The Nordics have the potential to become the most successful open banking market in Europe thanks to the region’s highly digital society and quick adoption of new technologies, according to a report launched today by open banking platform Nordic API Gateway. But how is the Nordic region driving new opportunities across industries and leading the changes with open banking? How have businesses leveraged open banking to create value and meaningful products? And are there any further learnings here for other European regions?

The report includes new research, conducted in January 2020, which found that in less than six months since the final deadline of the EU’s Revised Payment Services Directive (PSD2), more than half (53%) of those interviewed have invested in new technology and infrastructure, and 50% have already developed new products and services, indicating the speed of adoption across the Nordics.

The research, which was conducted with more than 100 decision-makers in financial institutions, accounting providers and Fintechs^[1] across Denmark, Sweden, Norway and Finland, was designed to uncover the region’s opinion, progress, challenges and growth opportunities since the final deadline of the EU Directive.

The EU Directive is aimed at creating a level playing field regarding payment services across Europe in order to increase competition, innovation and efficiency in the market, driving a revolution in financial products and services for the benefit of consumers and businesses.

According to the research findings, nearly three quarters (58%) of respondents felt the new legislation is already having a positive impact on the region’s economy, and 83% saw it as an opportunity for their business. Nearly half (45%) suggested that consumers will be the biggest beneficiaries alongside FinTechs (24%), with the latter particularly being championed by the larger financial institutions to succeed in this new era.

Even with territories such as the UK progressing well with their development of open banking-inspired interfaces, 64% of organisations in the Nordics believe the region is not behind its European counterparts when it comes to innovation around financial products and services, which according to Rune Mai, CEO of Nordic API Gateway, is down to the region’s perfect fit for open banking.

He comments: “The Nordics have adapted to open banking quickly and this can be attributed to a number of things; the region is already digitally advanced, there’s a real desire from the banks to be open in order for progress to be made, and unlike many parts of Europe, the Nordics very much take a collaborative and thorough approach, which all contribute to creating the perfect environment for open banking innovation.

“The arrival of open banking has signalled the beginning of the biggest transition in financial data rights across the EU, and a new era of innovation. These sorts of directives don’t just seamlessly integrate into day-to-day operations without significant process changes, so it’s extremely positive to see that rather than just ensuring their organisations are compliant, organisations in the Nordics have already developed interfaces that work well and can be used by both consumers and businesses.”

While 51% of those interviewed stated that they had already implemented changes to their business and/or product strategy (this was significantly higher with the banks at 72%), a third (36%) suggested they still hadn’t made any kind of changes presented to them, and 40% stated that the development of new products and services would have the biggest impact on business performance.

Rune Mai believes that more changes will be made as a result of the current Covid-19 pandemic. He adds, “The social implications caused by Coronavirus have accelerated the shift towards being more digital focused and encouraged more consumers and businesses to seek open banking solutions. We expect to see this continue as more financial institutions concentrate on the digital transformation of products and services which assist the customers’ changing situations.”

Almost 4 in 10 (38%) agree that their organisation found responding to open banking legislation a challenge, with nearly half (46%) challenged by a lack of resource to build new solutions, and 38% finding difficulty in incorporating open banking solutions into their current offer.

Rune Mai continues: “We are building the foundation of a new world; the Nordics are moving at a good pace in response to the new Directive but this first twelve months will see most of the movement taking place in the background – becoming compliant, understanding the opportunities, building teams to respond, automating processes, developing interfaces, and providing account aggregation externally as a minimum. But again, these challenges can all be overcome with the right collaboration.”

The research found that there is little doubt amongst those interviewed that financial institutions opening their payment infrastructure and customer data to third parties will change the business landscape in the Nordics; nine in ten (90%) expect more tech-start-ups, 79% believe there will be an increase in AI technology, 88% expect a natural increase in competition in the market and 82% expect an increased pressure on customer service.

“To make the progress we know this market is capable of we need a change of mindset to become a digital-first industry”, continues Rune Mai. “Only then will we truly understand how to create convenience in both the lives of businesses and consumers – the FinTechs are naturally set-up this way but the rest of industry needs to follow suit. And digital-first doesn’t mean building a brand-new mobile banking business, but more building cleverly on what we have already with the right technological solutions.

“The arrival of PSD2 and open banking should be viewed as a gateway to growth. The opportunities are clear for developing a more customer-centric and innovative offering, not just an operational necessity. We need to be all in and developing this market together – it has the biggest implications for progression than any other regulation regarding financial data.

“We should be under no illusion, it’s not easy to be build these open banking interfaces, but the region has learnt a great deal through the collaboration that’s already taken place, and that’s something we will be exporting to the rest of Europe as the market matures, positioning the Nordics as at the forefront of this digital movement.”

For further detail on the findings of the research, please click here to download a full copy of the report.