banking 2.0

Banking 2.0

Kirsten Nielsen,

Chief Project Manager, Capital Markets IT

November 2014

You might ask yourself “What relevance has banking in relation to computer science”

• The biggest competition/threats to traditional banking comes not from other banks, but companies like Google, Apple and Amazon.

• 90% of consumer banking interactions are done through computers today. How do you think it looks 1 or even 2 years from now…?

• Consumer Banking will be the next industry put out of business by tech, if banks are not able to adapt within the next 3-5 years.

• The Race to zero - trading is done increasingly without human interaction

In order to succeed in this transformation, we NEED young talent with your skills and ability.

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The only difference to IT is that technology improves much faster

Working with Technology – the game has changed

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The machines are coming

4

Presenter

Presentation Notes

F22 – Unstable, will crash w/o computers Robot workers, e.g. within healthcare 3d-printing Self-driving cars Computers win at cheese (Deep Blue) Algo trading – faster and more stable than any human

“It is not the strongest of the species that survive, nor the most intelligent, but the one most adaptable to change.”

Charles Darwin (1859)

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Customer experience is key

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Exponential growth results in faster and faster changes

Change in customer expectations Exponential technology trends

Change in habits and perceptions Change in requirements Change in what constitutes a great customer experience

New inventions New business models and products New approaches to leadership New IT roles

FUEL … RESULT IN …

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Customer behaviour changes rapidly driven by digitalisation

Quarterly data for Q3 2010 and Q3 2014 respectively 8

With new technology as catalyst, customer demand is evolving fast

• 352m net bank log-ins

• 4m mobile log-ins

• Total Digital touch points* 395m

5 years ago

• Access to everything from everywhere

• Increased customisation

• Unknown demands?

5 years from now

? • 263 netbank log-ins

• 189 Mobile log-ins

• 471m Digital touch points* = 64% increase from Q3 2010 to Q3 2014

Today

*Digital touch points includes Private Netbank, mobile, voice recognition telephone system (IVR), agent calls and advisory calls/remote meetings

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Presenter

Presentation Notes

Christian: Just think about how our use of technology has changed with in the last 5 years. 5 years ago there was hardly any use of mobile solutions as there were hardly any smartphones in use. Let me give you some figures: 352m net bank log-ins – FY2010 4m mobile logons –FY2010 Total Digital touch points 395m Digital touch points are, Private Netbank, mobile, telephone voice recognition system, agents calls, and advisory calls/ remote meetings �Today we are very mobile and use apps via tablets, smart phones etc and this shows in how much customers have taken in the digital solutions: 263 netbank logins – 2014 YTD 189 Mobile - 2014 YTD– In total there have YTD been 471m Digital touch points – that’s a 64% Q3 2010 to Q3 2014 �So what is going to happen in 5 years? Well we can surely expect that the digitalisation trend continues and that all services will be expected to be available anytime and from anywhere and that customer will expect a personalised experience which feels custom made. At the same time we see that the financial industry more and more becomes a digital service business. And the technology demands that the players are able to launch new and exciting solutions. Customers take in product and services very fast – and this means that being first on the market with new solutions becomes key. Many times being third or second will not count at all. Only the first mover wins and takes the market. Needless to say agility becomes key

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=9GOjB7oKVJC4_M&tbnid=5FIypLVA3pK8JM:&ved=0CAUQjRw&url=http://www.nettipsforum.dk/netbank-var-lukket_topic20414.html&ei=QdiAUsPmIuqH4ASf1oHwCA&bvm=bv.56146854,d.bGE&psig=AFQjCNH1oFqi7VUL63HoznCxLicEfFgHXw&ust=1384261756516478

Agility and adaptability are key to success

New digital customer demands

Capital efficiency

Cost per transaction

New players

Regulation

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Presenter

Presentation Notes

Peter:�There are a couple of key words that are essential for us to take note of. One is the new digital customer demands. As mentioned earlier customers will expect a personal experience which feels custom made and which is available from anytime and anywhere. We also in this market see new players emerging that we need to take notice of who are venturing into the traditional world of banking. That goes both for transactions – eg Apple Pay – lending market – Lending club etc. We have already seen the new players and the new digital customer demands have an impact on the retail business. We haven’t yet seen but surely should be expect to see similar challenges or opportunities for Wealth and Wholesale Segment. What we do know already is that our ability to handle new regulation is crucial. We face a massive regulatory agenda of interlinked metrics and the consequences of breaching compliance are dramatic as we have seen many examples of, eg JP Morgan Whale Trading scandal In addition capital efficiency will be key to agility and adaptability. For every customer and every transaction we need to look at how can we further optimise our contract, maturity profile, collateral to maximize risk weighted efficiency. We need to manage our capital effectively so we don’t tie too much of our capital so we can sustain a return of investment which is well above the cost of capital. The last thing I want to mention is the need to keep our cost per transaction down as much as possible. If we are going to compete in the market our transactions must be done not only smoothly and seamlessly but also at the lowest possible cost.

A strong foundation

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Nordea was created through a string of mergers

Pre-70

1970’s

1980’s

1990’s

2000’s

300 banks

80 banks

30 banks

4 banks

1 Nordea

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Strong customer-orientated values and culture

Foundation: Profit orientation and prudent cost, risk and capital management

Great customer experiences It’s all about people One Nordea team

A Great European bank, acknowledged for its people, creating superior

value for customers and shareholders

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Nordea is the largest financial services group in the Nordic and Baltic sea region

11 million customers - 8 home markets - Approx. 10 million personal customers - 520 000 corporate customers, incl. Nordic Top 500

Distribution power - Approx. 750 branch office locations - Approx. 7 million Netbank customers

Financial strength - EUR 10.0bn in full year income (2013)

- EUR 669bn of assets (Q3 2014)

- EUR 29.8bn in equity capital (Q3 2014)

- AA credit rating - Common Equity Tier 1 capital ratio of 15.6% (Q3 2014)

EUR ~41.6bn in market cap - One of the largest Nordic corporations - A top-10 European retail bank

Nordea = Nordic ideas

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SEPA End-date

Securities Law Legislation

FTT

Recovery & Resolution for FMIs

Structural Reform (Liikanen) Shadow Banking

MiFID II / MiFIR

EMIR Short Selling CSD regulation

PRIPs

Investor Compensation schemes

Dodd-Frank Act

Living Wills

Banking Union

Basel III CRD IV / CRR

Leverage Ratio AIFMD UCITS V

Fundamental Review of the Trading Book

Bank Recovery & Resolution

Directive

Long-term Financing

Transparency Directive

NSFR

Corporate Governance

Data Protection

Deposit Guarantee Schemes

Payments package (PSD II)

Volcker Rule

FATCA

Prospectus Directive

Coherence of legislation

“EU FATCA”

Solvency II

4th AML Directive Bank Account

Mortgage Directive

Remuneration MAR

& OUR CUSTOMERS

ELTIF

MMFs

Benchmarks Regulation

IMD 2

IORP II Credit Rating

Agencies Regulation

Insurance Guarantee Scheme UCITS VI

MAD

Legal Entity Identifier

SFT transparency

Additional derivatives regulations

Margin derivatives

for OTC

Approximately 50 banking regulations with substantial impact on banks’ balance sheets and operations

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Presenter

Presentation Notes

Starting from a strength

banking 2.0

Recruiting & HR

new technology

success new digital

equity capital q3

customer demand

leadership new

bn of assets q3

netbank logins

customer behaviour changes