Banking on a Wireless Future
By Tim Bird, Wed May 16 00:00:00 GMT 2001

Nordea is an early adaptor of technology, not to mention the mobile banking technology.

With over two million net-bank customers at the end of 2000, Scandinavian banking group Nordea is not only a regional pioneer in electronic banking services, but also the world leader. Talking to TheFeature, Matti Karvonen, Nordea's First Vice President, Electronic Banking Services, based in Espoo, Finland, explains why he thinks it really is just a matter of time before the Finnish example of widespread mobile banking becomes the global norm.

TheFeature: What wireless banking services does Nordea bank already offer?

Matti Karvonen: We have offered banking services by mobile phone since October 1999, starting with daily banking services, balance enquiries and so on. Very soon after that we launched stockbroker services via mobile phone, and today it is possible to do almost all banking functions that we have on the Internet by mobile phone. It has not taken such a big development effort for us to develop WAP services when we already had existing Internet services. In addition to PC-based services, we offer WAP and SMS services. The SMS option is very basic, but attracts 200,000 balance enquiries a month. But our main mobile transaction services are WAP-based.

TF: How advanced is Nordea in the mobile banking field, in regional Finnish terms and in a wider international context?

MK: We have more electronic customers than any other bank in the world. We have over two million Internet customers, and while it may be that other banks have more customers, we are still the leaders in traffic, with about six million log-ins in a month, and three million of those in Finland. That's much more than any other bank, I'm sure. If we calculate all electronic traffic we are the leaders in the world and Merita (Nordea's Finnish branch) is the leader in Finland. We think the most important thing is the traffic, how often customers log in, not the number of customers.

TF: Wireless and PC banking is clearly more advanced in Finland than just about anywhere else. How do you explain the fact that a country with a population of just five million is such a trailblazer?

MK: My feeling is that there are many explanations, but one reason is that we started very early here, launching the first home banking services in 1982. Very soon after that, in 1984, we launched home PC banking services. We had about 200,000 electronic customers already before we launched Internet services. People in Finland were familiar with electronic payment methods. It was widely known that it was possible, even if it wasn't so widely used. When the Internet came along, people started to ask why should it not be possible to do banking on the Internet. Immediately we attracted tens of thousands of Internet users within the first month of launching the service. Another reason is that payments in Finland are very standardised between the different banks.

TF: What do you see as the benefits for your customers in using your mobile banking services?

MK: Customers have mobility because they have a bank with them at all times and they can do their banking whenever they choose. That's the main thing. Of course, the Internet is handy because our customers can use all terminals: it is not limited to home or work place, and phones add mobility to this. We have different types of customers: some are more eager than others to use new technologies, but we also have traditional customers using older channels. About 20 per cent using traditional methods, and 80 per cent regularly using electronic methods.

TF: How are customers charged for your mobile services, and how do you earn income from them?

MK: We have monthly fees which are quite low, five or ten Finnish marks (USD 0.8 to 1.6) a month. The main benefit is in saving costs. Also, electronic customers such as those using mobile handsets to make payments are more active, and they increase the volume of banking, which is naturally important to us. We also believe that customer loyalty is increased when people learn to use these services. The service is better than the traditional kind: you have your account history in your hand.

TF: Is security perceived as a problem by your customers when using mobile payment methods?

MK: It's not a problem. We have been practising electronic banking for so long in Finland, and people do not associate it with security difficulties. They may be careful about using their credit card numbers for electronic payments, but they have fewer concerns when it comes to banking.

How do you distinguish your own mobile services from those of other banks to make them competitive?

MK: Our services are not unique and they are easy to copy. However, we are more advanced in mobile banking, and we have put more effort into it than other banks, although in general services are fairly equal. But our biggest difference is our concept that electronic channels are one additional channel, and our real strength remains the sales power which we have in our branch offices. Our branch staff are very highly motivated to sell these services to our customers. We are very active in marketing and promoting wireless and other electronic services. Most sales are personal sales, with branch staff encouraging customers to use the services. We demonstrate and explain before customers decide to use.

TF: Nordea is involved in a joint project with Nokia and Visa to develop a dual chip handset, with one of the chips designed specially for bank and credit card payments. To what extent have you developed your services in cooperation with telecoms service providers or other partners?

MK: Many players are required before we can offer these services, and of course they must be open to everyone, so we have not developed the kind of solutions which are limited to one operator. This means that our cooperation with individual partners has been limited. Such cooperation might have allowed us to develop more sophisticated services, but it would be against our principles. In the long run the benefits are not so great, because the access to the services is limited.

TF: You have mentioned the high level of standardisation of banking in Finland. To what extent do you cooperate, or plan to cooperate with other banks in the field of wireless banking?

MK: It's better to use our core competence to improve and develop service for our own customers than use it to help other banks! Our basic business, banking in the Nordic region, is such a big business that such consulting or software would represent a small part of it. It's better to use our competence to improve our own basic business.

TF: How do you think the future looks for wireless banking?

MK: Many people have been disappointed in WAP. They expected fast developments when the technology was launched, but they have not remembered what has happened in the history of SMS, for example. It took a period of three, four, even five years before a critical mass of SMS users was reached. Before that the growth in use of SMS was very modest. When the penetration rate was high enough, the volume grew very quickly. Some people have expected that WAP usage would grow as soon as the phones were on the market. Volume comes when we have reached a critical mass of phones in use and more services.

TF: So is the future of WAP vulnerable to consumer forces and technological trends, or is its increased popularity a certainty?

MK: It's a certainty, absolutely. It adds so much value, it's so convenient. If you compare PCs with mobile phones, the phone is always on, it's ready to use, it's so much handier. If you check your bank balance using your PC, you have to be next to the machine, you have to turn it on, you have to connect to the network, it all takes more time. If you choose to do something more complicated, then the PC is better, but if you have to carry out some simple banking task, the mobile phone is much better.

TF: And how long will it be before the "critical mass" you mention is reached?

MK: Perhaps two or three years. The application of GPRS (General Packet Radio Services) will make a big difference. I see that there are three limitations today. One is speed. Not so much the speed when you use the service, but log-in time, and GPRS will shorten this dramatically. Another thing is cost. Now you are paying according to time used on line, and with GPRS you will pay according to data transferred. The third reason is the shortage of phones in use. All three of these factors will disappear in the future.

There is some level of misunderstanding with some service providers, including some banks, which have said they will not provide WAP services because they are waiting for GPRS and they think that it will replace WAP. That's not so. The services will remain similar and you'll be using a WAP browser, but the network will be more advanced. Also, in the near future we will see many different types of terminals, Palm devices, for example. That' s a challenge for us because we will have to support different types of browsers, modifying the user interface to support the various devices, not only phones.

Tim Bird has lived in Finland since 1982, and has watched the phenomenal spread of mobile technology through Finnish society with a mixture of alarm and fascination.