DNB Open Banking - Nordic Finance Innovation
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This document provides an overview of Christian Løverås and his work leading Nordic Finance Innovation and Open Banking initiatives at DNB bank. It discusses the opportunities and challenges of PSD2 regulations, and how DNB is setting up programs and partnerships to take advantage of open banking through their new business unit and developer portal while also addressing threats from new fintech competitors.
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DNB Open Banking - Nordic Finance Innovation
- 1. Christian Løverås Nordic Finance Innovation February 1, 2018 Open Banking
- 2. ▪ Christian Løverås (1972) ▪ Computer science at the University of Oslo ▪ 20+ years of digital transformation ▪ 10 years developing software for the media industry ▪ Co-founded 4-5 companies, 3 (successful) exits ▪ 2 years in DNB ▪ Innovation ▪ Partnerships ▪ Startups ▪ Accelerator ▪ Open Banking Hello!
- 3. It’s not about everybody making banks It’s about making banking available outside of the banks
- 4. Norway’s Largest Financial Services Group DNB
- 5. ▪ Founded in 1822 ▪ ~10,000 employees ▪ Offices in 16 countries ▪ Around 90 legal entities ▪ 34 % retail market share ▪ 34 % owned by the Norwegian government ▪ The world’s 313th largest bank DNB
- 7. The EU Made Us Do It PSD2
- 8. 130,000,000,000 € Photo: The Bretton Woods Project >1% of EU’s BNP, per year
- 9. Cut costs Increase safety More innovation
- 10. PSD2: It’s Not For The Banks Acme Open Banking Acme Acme
- 11. Legislation Will Take Time RTS SCA-hearing and handling RTS SCA in effect in the EU and Norway Both PSD2 and RTS in effect in the EU and Norway PSD2 in effect in Norway and the EU 13.01: PSD2 in effect in EU Legal vacuum in the EU 2016 Hearing “finansavtalelov” Hearings and changes to Norwegian law Process in the EU Process in Norway Implications Guidance for this period will be provided 2017 2018 2019 PSD2 decided in EU, with 24 months to effectuate Partly ready - some technical details not ready Legal vacuum 1 in Norway Legal vacuum 2 in Norway RTS SCA decided, with 18 months to effectuate PSD2 in effect in national legislation in the EU member countries PSD2 in effect in national legislation in Norway New RTS SCA hearing Thanks, PWC! Rune Strømsnes and Lars Erik Fjørtoft
- 12. • If you do less, you will get in trouble with the EU • PSD2 is just a small start of Open Banking • A great opportunity for DNB • … aaand a threat • But mostly an opportunity • DNB is taking this very seriously PSD2: The Bare Minimum
- 13. New Business Unit Personal Banking Corporate Banking Large Corporates and International Markets New Business
- 14. 70 Data (25) Payments (15-20) Partnerships and New Ideas (5) New Tech Lab (8) Open Banking (8-16)
- 15. ▪ DNB is “Bank A-Å” (11.5 % better than A-Z) ▪ DNB will offer more than A-B as APIs ▪ A complete development platform for DNB’s services ▪ Probably not the same that we have today ▪ Also services from others ▪ PSD2 TPPs: A new type of customer ▪ Requires a different type of support ▪ Continuous Improvement, Continuous Deployment ▪ Software (API) lifecycle management ▪ Banks are becoming distributors of financial services through software DNB Open Banking
- 16. And Big Players New Players
- 20. GAFA Advantages Better data Superior user experience Customer loyalty
- 21. 21
- 24. A Few Examples Things Happen Quickly
- 26. ▪ World’s largest fund ▪ Launched in 2013, by a tech company Ant Financial: Yu’e Bao
- 27. Amazon
- 28. What Can We Do? What Now?
- 29. • New competitors, new tech, demanding customers • Scale through partnerships • Contribute to an eco-system • Build a platform • We want to work together with the people with the best ideas DNB Will Not Have All The Good Ideas
- 30. Death by a Thousand Fintechs HSBC Wells Fargo 🔪
- 32. 10% Group Revenue At Risk (585M€)
- 33. ▪ Borderless credit card ▪ Spend in 28 local currencies ▪ Foreign accounts are difficult ▪ Proof of address, etc ▪ Open an account in minutes ▪ Ideal when living or working across countries Transferwise MasterCard
- 34. ▪ Account aggregation ▪ 200 European financial institutions ▪ Payment initiation ▪ PFM ▪ Tink ▪ Grip (ABN Amro) ▪ Product recommendations ▪ Including on-boarding (KYC/AML) ▪ Move your mortgage in 5 minutes Tink
- 35. ▪ Integrate with bank infrastructure at 9,600 financial institutions ▪ Authentication (no BankID in the US) ▪ Validate income (no Skatteetaten API) ▪ Customers: Plaid
- 36. ▪ Aggregates financial data from 13,000 financial institutions ▪ Customers: Quovo
- 37. ▪ Founded in 2005 ▪ 60 M customers ▪ 18 markets ▪ 70 k merchants ▪ 476 M € purchased ▪ SKU-level details ▪ Banking license ▪ “One of Europe’s largest banks” Klarna
- 38. ▪ It may be a good strategy ▪ But! ▪ Initiatives must be started, because there is no time to catch up later What To Do? Wait and see?
- 46. (On Someone Else’s Computer) DNB In The Cloud ⛅️
- 49. All photos: James Ball, DOCUBYTE, docubyte.com
- 52. APIs
- 54. The Golden Rule of Platforms “Eat Your Own Dogfood” can be rephrased as: “Start with a Platform, and Then Use it for Everything." Steve Yegget
- 55. Open Banking = Free Banking? How will DNB make money?
- 56. ▪ Visiting a DNB branch has always been free ▪ (If you can find one: We have closed 129 branches the last 3 years, only 59 left) ▪ The same services are still profitable when offered through APIs ▪ Loans, insurance, etc Free Entrance
- 57. Typical API Business Models APIs Free Developer pays Developer gets paid Indirect
- 58. APIs Free Developer pays Developer gets paid Indirect Pay as you go Tiered Freemium Unit-based Transaction based Revenue share Affiliate Sign-up referral CPC CPA One timer Recurring Affiliate Consumer facing Public web Mobile/ Device Content acquisition Included Upsell Content syndication SOA+ Web/Mobile SaaS Internal facing Hanna Trygve Martin
- 75. What Do You Need? New Services
- 76. DNB is so complex that only customers see the whole picture
- 78. ▪ Monitor “extreme weather” alerts ▪ Alert local handyperson ▪ Use IoT sensors to monitor frost ▪ Turn on heat when needed ▪ More IoT: Fire, water, movements, .. ▪ Automatically lock the “smart lock” when away ▪ Automate (AirBnB) rental ▪ Advertise house for when owner is away ▪ Notify local housekeeping person ▪ Something else? ▪ How can DNB help make it easier for the owner? APIs for Holiday Homes
- 79. 79 ▪ Report accident: Police and insurance company ▪ A facade for third party APIs? ▪ Order a taxi to the current location ▪ Find the nearest car towing service ▪ GET /insurance/car/towingservice/{latitude}/{longditude} ▪ Something else? ▪ How can DNB make it easier to develop new services? APIs for Car Insurance
- 82. ▪ DNB’s internal services have been fully digitised ▪ Risk scoring, etc ▪ We also use APIs from Altinn and Kartverket ▪ Salary ▪ Tax ▪ Property information ▪ Two years work, lots of people ▪ No humans involved in the process ▪ Banks in other countries don’t believe us ▪ Will DNB offer (parts of) this process to others? ▪ “Risk scoring as a service”? ▪ “Mortgage as a service”? Fully Automated Mortgage Process
Editor's Notes
- Many similar challenges in media and finance: New technology Demanding customers (used to world-class digital services) New competition
- Open Banking: What is it all about?
- First: A quick presentation of DNB
- DNB IR: https://www.ir.dnb.no/ DNB rank: https://www.forbes.com/companies/dnb/ Norges Bank statistics: https://static.norges-bank.no/contentassets/b633cbc4154540abab705d622eefe52f/nb_memo_2_2017.pdf?v=05/16/2017163134&ft=.pdf
- 96 % of Norwegians are on the internet 91 % use online banking services 6 % of payments are with cash
- EU’s fragemented payment systems are very expensive. The estimated savings from PSD2 is 130 Billion Euro - per year Number: Antonio Tajani, member and president of the EU Parliament "Currently each Member State has its own rules on payments, and the annual cost of making payments through these fragmented systems is as much as 2-3% of GDP. Payment service providers are effectively blocked from competing and offering their services throughout the EU. Removal of these barriers could save the EU economy €28 billion per year overall.” https://worldline.com/en/home/blog/2017/july/psd2-what-behind.html
- PSD2 goals
- This is from a bank’s developer portal It’s a nice internal pep-talk, but not the most important topics for people outside of the bank
- Nobody knows when PSD2 will take effect in Norway “Sometime in 2019, or maybe 2020” is a good estimate
- If you just do the PSD2 minimum compliance: Good luck. Opportunity: Because DNB can now create services for non-DNB customers, and together with others Threat: DNB will not always have the best service. We will lose market share, but in a bigger market
- DNB has several business units The largest are: PM, BM, LCI, Markets We now have a new one, which we have decided to call .. New Business
- We will soon be 70 people Data: Data Architecture, commercialising data, data governance, master data management Payments: Strategic across DNB, develop infrastructure, biz dev, make transaction data available Open Banking: APIs, development, product ownership, biz dev Partnerships and New Ideas: Strategic partnerships, Accelerator, CVC New Tech Lab: Explore new technology that may be useful for DNB
- The largest banks in Norway
- The largest banks in Europe Tough competition, more with PSD2
- GAFA! Maybe these are DNB’s real competitors?
- Click “Like” on 150 things, and Facebook knows more about you than your partner World-class customer experiences Do you switch from Google or Amazon to something else?
- Smaller companies are also interesting. Basic services done very well. Minimum Lovable Product. Waiting lists. (Who has one of these cards, or both?) Curve: Virtual card, representing other cards. Choose the current card in the app. Revolut: Prepaid MasterCard. Just launched on-demand travel insurance based on phones location. Both have nice apps, with real-time transactions.
- Curve integrates with Xero to do your expenses automatically.
- Revolut travel insurance, just when you need it.
- An examnple from another industry: Transportation. NYC taxi medallion: Almost like gold. You could take out a mortgage on it Until! https://nycitycab.com/Business/TaxiMedallionList.aspx: 250,000 Photo: http://nordic.businessinsider.com/nyc-yellow-cab-medallion-prices-falling-further-2016-10?r=US&IR=T
- https://www.ft.com/content/28d4e100-2a6d-11e7-bc4b-5528796fe35c “Yu’e Bao, which means “leftover treasures” because it was originally promoted as a way to invest money left over from online payments, now has more than 260 million users. The vast majority of Yu’e Bao users are under the age of 30.” http://supchina.com/2017/04/28/alibabas-yue-bao-becomes-worlds-largest-money-market-fund-china-business-technology-news-april-28-2017/ http://www.ibtimes.com/alibabas-online-money-market-fund-yue-bao-8-things-you-need-know-1560601
- Loans: $1,000-750,000 for up to 12 months Pre-qualified, based on platform data Amazon Capital Services: Amazon Lending 3 B USD since 2011
- For every bank’s service, there is a competitor with laser focus on just that
- Here’s one example Does anyone remember the leaked internal memo from Santander? April last year. Revealed some very nice margins. https://www.theguardian.com/money/2017/apr/08/leaked-santander-international-money-transfers-transferwise
- One “fintech”, 10 % of group revenue at risk. 585 million € https://www.theguardian.com/money/2017/apr/08/leaked-santander-international-money-transfers-transferwise
- Now Transferwise is launching borderless credit card Only 1000 cards so far How much revenue is a stake? https://techcrunch.com/2018/01/08/transferwise-card/
- 20 M SEK mortgages moved with app: Unable to verify!
- Plaid is another aggregator
- Quovo is another What will this mean for banks?
- Banks: “Some company offering delayed payment online? Not a threat.” Claims to be one of Europe’s largest banks (number of customers?)
- So what does DNB do? Several things. Digital Challenge is one.
- Digital Challenge: A weekend of hard work! 200 students in 5 cities (Oslo, Bergen, Trondheim, London Mostly for recruiting, but many good ideas too
- NXT Accelerator, with StartupLab 3 months program, 1,3 MNOK funding DNB only contributes expertise and time. No money, no obligations in any way. 2017: An experiment 109 applicants, 5 companies selected. Goal: 1 win-win result, and we got 4 out of 5 2018: We know it works, so now we are investing more into it Deadline yesterday (Jan 31)
- DNB’s Facebook Messenger chatbot is powered by Convertelligence, on of the accelerator startups. Will try a video.
- DNB’s Facebook Messenger chatbot is powered by Convertelligence, on of the accelerator startups.
- FundingPartner is one of the companies: Equity crowdfunding. Hoping to get their license this month.
- DNB Venture: 250 MNOK to invest in startups. https://shifter.no/dnb-venture-investere-250-millioner-startups-selskapene-pa-utkikk/
- To make it possible to speed up innovation, experiments and partnerships, DNB is moving to the cloud.
- DNB has code in production that was written in the 80’s. And we have many old computers. Here are two of them. Left: VISA cards Right: MasterCards
- Some of our old computers are small and cute.
- Others are larger, and stranger.
- We are still using our old computers, but we are also building a whole new infrastructure in on someone else’s computer: Amazon Web Services.
- There are a lot of AWS products available The typical benefits of: Flexibility Pay for what you use Scaling Security Integrations Updates New functionality
- Build a new platform on AWS Hide the internal complexity. Make services available through APIs
- DNB’s first cloud-based service was Vipps. Using Microsoft Azure, not AWS. Vipps is now a separate company, and have moved out of the DNB buildings
- https://plus.google.com/+RipRowan/posts/eVeouesvaVX
- Running a branch is not free, neither is running a development platform. You don’t have to charge for the API itself. Picture: https://www.bergensentrum.no/bilder/121119-DNB-T2-1ETG-007-1024x576.jpg
- Some companies make most of revenue through APIs: - Salesforce: 50 % eBay: 60 % Expedia: 90 % https://hbr.org/2015/01/the-strategic-value-of-apis Thanks to Hanna, Trygve and Martin for this overview CPC: Cost per Click CPA: Cost per Action
- From: Creating products and solutions inside DNB To: Inviting to conversations and collaborations with others Outside-in: What do you need? DNB want to contribute to, and be part of, an eco-system We realise that not everybody wants to build a new bank
- From: Creating products and solutions inside DNB To: Inviting to conversations and collaborations with others Outside-in: What do you need? DNB want to contribute to, and be part of, an eco-system We realise that not everybody wants to build a new bank
- To work together with others, DNB is launching a developer portal Finally We have been working on this for a while We had a hackathon to test APIs in September We have a developer event next week to test the developer portal - and updated APIs
- Information about the Account API
- John Does’s profile page, with his two apps
- The details of an app Shows the client id and the connected APIs
- And in an unfinished presentation Real APIs, but design not quite ready
- GET /accounts/ Get the accounts for the current customer.
- Similar to PSD2 Focus: Developer friendly
- The developer platform makes it possible to create new services. Some by DNB, some by others.
- https://upload.wikimedia.org/wikipedia/commons/c/cf/MAZE.png
- It’s natural that relevant non-DNB functionality is offered on the DNB platform An example from Lufthansa: Find the nearest airport: https://developer.lufthansa.com/docs/read/api_details/reference_data/Nearest_Airport
- Outside-in! Design Thinking Empathy
- Norway has one of the world’s best digital infrastructure Here: Tax API for annual income
- Tax API for annual tax
- DNB used the public service APIs to create the world’s first fully digital mortgage process When you want to buy a house, you only have to deal with a robot. Ludwig Mies van der Rohe: Farnsworth House Ex Machina
- Gjør det mulig for programmer å kommunisere med hverandre