Even though banking will surely remain a necessary service also in the future, head of client data services at SEB Group Harri Rantanen is not convinced the same is true of banks. He says that banks have been very slow to implement technological changes, but that some change is noticeable in recent months.
Yes. It is not difficult to agree here. Only in recent months, or the past year, has the situation really started to change. SEB launched its project 18 months ago.
It is a question of culture – how we treat clients, how we treat ourselves. Most banks do not create new technological possibilities themselves. Someone else has created the new services in banking, based on client perspective and the specific nature of banking. That is why cooperation with fintech companies is crucial to us. They are smaller and faster; they are better at creating mobile applications. Cooperation is key.
At first, a year or 18 months ago, the question was whether fintech was competing with banks. Naturally they compete in certain areas; however, there are multiple avenues for cooperation. We create services together because we, the banks, are slower, we're expensive. However, we have client data, accounts; we usually have more money for fintech, and we can support their new ideas. The banks can learn how to offer more client-friendly services.
You use the term «open banking». What does it mean?
It means using new technology, for example Google's services in banking, without middlemen. Computers get the necessary information and services straight from the service provider. That is how it works in all hotels, airlines. If you book a flight using your cellphone, you can do it without involving a travel agent. Mobile banking applications that function without mediators are open banking.
There has been nothing of the sort recently. Banks have always been isolated. Banking services have been specific to individual banks. Now we have several companies that bring the sides of the banking transaction together automatically.
How secure is open banking?
How secure? Of course, identification must be handled competently. No one can have access to another person or company's bank account. It is important as we lack a common standard for electronically identifying clients.
Unified identification would be a big step forward, because then we wouldn't be offering services a la SEB, or Nordea, or Swedbank, but rather universally, so that third parties could offer our clients their services. Clients could use banking services universally.
It is currently impossible; however, this problem needs to be solved. No bank wants to offer API services specifically, but rather universally, because otherwise we are left even more isolated.
What is currently the banking sector's biggest concern? Is it technology, or is it something else entirely?
The biggest concern is rules. Things are difficult between us and banking watchdogs everywhere. We must constantly comply with rule sets that makes open banking much more complicated. We must know our clients quite intimately, meet new clients face to face, instead of communicating electronically that is entirely feasible these days.
(It is possible to open a bank account without physically appearing in the bank in Estonia since October 31 – ed.)
So the rules are our main concern – how far requirements banks have to comply with go, instead of making banking services better available to clients. Let us presume you want to make a payment online. In some cases you have to fill in a lot of boxes and press “yes” and “confirm” several times to be able to process the operation.
I once saw a demo of Chinese online shop Alibaba. You enter the shop with your phone or computer. If they have your bank account information, you just shop until you find something you want to buy, in which case ticking a box is all you need to do to conclude the transaction.
On the other hand, you must know who is on the other side – whom you give access to your bank account. The bank cannot show one client's data to another without permission.
How to reconcile the rules with open banking? In the field of ride sharing, for example, the old and new system are fighting tooth and nail.
That is a major problem; the biggest in the financial services world, I would say. Because financial supervision is protectionist. We have central banks, control organs that make sure money is used properly.
For example, Bitcoin is completely open, everyone has access, while money laundering watchdogs are keeping tabs on those who use it. That is also the case regarding cash. However, the world has a lot of countries where people and companies – mostly people – do not want to use bank accounts because they don't want to be visible to banks.
There are blockchain solutions that transfer values instead of money. I do not know whether it will happen in two years, or five, but it is possible most values can be transferred without a bank account in the future.
What will banking be like in ten-twenty years?
There will surely be banks and bank accounts because banks are conservative, just like their clients. However, there will also be new services we are currently unaware of, as API will create a lot of new business models.
There will be balance between the old and new world. The make-up of financial services will become clear in cooperation between banks. Banks will specialize – some will offer certain services, while others will provide something else, whereas they will possibly offer some services together through partners from outside banking.
Cooperation is key. It did not start in the banking sector; however, it has reached us now and will determine our success in the future.
It is said your bank has an AI servicing clients. Is it already in action, or is it something for the future?
Soon. We are currently testing it. The client will call our customer service upon entering the bank; the AI will answer the call. The client will provide their user ID, which the AI will then verify. If the client was telling the truth, the AI will grant access to data. With no human service component involved.
People are afraid that artificial intelligence programs and robots will take our jobs. Is it a danger or a possibility?
I would say it is a change of paradigm. Robots will come to the financial services sector. We are testing them at checking payments and correcting mistakes that would otherwise require a lot of manpower.
Will we have more banks in 2030?
Yes, that is a good question. I agree with Bill Gates in that we need banking, but not banks.
It will always be necessary to transfer values from one person or party to another, because otherwise we would have to go back to trading goods, like we did before we invented currency. Switching from goods to currency was a major leap; however, today people transfer values rather than money from one account to another.
It is 14 years until 2030. I cannot rightly recall what we had 14 years ago, in 2002. But I know the world is far more interesting today. So, yes, it would be very interesting to see the year 2030.