EBANKING-PART3

Finland PioneeringFinland and its other Nordic countries are pioneering developments in Internet banking services. They are well ahead of their continental rivals in terms of customer penetration and the services offered.
Finns can do their banking irrespective of time or place with an ordinary phone, personal computer, or a wireless terminal such as a laptop computer, GSM or WAP phone. This means that the banks are open 24 hours a day and customer can chose from a variety of services. This is very different from the banking services available in other European countries as Internet banking has only just taken off and most customers adjusting to the benefits of the telephone service.
Finland’s three biggest banking groups, Merita, Leonia and Okobank, are global pioneers in the development of electronic banking services. Finland was the first country in the world to offer telephone banking in 1982, on-line share trading in 1988, banking via a mobile phone in 1992, Internet banking in 1996 and banking using a WAP phone in 1999. As a result only 10 to 15 per cent of all banking transactions in Finland are now done over-the-counter. All of these services are integrated, for instance users of the Okobank can access WAP services using the same codes that they currently use for GSM services, the Internet, telephone banking and the automatic telephone service. This means that their customers have the opportunity to use those services that suit them best at any given moment.
Improved Customer Choice
Merita, Finland’s largest bank is owned by the Swedish company Nordic Baltic Holding. It’s pioneering e-banking ‘Solo’ service currently has 1.4 million users and offers customers a wide range of banking services, it can be used with a wired phone, a GSM, or WAP phone, a computer or even a television if it is connected to the Internet using an add-on device. Most importantly, their e-banking service enables customers at any time to check their accounts, pay bills (even foreign exchange invoices), apply for a loan, e-shop in cash by paying for a purchase using the bank’s ‘pay’ button on the website of the company concerned, subscribe for units in mutual trusts and bonds, or submit an order to buy or sell shares which is transmitted directly to the Helsinki Stock Exchange system once the exchange opens. The possibilities are endless and among features currently being expanded are electronic billing for cases in which the customer does not want to use the cash-payment facility, making contracts using the bank’s identification routines, and the totally electronic processing of consumer loans. Nordic Baltic Holding was recently awarded a prize by the UK-based journal ‘The Banker’ for having the best electronic strategy in the world. The panel of judges gave particular praise to the bank’s multi-channel e-Banking services and its progressive steps forward in wireless technology.
Benefit to the Bank
There are many ways in which Finnish banks can benefit by providing these services. It enables them to provide more value-added banking services, improve their customer service relations and offer a more efficient, direct and personalized approach. They are not restricted by geographical restrictions or limited by branch locations, so they can widen their customer base. Most significantly, these automated services have meant substantial cost savings in overhead and operating costs. For instance, the number of self-serve machines is declining in Finland. Although, it is not envisaged that branches will closed altogether, some closures are expected. Since the Swedish bank SEB introduced its online services, it has closed 20 per cent of its branches and is seeing its staff numbers fall by 5 per cent a year. The result of this is that branch staff are less tied up with day-to-day transactions and are freed up for other services such as providing and selling products liked pensions and life assurance that cannot be sold online. These changes and their implications are clearly revolutionising the Finnish banking industry.
Technology
The technology for such innovations should have developed in the region is not surprising. It has been the rapid adoption of the new technologies by financial institutions here that has made them world leaders in several sectors. The introduction of these services has proved so successful in Finland as they have such a high-technology environment. They are commonly reputed to be the world’s leading information society with an advanced communications infrastructure and with the highest penetration of mobile phones and Internet connections in the world. The Finns are also considered ‘tech-savvy’ and responded well to technological innovations welcoming the benefits that they can bring to their working and domestic lives. It seems hardly surprised then, that Finns have adapted to these ’e-services’ so quickly. It is clearly a unique situation in Finland and banks in other countries will not find it so easily to introduce similar services with a successful take up. However, they can learn from Finland’s experience as it serves as an effective example of how to do it successfully. Finnish banks have actively encouraged people to utilise new technology by making it cheaper to pay bills online and introducing a surcharge for cheques and other traditional banking services. The success of this strategy is shown by the success of Nordic Baltic Holdings who manage Finland’s Merita Bank, as 32 per cent of all Finnish bill payments are now made online. In this case a reliable and cost-effective payment system is central to take-up.
Expansion
Industry experts believe that e-banking has huge potential. Customers will take more control of their finances, they will want more information, product choice and access to international markets. Across Europe, Asia-Pacific, Japan and Latin America, it is estimated that the number of households who are connected to the net and are active investors will grow more than four-fold in the next decade to 50 million. Analysts also believe that only by expanding outside of the Nordic region will Finland’s banks really be able to capitalise on the technical skills and experience gained in the Nordic region. Finnish banks have got a head start on the rest of Europe, so it would be a natural step to take in their development. It would greatly enable them to expand their penetration and customer base. eQ-online is Finland’s market leading online brokerage service and is demonstrating this trend, it is already up and running in Germany. It has ambitions to become the leading European provider of fast, reliable, highly secure, easily accessible and fully automated online brokerages to active retail investors.
Competition
In Finland the three biggest players, Merita, Leonia and Okobank dominate the Internet banking market and this has meant that new entrants have stayed clear. This situation is different in Denmark, which has been seen as an opportunity to outsiders, partly because Danish banks were slower to launch their own online services. In the other Nordic regions; Sweden’s ForeningsSparbanken and SEB have launched Internet banking operations there. A new internet bank, Basisbank, partially backed by Iceland’s Islandsbank iFBA, will also start operations there soon. Basisbank also has ambitions to enter Norway. Finnish banks clearly have the upper hand here.
However, competition within the Nordic market could intensify, a company called Silicon Capital is planning to start a pan-Nordic Internet banking operation called Bankia next year. Although, the Nordic countries have made a head start may soon be about to face some though competition for the global investment banks. For instance, Merrill Lynch and HSBC are recently joined forces to create the first global online banking and investment services company focused on a European market. Given the short business cycles in today’s Internet environment, it means that competition can intensify further as it becomes easier for new entrants can enter the market. This competition will undoubtedly serve to benefit the customers as it will open up the marketplace, encouraging further innovation, improved value added services, increase the amount of services available, offer price reduction and further investment in technology.
The Future of Banking
The newest industry buzzword is ‘m-banking’. This latest abbreviation stands for ‘mobile banking’ which is the current focus of many European bank’s strategy and they are investing a great deal of money in its development. M-banking would provide customers with an additional channel form services and increased mobility. Although, ‘wireless’ banking services are already in place in Finland using GSM and WAP technology, m-Banking will make use of the new GPRS networks, 3rd Generation mobile phone technology and more sophisticated handsets. It offers much more potential and now the race is on to see who will provide the first services.
Finland’s Okobank are a definite contender, they developed the world’s first GSM and WAP wireless banking services which enabled it customers to access their account over their mobile telephone, check account and credit card balances, authorise credit transfers, make bill payments and trade shares. Okobank suggest that, “wireless banking is a perfect compliment to Internet banking”, and now m-banking will provide greater mobility which is the prefect enhancement to this situation. Indeed, this has not just been limited to the traditional banks, online brokerage eQ-Online is currently developing mobile solutions for financial services, and they are far from alone.
As with the wired Internet, early successful movers in the mobile Internet stand to garner the largest customer share. Partnering with other companies to quickly fill the gaps in areas outside their expertise will be necessary for companies to strengthen their mobile Internet platforms and achieve market share. Although, we are yet to see any Finnish banks entering into strategic partnerships with telecommunication companies, Norway’s Den Norske Bank has entered into an alliance with Telenor (the state owned telecom) to create a new portal called ‘Doorstep’ and mobile services.
Finnish Optimism
Many industry experts are extremely optimistic about the success of m-banking. Bo Harald, a Finn himself and chairman of the industry group, the Mobey Forum says; “in times to come, every Finn will have the Internet in his or her pocket in the shape of a WAP phone. This means that everyone will have a handy personal bank, as easy to use as a computerised connection”. Simiilarly, Birgitta Johanasson-Hedberg, the CEO and President of Sweden’s Foreningssparkbanken firmly believes that; “those who refuse to move with the times will, perforce, have to comprise on their quality of life”.However, some analysts do not share this enthusiasm, they believe that adoption of the mobile Internet may be slower than expected due to high prices, slow access and transmission speeds, limited functionality, lack of available content, entrenched pricing/distribution models and disparate global standards. To overcome these problems, Finland has had an instrumental role in developing global standards and compatibility with banking services and mobile communications. The Mobey Forum, whose members include many international banks and telecommunications companies such as Nokia, Ericsson and Motorola, advocate open standards, encourage the use of wireless services and promote an operating environment for these. Also, Nokia and VISA International is running a project called the Electronic Mobile Payment Service, the target of which is to create a global standard for payments and other related services.
There is also concern about the ability to provide content on a small, mobile screen, Matti Korkeela, the Okobank Group’s Director of Development, believes that; “the main restriction is the size of the screen. Some people find it too hard small for dealing conveniently with their daily business”. Despite this concern, the leading Finnish company Nokia, is currently developing its ‘Nokia Mobile Display Appliances’ (NMDA), which will have: a high end display, IP technology and mobility, offer end-users new communication solutions, it will be cheap and light weight, with a wide touch screen display and is a centric consumer device. It seems that the phones are getting more sophisticated, the range of services is expanding, and the dial-up speeds will improve when GPRS and the third generation systems are installed, so the banks remain confident that many of their customers will soon be checking their bank balances, paying their bills, and buying and selling shares while on the move. But there are other problems that m-banking has to overcome.
Further Problems
Another factor that threatens to limit the take up of mobile banking is the issue of security, but Finland has again made pioneering achievements in this area too. As a platform for WAP services, Okobank uses its own Nokia WAP Server 1.0 WAP-Gateway, it also uses its own servers for the GSM services as well. By relying on in-house servers, the bank can guarantee the security and confidentiality of its customers' information and it also allows for flexibility in product development. Finland is a leading country in enabling the use of electronic identification in electronic commerce. Okobank was the first bank to integrate electronic identification and digital signatures into banking services. A digital certificate, that's kept on a smart card's chip, enables electronic transactions. They are now working on bringing the use of electronic identification and digital signatures into their GSM and WAP services as well.
In addition to this, another Finnish company F-Secure, which is a leading developer of centrally managed security solutions has just announced the release of the world’s first anti-virus product for the Symbian EPOC platform. The new product incorporates F-Secure’s Mobile Scanner Technology and highlights advanced wireless features. Risto Siilasmaa, F-Secure’s President and CEO, says; “The next generation of mobile phones and PDA’s (Personal Digital Appliances) bring the Internet to your pocket. The openness of wireless information devices poses new security issues, which must be addressed. Information must be protected where it is created, stored and processed, since these new platforms will take information everywhere the user goes, security protection must follow. F-Secure Anti-Virus is the first native solution protect these systems against malicious code”.
They Don't Stop There...!
Finland’s major banks are not limiting their innovation to m-banking, they are also currently discussing the potential of Digital TV as a future channel for banking services. Birgitta Johanasson-Hedberg, for Foreningssparkbanken has also recogised this opportunity, she believes; “televisions will surpass computers as the prime means of connecting people to the Internet, so in future we may easily pay our bills while at the same time watching the evening movie”. Finland is clearly planning to stay ahead and continue leading the way for the future of banking; other countries it seems will simply be left following and trying to catch up.