houses have now begun to form alliances with external fintech providers.

Swedbank has hired Asteria to develop specialised digital products and services that are customised for SMEs. The partnership is focused on delivering next-generation, simplified, cost-saving financial planning digital banking for small companies.

The Swedbank-Asteria alliance’s primary objective is to provide SMEs with advanced digital tools that enable them to take a “360-degree view” of their financial planning and business cycle processes, said Per Skargren, Swedbank’s head of segment management corporate.

“We want to develop digital solutions that target and fix many of our clients’ pain points,” he said. “These are solutions that can simultaneously remove time-consuming administration and enable companies to concentrate on their core business and growth.”