18 September 2019
Nordea was one of the first banks to open up to fintechs: ‘We treat developers as customers’
Nordea – the Finnish bank with more than 10 million customers – took the lead in the Open Banking era. They were one of the first banks to launch a fully functional development portal, which allowed third parties to have access to customer data. The portal went live in December 2017 and given the interest, it was an immediate success. Now, more than 4.500 fintechs are using the test environment (sandbox) in the portal. Liisa Kanniainen, Strategic Partner at Nordea, explains the challenges and learnings that Nordea encountered last year.
API and IT skills
It was a good time, says Kanniainen when she looks back at the past year. She phrases it this way: for Nordea it was a year in which 'lots of the basement has been cleaned'. By this, she means that the bank has been cleaning the infrastructure and legacy systems. This is necessary in order to be prepared for a future in which APIs will play a key role. Kanniainen: "For a successful future, we need to develop our API and IT skills and transform our infrastructure."
You could say that an important goal this year was acquiring knowledge. With more than 4.500 third parties using the sandbox, Nordea is now surrounded by an enormous amount of specific knowledge. And the bank takes advantage of this knowledge. "One of the most important lessons we learned when we started with the APIs was that we should see third party developers as customers. We asked them if they were happy with the way the APIs were designed and if they had any suggestions for changes. We thought we had opened the gates to the sandbox properly, but the response from third parties showed us that there was plenty of room for improvement. We modified our APIs after their feedback, and now our developer experience has been ranked as the best in class."
Piece of the pie
Kanniainen realizes that this way of thinking is completely new to banks. No bank treats third parties as customers, if only because at the same time they are competitors who are keen on market share. Fintechs also want a piece of the pie. Kanniainen: "We have to be realistic; third parties will actually claim a piece of the pie. To see them as customers may go a little far, but we have to go down this road to increase our skills around API-development. The future is machine to machine communication. The era of traditional banking is over, API banking is the future. It is time to improve our skills in order to become future-proof."
In this context, Kanniainen’s expectations for next year are not surprising. She thinks Nordea will improve efficiency across the entire infrastructure, and also simplify the back-end, with the goal of moving to a complete API architecture in the near future. Kanniainen: "We need to improve the granularity of the API’s, so it becomes easier to divide information among individual resources. We also want to create more capabilities and a perfectly functioning engine so we can offer data-driven services."
Nordea has also tried to link a business model to data sharing. "We are obliged to open up certain data without a business model. For the PSD2 APIs there is no compensation for the bank. However, we have also opened up non-PSD2 data through premium APIs. Fintechs and other customers can only receive this data for a fee. Real-time data reporting is an example of a premium API. Besides that, we also have partner APIs, which can be used by selected partners. Our collaboration with Finnair is an example of this: Finnair is accessing our APIs for card issuing. As a result, the customer will stay at Finnair’s front-end and will not be redirected to the back-end, which simplifies the customer experience."
According to Kanniainen, the contact with third parties is going well. Nordea is satisfied about the way that the bank is exchanging data for knowledge. "You can put it that way", says Kanniainen. "If you really look at the PSD2 market, you see only few licensed third parties so far, so the magnitude is not very big yet. This is the ideal time for banks to learn and upgrade their IT and API skills so that we can prepare for an API banking era. I expect that, in the future, banks themselves will become a platform or will join a platform. But in both situations, banks go from a solo game to an ecosystem game."
As said before, Kanniainen will focus on improving the IT and API infrastructure with Nordea in the near future. She realizes that this topic is not so exciting for the media and the general public, who are mainly looking for new technological solutions that will conquer the payment world. "What we are currently doing is often a little too technical for the general public, but it is a crucial step that we need to take. When the banks are fully future-proof, we can expect new and exciting developments again."
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