Claus Richter, Head of Transaction Banking Solutions at Nordea shares his views on the impact of technology, particularly blockchain, on domestic and cross-border payments.
Here is the transcript:
Claus: I think what we are seeing in the Nordics is a couple of things. First of all, we see a trend very heavily towards mobile, where we see the local schemes, Swish, MobilePay, Vipps and so on, really take a dominant force to move the society towards a cashless society. Secondly, we see a very new collaboration going on in the Nordics between seven of the major banks in the Nordics around what we call the Nordic Superhighway or Project 27. Twenty-seven is just for the 27 million people in the Nordics.
What we’re trying to do there is to create a fully-integrated real-time clearing infrastructure both for domestic and cross-border payments. We hope that we can move this forward pretty quickly so that it can further enable both trade as well as the mobile revolution.
Boon Ping: Tell us, with all this innovation and disruption, how is that impacting the very business of payments and protection?
Claus: So, I think generally speaking in the payment area, there is price pressure. So, the transaction price that we as banks can charge to our customers is heavily under pressure. It has been for some time. I think it’s a trend that will continue. What that forces us to do as banks is of course to find different revenue streams around the payments. That means that we need to look at the payment ecosystem overall, see what type of things and value-added services we can put around the payments. It can be financing, it could be insurance, it could be a lot of different things, but we clearly need to attach other value propositions to the touchpoint we have with our customers around payments.
Boon Ping: In terms of foreign exchange as well, increasingly, that’s one of the areas where they are seeing margins. Tell us in terms of where you mentioned trade, today, in order for trade to happen, there must be open borders. How do you feel about the current environment towards anti-globalization? How is that affecting that region and how are you looking at trade opportunities in the rest of the world?
Claus: So, I think maybe luckily we can say that the Nordic region itself is not heavily impacted by this. It’s a fact that 50% of the cross-border trade from the Nordic countries happens inside the Nordic region, which is also why it’s very important to have an efficient payment infrastructure between the countries to facilitate that trade. But of course, at the same time, many of the Nordic companies are global companies. They do trading all over the world and of course, there we see restrictions coming in and it’s something where we have to help with our trade financing products, etc., but it is hampering trade to a certain degree when we look at it on a global scale.
Boon Ping: The final question, how do you see new technology – a lot of it is not new, but the new application of technology like the APIs, what is really frontier is blockchain. How is that impacting business?
Claus: So, I think there’s two sides to that. We have the open-banking revolution where we see that the API business and everything is starting to come in. We see some banks, we see a couple of leading Asian banks, DBS, we have some of the big global banks, BBVA, Citi, etc. that really goes heavy on this. From a Nordic region and from a European scale, Nordea is clearly really pushing our open-banking infrastructure. We see it as a strategic move and we see that this is the future of banking.
Looking at blockchain, we have, from a Nordea point of view, chosen a number of specific efforts. One is ‘we.trade, where we have launched and together with a number of other, both European and global banks, and I think we see that this is a technology that will support the banking business going forward.
Boon Ping: Ok, with we.trade. So, how long before it becomes mainstream?
Claus: I think it very much depends on the different business areas of banking, to be honest. I think in the trading world, we will actually see it relatively soon. So, we expect that we.trade will have picked up on the customer’s side already in 2019 and become a mainstream product for us.