Case for the course
Context in brief (only illustrative to link the case into bigger picture)
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Digitalization is shaking industries and disrupting them one by one, think e.g. media,
retail, telecom, etc.
Potentially the next big industry to take the hit is financial services
To begin, financial technology (fintech) companies, that are and have been getting
heavy investments lately, are taking on the incumbent banks and attacking them on
multiple fronts. During the last few years, innovative fintechs have redefined some
of the traditional banking services, as the market is saturated with different
customer- and merchant-facing services that not only offer superior features and
usability but wholly redefine certain processes (e.g. peer-to-peer finance services)
This, along with for example the modern digital technologies and changes in
customer preferences and expectations, has already affected digitalization finance
industry
o Operational efficiencies have been sought by for example: automating
existing core processes and optimizing the operations as well as using data
in improving error rates and risk management
o Customer experience and service improvements have been sought after on
the other hand by digitalizing customer interfaces, especially in marketing,
sales, and customer service, and by personalizing communication and selfservice capabilities
o However, the most radical changes where for example the products and
services could be redefined, the traditional value chains could be broken
down or the industry boundaries could be blurred is yet to come
There are number of trends have the potential to transform the financial services
industry, among others:
o Advanced analytics, big data & Internet of Things
o Artificial intelligence & robotics
o Blockchain
o Collaborative economy & social networks
o Digital platforms and open APIs
The most pressing trend that banks need to focus on in the short term is perhaps
the platform revolution which will pose an existential threat to banks in the
upcoming years
Digital platform economy has already impacted many other industries
Players like Google, Apple, Uber, Facebook, Alibaba, AirBnB are all good examples
showing that:
o The long-standing rules of the game have been changed: players no longer
need to own or control resources to capture their value
o Think e.g. it was not iPhone that killed Nokia, it was more likely the App
Store
Business models built upon digital platforms are key to the success of modern
digital businesses and they are the choice for digital natives – and financial service
companies are also seeing this trend
Furthermore, an EU-level regulation, the revised Directive on Payment Services
(PSD2) as a catalyst for the change towards digital platforms
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PSD2 enables third-party service providers to offer services that traditionally have
only been provided by banks (e.g. access to the customer’s account information
and the right to initiate payments)
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Retailers may directly ask consumers for permission to use their bank account
information
New third party payment service providers
 Payment Initiation Service Providers (PISP)
 Account Information Service Providers (AISP)
Ban on card payment surcharges
Improvements to consumer protection on payment
The most direct effect of PSD2 is indeed on banks as account providers (hence
eating away profits they would get from e.g. transactions), but it creates broader
opportunities across the industry and far beyond the daily transactions
o PSD2 for example opens the opportunity for banks to accelerate into new
market space by offering their current (and new) services and products to
customers of other banks – to be disruptive FinTech players themselves.
Case [Danske Bank]
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The bank’s executive has contacted you to hear about potential project.
They have understood that the change is already inevitable and have the foresight
not considering open banking platform talks as threat but also as an opportunity.
Furthermore, in relation to the regulation they do not want to only comply and
defend their current position – they are looking to use PSD2 as a stepping stone
towards platform business models.
However, the whole platform business is completely new to them, and they are
uncertain whether it really is feasible and, if so, how should they go about it. In other
words, they need assistance in exploring their options.
They want to understand what kind of new opportunities there are, within and
outside their comfort zone, they ask
– What new services could we offer, i.e. could we somehow expand our
offering?
They also have some concerns and pose a few supporting questions (note: not all
of them need to be answered, depends on the approach and defined scope)
– What kind of additional services would our customers appreciate?
– Who would be the customers outside of our current ones?
– Which own core services can we leverage?
– How do we make money?
– What would this mean for our organization?
– What are the best suitable partners to team up with?
– How do we make ourselves an attractive partner, why would they want to cooperate with us?
They are asking, since you are familiar with the industry and the digital business
models, would you be able to help us and how would you propose doing that?
Tips and instructions:
– Banking is rather complicated and multi-leveled business
o Think about customer segments and business areas
o It’s allowed to focus (the only way to dig deeper into interesting stuff)
o Do not spend excessive time on the technical stuff, the regulation for
example, but focus on understanding the customer needs and business
problem/opportunity
– Danske Bank is really just an example, you may choose another one as well (but
you’ll need to discuss that with course responsible)
» Important thing to keep in mind is that, whichever way you tackle the case,
the results should be relevant for the case company – not just generic
» In (the most likely) case that you cannot find some necessary information
you can make an educated guess as long as you can justify that (explicitly)
– Very rarely real cases are handed to you in a well-thought form
» There is always plenty of information, questions, uncertainty, opinions,
concerns, ideas, etc.
» Your job is to make sure you’ve understood the fundamental problem and
can adjust your solution to that
» It is okay, even preferable, to ask for feedback during the project