As costs and competition rise, Nordic banks must modernise at pace

Faced with high maintenance and compliance costs, plus the burden of working with rigid legacy systems, Nordic banks need to modernise. Nikolai Kjaersgaard Andersen, Director of Sales for Denmark from Tieto Banktech explains how banks are speeding up new product delivery, reducing risk and cutting costs using flexible models.

The high costs and technical challenges of working with outdated core technologies need no introduction to anyone in Nordic banking. Less well appreciated are the time and cost of keeping up with new card scheme mandates, or the amount banks spend on PCI compliance, estimated at between two and seven million Euros per banking group each year. 

Sources estimate the number of banks in Denmark could be just a third of the current level by 2035, showing how tough competition is.

Such inefficiencies come at a time when banks face rising customer expectations and growing investor and shareholder demands for better performance. In Denmark, for instance, the banking industry continues to rationalise through mergers, with some sources estimating there could be as few as 25 banks in the country by 2035 – around a third of the current level. 

Time to change – but how? 

Eighteen months ago, we published a study showing that eight in 10 banks across Europe are now at some point in the modernisation journey – and the Nordics are no exception. The way a bank chooses to modernise can make the difference between profitable success or costly failure. Use too many vendors, and the risks of systemic friction and inefficiency rise; take too long, and there’s the chance you’ll be left behind.  

The answer lies in modular card issuing platforms that enable modernisation without increasing complexity. Such systems enable the rapid delivery of new card products without relying on legacy technologies, improving the rate at which a bank can innovate new products while managing risk and reducing cost.  

Tieto Banktech’s Cards-as-a-Service (CaaS) platform is currently helping Nordic banks of all sizes to revolutionise how they deliver card programmes. For smaller institutions in particular, CaaS creates card products and services that would have been too complicated and expensive for them in the past.  

Cards-as-a-Service (CaaS) in action 

The Cards-as-a-Service (CaaS) model sees banks and financial institutions working with a single specialist provider for all aspects of payment card issuance and management. Instead of building proprietary systems or juggling multiple vendors, institutions rely on one partner to handle card production, transaction processing, integration with payment networks and more. CaaS empowers banks to offer customers physical and digital versions of debit, credit, or prepaid cards, plus features such as instant card issuance and mobile wallet integration – all through a single streamlined solution. 

As an example of how CaaS improves the speed and quality of programme delivery while minimising cost, we re-issued more than 300,000 cards within twelve weeks of the takeover of one Nordic bank’s card portfolio by another bank at a near-to-zero error rate. As our client put it, “the process was carried out without friction, thanks to the trust we placed in your decades of experience to guide us.” In addition, we manage a portfolio of around 5 million cards with 200 million transactions every month for a Tier 1 Nordic bank through our CaaS platform. 

Across the board, CaaS enables banks to move rapidly with the issurance of new products, since all aspects of issuing – from technical infrastructure to card production, network integration and transaction security – can be outsourced via a single API integration to your provider. As well as getting new products to market fast, this arrangement reduces the need for infrastructure and specialist staff, helping you to control costs and improve efficiency. Flexing and scaling your card programmes as your bank grows or as customer preferences evolve is also easier in partnership with your provider.  

Other advantages to issuing and managing cards via CaaS include access to market-leading expertise in transaction security and regulatory guidance. This protects your customers and reduces the cost of compliance with standards such as PCI DSS, the forthcoming third Payment Services Directive (PSD3) and more.  

Through the CaaS platform, banks can customise cards for different market segments while ensuring all products are consistent with the bank’s brand. All-important new features can quickly be added to card programmes to keep your bank competitive – such as the integration of mobile wallets with your card programme, real-time controls for users via app, or rich data analytics that help you better understand usage patterns and identify new product opportunities.