Copenhagen Fintech magasin juni 2017 by Business Insights

Fintech startups most popular among investors

Regulators are tightening the grip on banks

Unexpected competitors are stealing banksâ&#x20AC;&#x2122; business

Copenhagen Fintech...

Sponsored magazine about financial technology June 2017 - Produced by Berlingske Media

New Nordic Fintech? Copenhagen is rising towards the worldâ&#x20AC;&#x2122;s fintech top. Hereâ&#x20AC;&#x2122;s how industry leaders plan to keep growing

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Tags: payments infrastructure, startups, innovation lab

Danish payment infrastructure ready for fintech startups The infrastructure is ready for the next generation of payment apps and innovative solutions, says Nets CEO, Bo Nilsson, inviting fintech startups inside.

ntrepreneurs who are passionate about financial technology now have a chance to work with the backbone of Danish payment systems. “We see a role for Nets in establishing partnerships with startups that want to use our payment infrastructure,” Nilsson says. Nets is a leading provider of payment services in the Nordics, connecting banks, businesses and consumers. It’s mostly invisible to the general public, while being the enabling force behind most card transactions provided by Dankort, the direct debit service (Betalingsservice) and NemID, the national login solution − to name a few Danish finance-related services. It handles 98% of all digital payment transactions in Danish stores − a task that requires continuous innovation. In the last couple of years, Nets started forming partnerships, acquiring startup companies and holding hackathons to come up with new ideas. In just two years, Nets has acquired seven other companies and is currently looking at 80 other fintech-related firms for potential partnerships. Nets invites startups to innovation lab Digital receipts are a recent example of how the experience around payments is changing. Instead of a paper receipt, you get a virtual copy on your phone. The startup behind this innovation,

Storebox, was acquired by Nets in late 2015, making it even easier to roll out the service throughout the Nordics. “Fintech startups have an innovative force that benefits Nets. At the same time, they need us to scale their solutions, and maybe grow internationally. That’s why we are now focusing more on partnerships to create innovation,” Nilsson says. Another similar example is Nets’ partnership with Danish blockchain startup Chainalysis. It helps Nets and its customers to make sure that new types of blockchain-based payments comply with legislation and aren’t being used for criminal purposes. In the same field, Nets has also partnered with Danish bitcoin company Coinify. Together they have established the Blockchain Development Lab, where Coinify develops new blockchain solutions for Nets. This way of working with startups is now becoming a recipe for future partnerships. Each new startup is invited to Nets Innovation Lab to make a proof of concept and test if their idea has commercial potential. “The startups go through a process where they ultimately get access to our extensive payments infrastructure,” Nilsson explains. Denmark is an ideal test bed There are several reasons why Denmark and the Nordics provide a particularly good place to test out new fintech ideas.

For one thing, the countries are absolute frontrunners in digitizing everything from payments to the identities of citizens. Combined, the Nordics have the highest number of card payments and lowest number of cash payments per capita in all of EU. Especially if you include NemID, this makes for a large market to test out new digital payment solutions. “There’s room for growth within fintech if you are looking at payments. The Nordic payments infrastructure is state of the art and we support a wide range of new types of payments,” Nilsson says, adding: “As a fintech startup, you’ll be able to get started quickly.”

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Bo Nilsson, CEO, Nets

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Nets by the numbers Employees

Revenue (2016)

~2,400

DKKm 7,385 ~8m

~35m

digital identities

the number of cards for which Nets processed transactions in 2016.

are handled by Nets

98%

FTEs

of all digital payment transactions in Danish stores involve one or more of Netsâ&#x20AC;&#x2122; services.

7.7+bn

card transactions (issuing and acquiring transactions)

>90%

of Danish households use Betalingsservice for their recurring bills 1

3 Business Segments

CORPORATE SERVICES

FINANCIAL & NETWORK SERVICES

MERCHANT SERVICES

Corporate Services comprises Betalingsservice and NemID in Denmark, eFaktura, AvtaleGiro and BankID in Norway as well as the national clearing systems.

Financial & Network Services manages domestic card schemes such as Dankort and BankAxept and processing services for international card schemes.

Merchant Services provides payment solutions to all types of merchants, from small shops to large multinational retail chains and e-commerce. Merchant Services also acquires international cards.

NetAxept

300,000+

30,000+ online

240+

use Netsâ&#x20AC;&#x2122; services

served by Nets

corporate customers

banks

of which

240,000+

Nets estimate

merchants

18 Sponsored content

Fintech is the most popular startup sector in Denmark among investors

Author: ElĂas LundstrĂśm

Sponsored by

Tags: startups, workspace, jobs, competencies, automation, union

Financial jobs are disappearing – Copenhagen Fintech’s job is to get them back Disruptive technologies are already replacing a range of jobs in the financial sector. As a response, The Financial Services Union founded Copenhagen Fintech with a mission to bring back jobs that are relocating to other countries. “The demand for competencies is changing rapidly,” says the union’s chairman.

hen the financial crisis hit in 2008, massive layoffs in the financial sector were an inevitable result. So, once the crisis waned some years later, it was not unreasonable to expect jobs to reappear. But, although a lot of new jobs were created, it was not the ones that many people in the financial sector expected. “We saw how digitisation took over after the crisis and how the demand for traditional financial workers declined,” says Kent Petersen, chairman of the Financial Services Union, before elaborating further: “Once we took a closer look, we discovered that the number of employees in the financial world was rising, but not in traditional areas such as banking, mortgages, or insurance. If you count in financial technology, employment is not decreasing, but the demand for competencies is changing rapidly.” This discovery fueled the union’s decision to found an association called Copenhagen Fintech and its appurtenant startup office space in order to support the growth of fintech innovation in Denmark. Ultimately, the goal is to bring back

some of the new jobs, which have been going abroad lately, Petersen adds. Not the typical founder A bet on fintech of this magnitude is not a typical move from a union, which used to stand in opposition to the financial companies on behalf of the workers. It may, in fact, be the first time in history that a financial union is the founding force behind a fintech hub − an act that might be surprising but is completely justifiable, according to Petersen. “A lot of research show that once a job gets automated, at least one new job is created. The problem was that we couldn’t see it happening in Denmark,” he says and adds that this was mainly because of a lack of the required talent in Copenhagen and because other foreign financial hubs were more attractive to companies. “So, we realised that if we were to attract the right competencies and establish a hub, we needed to get better at entrepreneurship.” Three years have passed since that recognition and Copenhagen Fintech is now a thriving hub, where startups, es-

...

Kent Petersen, chairman, Financial Services Union

tablished financial companies, universities and public authorities are working together to revitalise the financial sector. Broad support in society One of the strengths of Copenhagen Fintech lies in its broad base of partnerships. They give fintech startups certain advantages by providing easy access to a workspace, legal advice, data from established companies, mentoring, education and contact to the Financial Services Authority. Thomas Krogh Jensen, CEO of Copenhagen Fintech, also believes that it makes good sense to have the union as a founding partner: “They have 50,000 highly qualified employees as members, which allows us to build a bridge between the old and new sector − not only through management but the employees as well.” In the future, the union’s ambition is to integrate the hub with universities to create education specific to the fintech sector and to attract foreign talent and companies to Copenhagen. “I believe the foundation for that is already here,” Petersen concludes.

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Tags: property valuation, mortgages, financial tools, automation

e-værdi gives accurate property valuations For ten years e-nettet has been working with statistical property valuations and has created a model that can be adjusted to the individual financial institutions and form the basis for positive customer experiences.

he financial sector uses statistical property valuations to ensure solvency both for portfolio management of property values and for credit evaluation of homeowners who want to take out new mortgages. Statistical property valuations, which are based on carefully prepared data, are essential for homeowners and homebuyers: for example, if one wants to sell one’s home or buy a new one. With the e-værdi product, e-nettet has developed a model to calculate the current property value of homes whose high quality can be documented. And this is a valuable tool for employees in the financial sector. ”The tool is based on a regression analysis, with a number of explanatory variables that have significance for the property value as input. For example, it has data about prices in the local area within a given radius from the property in question,” says Steen Høy Hansen, a consultant at e-nettet’s Property Data Solutions. ”We examine the properties that have been sold in the area. I mean the properties that have been for sale “on the free market,” where they have been visible at an estate agent’s. This is important, because if you only base things on what is registered on the public registers as free sales, this can include things like transfers within

families, where the price is often lower. We crosscheck with properties that have been on offer, and therefore we can say with certainty that they have been in free sale. This increases the quality of our data,” he points out. e-værdi streamlines work in the financial sector Since the model automates the process of estimating the value of properties, a fair amount of time can be saved at the mortgage and financial institutions. This time can be spent on giving better advice to bank customers. Several financial institutions have developed their own solutions based on e-værdi, which have reduced the number of physical valuations carried out by consultants. ”In the financial institutions, you have a streamlined work process, where, in many cases, you can get a good idea of the property right at your desk, without having to go out and look at all the properties in a valuation. Accordingly, it is important for us to be able to demonstrate that our model has a high performance,” Steen Høy Hansen says. ”Our overall statistics reveal how accurate our evaluations are: our performance measurement shows that 90% of our city property valuations deviate less than 20% from the actu-

...

Jørn Knudsen, CEO, e-nettet

...

Steen Høy Hansen, consultant at Property Data Solutions, e-nettet

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al sales price, and that figure is even slightly lower on a national basis,” he adds. The optimal circle These high performance numbers are due to the long series of disparate data that are taken in and refined by the regression model. Some of that data include asking prices and reduced prices, as well as amenity values such as the size and age of the property and its location in relation to a motorway or a lake, which can influence the valuation in diverse ways. ”As well as that, the idea is to include properties that are close to the property you are valuing, and which have been sold within the shortest possible period of time. This is what we call the optimal circle. Less recent sales over a larger geographical area provide less certain data,” Steen Høy Hansen explains. Tailor-made solutions e-nettet is in possession of a considerable amount of diverse data, which can be supplemented with one’s own valuation data or other property data products. By doing this, a financial institution can get a tailor-made solution that meets the exact need that it has in relation to property valuations. “We have made an additional standard solution that we call rating. We supplement the model value with some rating figures that can give the

user a feeling of how safe the basis of e-værdi’s calculations is. This means that we can give an exact indication of when it makes sense to look more closely at the model-estimated property valuation made by e-værdi,” Steen Høy Hansen says.

...

e-værdi was launched in the financial sector back in 2012. It is merely one of many examples of how e-nettet is working with data and data quality, and, by collaborating with the financial sector, how it is generating the benefits of digitisation for bank customers.

e-nettet connects the financial sector The financial sector has discovered that it does not necessarily make sense or give value to only create individual systems and solutions, and that there are great benefits to be obtained from working across the industry. e-nettet brings the sector together and creates shared infrastructure solutions that form the basis for positive customer experiences in the future e-nettet has been involved in managing the digitisation of Denmark in several important areas. e-nettet has, for example, made it easier to register land documents, exchange documents in a property sale and change banks quickly and efficiently. e-nettet’s aim is to be the impartial and trusted partner of the financial sector. This means, for example, that where others can be driven by a purely commercial focus, e-nettet’s success has to be measured by its ability to create the benefits of digitisation for the customers in collaboration with the financial sector. ”At e-nettet we have a strong position at the centre of the financial sector as the focal point for both infrastructure and collaboration. We connect the financial sector and link it to the public sector,” says Jørn Knudsen, e-nettet’s director. ”We have to strengthen this position, because we want to be a dynamic company that has an important role as a partner of the financial sector. By creating positive digital user experiences along with the sector, we can help to make a difference for all Danes,” he says.

30 Sponsored content

Tags: startups, gender equality, leadership, investors

The lack of diversity in (fin)tech:

Still staring through the glass ceiling Tech is still a business dominated by men. Despite gender quotas, a surge in feminism and the awareness of equality, there are more male founders than female, more venture capital goes to companies founded by men than women and there are fewer female investors than male. Journalist: Simone Okkels

... Louise Ferslev, founder & CEO,MyMonii

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Why the GDPR Is Such a Big Deal Staying ahead of the game when it comes to the EU General Data Protection Regulation (GDPR), in an age of ever increasing mountains of data and the associated potential for abuse – is quite some task.

ompanies are not only obliged to have clear documentation and policies on how they handle personal data, they must know the whereabouts of data, its usage and who is accessing it.

...

The task becomes difficult because: 1 Personal data can be elusive – Data on its own could be meaningless or

without risk, but pieced together with other personal data, it could become high risk because you can link it to a real person. 2 Efforts needs to be ongoing – This is not just a matter of fix and forget. With GDPR, the less governed your data is, the harder it is to stay compliant.

3 GDPR calls for an organization-wide focus – If a consumer withdraws consent, the erasure of the consumer’s data is the consequence of this. That could prove tricky if duplicate consumer data resides in various formats and systems. Therefore improving data quality and data governance processes throughout the organization becomes necessary.

5 Steps to Help your Journey to Compliance It’s clear that GDPR will affect your entire organization. You’ll need to rethink how personal data is handled from the source of origin to the point of consumption. With industry-leading solutions for data management and analytics, SAS can help you meet evolving data protection compliance demands. We recommend five steps to help make your compliance efforts more manageable.

• Access data sources for personal data investigation or business usage. • Access workflows that define actions, policies and processes for personal data. • Access audit, monitor and risk reports on personal data.

• Find and catalog personal data. • Analyze personal data attributes, patterns and contexts to evaluate the need for de-identification. • Analyze personal data for risk assessment.

• Define personal data terms to align business and IT users. • Link systems, processes and business owners via data flows. • Ensure integrity of personal data so that it’s accurate, complete and consistent.

• Implement data protection safeguards.

• Log and monitor personal data usage.

• Apply privacyspecific measures such as pseudonymization, anonymization and encryption.

• Audit usage of personal data to demonstrate compliance with privacy controls.

• Minimize data to the purpose for which it is being collected.

• Analyze and report to prove that personal data is not at risk.

Source: SAS Institute

Compliance with the GDPR may be your primary goal today. But keep the larger goal in mind.

With a solid data strategy, and better data quality and governance processes, it’s not just your GDPR efforts that will be rewarded. The insights uncovered can provide a foundation for faster, better business decisions across the enterprise. So you’ll be positioned for the next regulation that comes into play – and gain a competitive edge along the way.

WELCOME TO NewBanking Next banking generation of identity management and verification, KYC data, AML screening and payment transaction monitoring.

SOLUTION

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KYC

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PAYMENTS

CONTACT

NewBanking is the next banking generation of identity management and verification, KYC data, AML screening and payment transaction monitoring. We bring innovation in the heart of financial services. NewBanking is a company registered in Denmark with registration number 37153176.

Address: Klausdalsbrovej 601, 2750 Ballerup, Denmark Email: info@newbanking.com Website: www.newbanking.com

34 Sponsored content

Tags: payments, mobile, competition, tech giants, NFC, PSD2

Two national rivals − Nets and Danske Bank − are fighting to gain the favour of consumers with their new mobile payments solutions. But the national battle may just be a foretaste of what’s to come.

The payment war has just begun Journalist: Dan Mygind

enmark became a pioneer in electronic payment systems with the introduction of the national payment card, Dankort, in April, 1983. Back then, it was one of the very few forms of payments, but fast forward to today, and there are countless alternatives with more to come. The launch of the Dankort mobile app this spring marks the beginning of a war between national and international payment providers. It is still unclear who will win − besides, perhaps, the consumers.

tween the leading Danish financial institutions, for a mobile payment solution, because it felt Swipp was too slow to react against a new threat in the form of a mobile payment service introduced by the big telecommunication companies in Denmark. MobilePay became a big success and when Nordea, another big Nordic bank with a strong presence in Denmark, announced in October, 2016 that it would leave Swipp to join MobilePay, the remaining banks in Swipp followed suit quickly.

Mobile Dankort versus MobilePay Unlike in 1983, the new Dankort app has a competitor called MobilePay, an app introduced in May, 2013 by Denmark's biggest bank, Danske Bank. In 2012, the bank had left Swipp, a cooperation be-

MobilePay excluded from 65 percent of Danish retail All major Danish banks have now decided to support MobilePay, so you would think that it is destined to be the mobile payment solution. Well, you’d better

think again. Despite the success of MobilePay, two of the biggest retailers in Denmark, Coop and Danish Supermarket, have decided not to accept payments through MobilePay. That's around 65 percent of the Danish retail market excluding MobilePay. Why exclude a payment solution which around 3.3 million Danes have in their pocket? Even though MobilePay is used a lot to transfer money between individuals and smaller businesses, its widespread usage has not spread to the shops. “It's too difficult to pay with MobilePay in shops. Compared to a contactless Mastercard or Dankort, it is too cumbersome to get the mobile out, unlock it, start the MobilePay app, enter the PIN and swipe the amount,” says Jan Damsgaard, professor at Copenhagen

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Tags: payments, mobile, customer experience, tokenization

Paying with a mobile phone instead of a card is just the first step on the way to a future, where payments become more intelligent and ultimately disappear altogether.

The dawn of invisible payments W

hat if you could just walk into a supermarket, grab whatever you need and walk out without touching your wallet? Up until recently, this has been known as stealing. Today, however, we are looking at a future, where this could be legal and a part of everyday life. It is already possible now to make payments through your phone and not just by card or cash, and in just a few years, they might even become completely invisible. Take the Amazon Go store that has opened in the US recently as an example: customers log in with an app upon entry, take the stuff they need and walk out. The systems automatically charge the customers’ Amazon account. “The end goal is to have invisible payments. That’s the road we’re headed,” says Hans Henrik Hoffmeyer, Senior Vice President of Nets Mobile Services. “The technology is there. Now it’s only the innovative pace at the retail stores which sets the limit,” he adds. Mobile payments becoming the new standard We already saw the first major step towards invisible payments earlier this

...

Hans Henrik Hoffmeyer, Senior Vice President of Nets Mobile Services.

year. The introduction of card-based or ‘dankort’ payments on the mobile phone marks a seemingly small but highly significant change in the way we pay for goods at the stores. “Mobile payments indicate a renewed dialogue with the customer in the store. Payments are becoming more than payments, because shops now attract the customers’ attention through their mobile phones, where they can give offers, sell more and improve the customer experience,” Hoffmeyer says.

When you pay for groceries at the supermarket, the scenario usually unfolds like this: You start packing the food at the end of the counter, but when the cashier tells you the price, you have to elbow your way back to the terminal, get your credit card out, type the pin and press “accept,” while people are waiting impatiently in line. This is the kind of inconvenience invisible payment will change. Nets has been testing a new checkin and check-out feature on its Dankort payments app, which means that you can check your card in when you pass the terminal and continue on to pack your groceries. Once the final payment is due, it will appear on the phone display. You can then simply swipe to accept the payment directly on the phone instead of having to walk back to the terminal. It might seem like a small change, but history shows how that can still make a big difference. “Since we introduced contactless cards, our users have been enabled to simply tap their card instead of inserting the card and entering a pin, which is really a minor change if you think about it,” Hoffmeyer says, adding that this improvement by itself caused contactless

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“

The end goal is to have invisible payments. That’s the road we’re headed ... Hans Henrik Hoffmeyer, Senior Vice President of Nets Mobile Services.

payments to gain so much popularity that they accounted for over 25% of payments in a little more than 18 months, which is unprecedented globally. “It shows that even if you marginally improve the experience, the customers will take to it immediately,” he says. Accelerating change It’s still only less than two years ago that contactless card payments were introduced in Denmark, but now the next wave of mobile payments is ready to take over. Experts predict that at least 50% of payments will be carried out by phones by 2020. According to Hoffmeyer, this could easily happen even before then. “The transition is already well underway. Though people mostly associate payments with physical stores, they have been paying with their phone on many occasions − for example for parking,” he says. It wasn’t long ago, however, when cash was still the prevalent form of payment. During the 1990s, cash accounted for 60% of all payments, but fast forward to 2017 and you will find that coins and paper notes were down to 20%, according to the Danish National Bank. Nets

anticipates that the launch of Dankort on mobiles will help drive this trend further. “We have gone from decades to months between new technologies being brought to consumers,” Hoffmeyer says, referring to the time it took for payment cards with magnetic stripes to get chips and to become contactless and, ultimately, to appear on mobile phones. “It’s all part of a future trend, where technologies are introduced at an accelerating pace and where consumers adopt the technologies faster − as long as they work and increase convenience,” he says. "I forgot to cancel my Netflix subscription again…" The shift to mobile payments also marks the coming of an era of more intelligent payments, for example when managing online subscriptions. It can be hard to keep track of the increasing amount of online subscriptions from streaming services like Netflix and Spotify. They all have access to your card, but, at present, it’s not possible to manage these payments centrally. With mobile card payments, however, that is going to change.

Take the smart token from Nets, for example. It can be best described as a virtual copy of your card, which can be programmed to work the way you want it to. Let’s say, you only want your Spotify subscription to last for three months. All you have to do is put a limit on your token, and it will expire after three payments. Another possibility is to create tokens for your kids. These tokens can be customised to only work during daytime hours or at certain stores. They may even be limited, so they can’t pay for alcohol or cigarettes. “Tokenization makes payments more secure and it gives you programmable money,” Hoffmeyer says. Towards invisible payments While programmable money and invisible payments can seem futuristic, they are actually indicating a return to the past. In the old days, shopkeepers used to keep a tab on every customer, who could then take whatever he or she needed from the store without paying for the goods each time. The shopkeepers also knew when someone was too young to buy alcohol or cigarettes. This is not very different from a future, where payments happen automatically and intelligently with no need to tap a card for every transaction. “We have to remove the complexity from payments,” Hoffmeyer concludes, anticipating a future where mobile payments become invisible: “It’s not so far away.”

38 Sponsored content

Tags: Legislation, privacy, data sharing, EU, PSD2, GDPR

Attorney: Radical EU demands for data sharing in the financial industry will not end off in Wild West A directive advocating third-party access to bank customersâ&#x20AC;&#x2122; financial data and a regulation strengthening data protection for European citizens. Are they on collision course? Journalist: Dan Mygind

Fotos: Stine Heilmann

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Tags: banks, identity management, GDPR, regulation

Regulators are tightening the grip on banks' identity access practices It is no longer enough to only manage access to core IT systems within financial companies. In order to efficiently protect personally identifiable information and stay compliant with regulations, companies have to rethink their entire approach to managing the access and entitlements of their employees, says CTO of Omada.

n 2008, a rogue trader nearly brought down French bank Société Générale. Jérôme Kerviel, then a junior trader at the company, single-handedly managed to make unauthorized trades of 50 billion euros, which ended up costing the bank 4.9 billion euros. It is not the first – and probably not the last – time a big bank has seen a rogue trader running amok, damaging both the financials and reputation of the company. What is more alarming, however, is that it is not only the proper risk control mechanisms to prevent this sort of behaviour was not only missing from Société Générale and other similarly impacted companies. Even today, many financial companies struggle with the authorization and segregation of duty mechanisms. In other words: who gets access to what, when and how. “When we run audits in financial companies, we often find things that don’t meet the standards of the regulatory authorities,” says Santeri Kangas, CTO of Identity Management Solution-provider Omada. Risk of unauthorized access According to Kangas, it is not uncommon for Omada to discover so-called “orphan accounts” in the IT systems of financial companies in an audit.

These accounts do not have any owner – perhaps because the person has left the company without the account being shut down. Sometimes the password is even changed after the person has left, which keeps a door open for people who should no longer have access to the systems. Omada has also discovered accounts that never expire. “It means somebody could be using the account indefinitely” Kangas says. On a general level, he says, companies risk not complying with the general principles laid out across EU in recent regulations such as Basel II and Solvency II. They require companies to step up their game in terms of control and compliance across their IT environments and monitor the entire lifecycle of identities in the organization, among other things. For example, to follow the principle of segregation of duty, a person who makes purchases in a company cannot have the role of approving those purchases as well. In addition, the principle of re-certification implies periodically reviewing access rights to everybody in the company, so no one gets access to something they shouldn’t. In Germany, where Omada also operates, financial regulators have taken

When we “ run audits

in financial companies, we often find things that don’t meet the standards of the regulatory authorities ... Santeri Kangas, CTO of Identity Management Solution-provider Omada

this a step further to prevent convenience shortcuts. In the past, one bank manager was enough to authorise re-certification, but such shortcuts are now strictly forbidden and it is mandatory to have two people approve requests. Kangas stresses that these principles are also important to increase security and prevent data breaches. “Over 35% of breaches are committed

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... Santeri Kangas, Chief Technology Officer, Omada by insiders, and in nearly all APT (Advance Persistent Threat) attacks today their identities are being used as an attack vehicle,” he says. Identity management key to protecting personal data If these things sound complicated today, it is nothing compared to next year. When the EU General Data Protection Regulation (GDPR) comes into effect on May 25, 2018, many financial companies will have to rethink the way they approach identity management, according to Kangas. Financial companies usually have measures to reduce risk in systems that involve moving money around. But when the GDPR comes into play, companies will have to expand the scope, he says. “Now everything needs to be governed. Not just the core banking systems but all those that handle personally identifiable information, like a customer’s name, phone number or email address.” Implementing these requirements could be complicated without proper tooling. It is not uncommon for a financial company to have hundreds of systems with user access, and because many of those companies still manage

accounts and their entitlements manually through IT service management systems or with aging, homegrown systems, expanding the scope can seem overwhelming. “It’s no longer just a paper exercise once a year – you need to maintain a full log on who has access to information and who authorized the access. It becomes so expensive and cumbersome, that it doesn’t make any sense to do it manually anymore,” Kangas says. Automating identity management The key to managing access in financial companies with a complex environment is, according to Kangas, to automate some aspects of it using role-based access control (RBAC). That means integrating with existing HR-systems and automatically assigning the proper user role for each employee based on his or her position in the company. The solution automatically calculates which “birth right” resources employees should have access to, and automatically provisions the right resources to them. It also automates common employee lifecycle operations, such as changing department or position, holiday deputy arrangements or going on a maternity leave.

Financial companies in Germany have already adapted to most of these new standards according to Kangas. “Germany has been leading this movement which promotes risk governance,” he says and concludes: “In the rest of Europe, large financial institutions, insurance companies, municipalities and others are now responding to the call.”

...

About Omada •

•

Founded in 2000, Omada is a fast-growing, independent cyber security company providing identity management and access governance solutions and services. Core services are identity lifecycle management, compliance control, provisioning, and access risk management. Omada's customers include large and midsize enterprises within regulated industries such as finance and pharma, as well as other sectors, predominantly in Europe and North America.

42 Sponsored content

Tags: bank data, standards, PSD2, APIs, innovation

Danish banks are preparing for Payment Service Directive II, but some fear that innovation will be delayed because the banks are missing a standard approach to exchanging data.

Wanted: A Standardised Way to Access Banks' Data Journalist: Dan Mygind

“T

he banks in Scandinavia are lagging behind in making open APIs.” Rafal Lipinski, cofounder and CEO of Hufsy, a Danish fintech startup, is calling for a more unified approach to open APIs in the Nordic countries. One of the core elements in the Payment Service Directive II (PSD2) is the requirement for banks to provide open APIs that give third parties access to account information and make payment initiation possible. Some Danish banks have already established partnerships with fintech startups and given access to some of their systems by means of APIs, but they still lack an overall standard for the APIs. Germany leading the way At Hufsy, Lipinski and his colleagues have chosen to launch their service in

... Bjarne Stech,

Chief of Innovation, BEC

Germany where effort to standardise bank interfaces have already paid off. “In terms of readiness, the German banks are frontrunners. They chose the HBCI (Home Banking Computer Interface) standard for interfaces for banking. Thanks to that you can create an API and connect to the banking infrastructure based on legacy systems. In Germany, you have companies that are just API providers − like Figo that can connect to 98% of German banks. In other countries there are no such standards,” Lipinski says. Focus on standard API This concern is echoed by Bjarne Stech, chief of innovation at BEC which provides IT and services for a number of financial institutions in Denmark. “I am a bit worried that there is not one standard for the API. We can end up with a situation where there is one standard for BEC financial institutions, one standard for SDC financial institutions, one standard for Bankdata, one for Danske Bank and one for Nordea. This can hinder innovation,” Stech assesses. He mentions a UK initiative called Open Banking Working Group (OBWG) that could be an inspiration for Danish and other Scandinavian banks. OBWG is working to provide a framework for open banking and data sharing via APIs for UK's banking industry. Need for a technological sandbox In Germany, Hufsy is cooperating with Fidor Bank and, due to standardisation, it is much quicker to start the technical implementation of a solution.

“With Fidor, we didn't have to have lengthy negotiations, do business process work or speak to lawyers − things that take so much time. It only took three weeks to do a test in a sandbox and move to production. That's pretty speedy,” Lipinski explains. Despite the lack of a standardised approach similar to the German one, Danish fintech startups are using APIs to build new functionality on top of the traditional banks’ systems. One example is Lunar Way, which developed a mobile app that accesses Nykredit's systems. “Lunar Way is using our existing APIs to get access to our backend systems,” Stech says, and expects many banks’ internal APIs to be used as a foundation for PSD2-APIs. He is convinced that the way forward for API standardisation is more cooperation. “If we can establish a technical setup where cooperation and innovation are encouraged, i.e. a common sandbox environment with data and APIs, we will go a long way,” Stech predicts.

...

What is an API? API is an Application Programming Interface, which is a technical term for the interface IT systems use when they exchange data with each other.

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Tags: niche banks, digital disruption, analytics, data insights

Next five years are crucial for Danish banks’ survival Danish banks are resting assured, while new, unexpected competitors are challenging their business. If the banks don’t act now, they will be in trouble within five years, Experian estimates.

ubstantial profit is yet again normal in the bank sector after the financial crisis has come to an end. According to analytics experts at Experian, however, this might soon enough change. Not because a new recession is lurking, but because new competitors are sneaking up unnoticed. “When the largest banks are keeping an eye on each other for their next strategic moves, they are looking in the wrong direction. Non-finance companies with a massive customer base are entering the bank industry – those are the ones to worry about. They will steal market shares, but banks have not yet realised this,” says Mads Heindorff, Commercial Strategy Director Nordics at Experian. Forrester Research has recently conducted a survey in cooperation with Experian to find out how business leaders see the future. Their report shows that almost three out of four top executives think that traditional business models will disappear in the next five years due to the digital revolution. “Continuing with business as usual is the biggest risk the financial sector faces today. They simply have to invest in innovation,” Heindorff says. Airline steals market shares from banks New competitors from other industries have already started attacking traditional banks by focusing on digital niche markets. One of these newcomers is Bank Norwegian, which offers savings products, credit cards and personal loans online. The bank, established by low-cost airline Norwegian, has automated the process that assesses customers’ creditworthiness. The result is more than 1

million Nordic customers – managed by only 69 employees. “In the future, more competitors like Bank Norwegian will come from other industries. Companies with huge customer bases will enter the banking business and take over parts of the banks’ business,” says Jacob Carlstedt, Sr. Global Business Consultant at Experian. Utilizing the data gold mine                     In order to survive the digital challenges and increased competition, banks must optimize customer experience by using data, according to Experian. “Banks need to know their customers very well. A lot of banks – and businesses in general – currently don’t. Instead of optimizing customer experience and hence earnings from existing customers, they are mainly focusing on acquiring new ones,” Carlstedt says. Today, data means so much more than just a collection of facts and figures. By using advanced analytics and automated decision-making software, banks can generate insights and decisions on how to interact with their customers. Not just to improve customer experience, but also to increase profit by upselling at the right moment. “Many banks have a gold mine of data – but if they don’t have the right competencies in-house to harness insights, even the most advanced software is of no use,” says Carlstedt, adding: “Experian can help banks with exactly that, so they can focus on optimizing customer experience instead and automate more processes using data.” Customer experience drives loyalty In the good old days, managers of local banks knew everybody in their commu-

nity and what they needed. Banks should give their customers the same experience today – using data. “Traditionally, customer loyalty has been high in the financial sector, but since it has become easy to change banks, customers are more willing to switch providers to get the best experience,” Carlstedt claims. A key step in becoming the desired provider is to look at data more broadly. “Today, banks’ departments often work in silos, not sharing data. A client in one department can be targeted with an onboarding campaign from another department. Banks have to get a 360-degree view of their customers and use it to create additional value,” Carlstedt says. Coming years are pivotal The pace of the digital transformation hasn’t been particularly high yet, according to Heindorff, but it will soon accelerate violently. “Banks are facing big challenges. If you think Bank Norwegian has reached its peak, you’re wrong – I am confident, their growth continues in the coming years. If traditional banks don’t act now, it will hurt them in the long run,” he predicts. He also argues that with data, analytics and automation advancing so fast it’s only a matter of time before we see banks with only a handful of employees. ”If the traditional banks continue their business as usual they will start losing opportunities and customers. Some will make it, others will take cuts – and some have to really wake up, if they still want to be in business,” Heindorff concludes.

Sponsored by

...

Jacob Carlstedt, Sr. Global Business Consultant, Experian

...

Services and solutions for Bank Norwegian provided by Experian: • • • • • •

Business consulting Credit Data for decisions in Denmark and Norway - positive and negative data Power Curve Strategy Manager Analytics – Full IFRS 9 framework (all models, ECL) Estimation and macroeconomics impact Analytics outsourcing – 3 year near and offshoring program

Winning in the customer era – Key Findings

73%

of business leaders believe that traditional business models will disappear in the next five years due to the digital revolution.

81%

believe better customer insights will be a top business priority in the coming years.

73%

believe enhanced analytics capabilities is a top business priority.

43%

In the Nordics, believe new competitors are the biggest inhibitor to success.

71%

Also in the Nordics, see existing customers as the single biggest driver for business growth.

Source: Forrester Research Report made in cooperation with Experian based on a study with 380 C-level and functional leaders at brick-and-mortar organization in Europe, the Middle East and Africa. 48 % being from the financial services industry.

48 Sponsored content

Tags: corporate innovation, established players, startups

Technology and customer expectations are moving fast. In order to be one step ahead, more and more banks are investing in startups or creating startup-like environments inside their own organisations.

Banks are learning from startups for future survival Journalist: Klaus Thodsen

eing a bank with happy customers is more than just a question of profit and loss for the individual. It is also very much a question of banking products and services, and giving the customers what they didn't even know they needed. Doing business with a bank can be a complicated process for many people, and that’s why the little tools to make it all run a bit smoother are in high demand. “We pay a great deal of attention to relevant services within personal finances, and we try to always be aware how technology can help both the bank and the customer,” says Ole Madsen, Senior

Vice President for Communication & Business Development at Danish bank Spar Nord. Investing in the future These days customer behaviour is very different compared to just a few years ago. We are used to interacting with our bank via mobile phones. The best solution is very often the most convenient solution for us, and the market now sees a growing number of services aimed at making banking both easier and more accessible for the customer. “We always have to be aware of what our customers need. Even if they haven't

realised this themselves. As an example, we have developed Sunday, a home-buying platform where users can search for available homes based on their financial situation and can even get pre-approved for a mortgage. Customers save time and, at the same time, the process reduces manual work within the bank. It's efficiency in its purest form,” says Simon Haldrup, Head of MobileLife, an innovation department of Danske Bank, located separately from the parent company. While banks have closed one branch after another over the last few years, traditional communication with customers has also become a thing of the past. The

Sponsored content 49 trying to be on the technological forefront,” Madsen says. Technological development has been speeding up dramatically over recent years. Today, most of our day-today banking can be done from our own living room. Piles of paper, snail-mail and slow administration is a thing of the past at most institutions, and fast and efficient work processes have become a condition for the banks of tomorrow. ”Traditional tasks such as customer meetings and a human touch on a given case will continue to be an important element within the banking industry. I don't think that part is going to change. But there is no doubt that every step of the process before and after the meeting, such as calculations, signing, approvals, etc, should be made as easy and efficient as possible,” Haldrup says. mode of contact has moved from personal to digital: via mobile phones, laptops or tablets. To innovate in the financial sector, it’s necessary to think like a startup − something that Spar Nord and other similar banks have realised. “At Spar Nord we are very keen on partnerships with startups in the eco-system around our own business. We like to open up our platform for independent and talented entrepreneurs who think in a different way, and bring new ideas to the table. An in-house department is no guarantee for success, so this is our way of looking for quality,” Madsen says. Even though there are differences in how Danish banks invest in digital solutions, the need for a new approach is something that the entire sector is very much aware of. If you ask Simon Haldrup and Ole Madsen, there are some very good reasons for this. “The future doesn't wait for anyone, and

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Ole Madsen, Senior Vice President, Communication & Business Development, Spar Nord

if you want to be a part of it, you have to adjust to it. Customer expectations are constantly changing, and if you don't try to always be one step ahead, you will be left behind,” Haldrup says. Challenging loyalty Mobile services and products are regarded as essential for keeping customers and attracting new ones. Both Madsen and Haldrup believe that technological advances will challenge customer loyalty. The future will be much more a question of loyalty towards the best services and products, than of the individual affiliation to a bank, they say. “It's an ongoing struggle for the future. The next great idea, the next product on the market is aimed at the next generation, and we are always on the lookout for entrepreneurs with great new ideas. As a small bank this is the way for us to compete − by always

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Simon Haldrup, director of MobileLife, Danske Bank

Separate the startup from the mothership It is agreed by both Danske Bank and Spar Nord, that understanding the customer, as well as your own strengths and weaknesses, are among the key attributes of a successful startup − whether it is an integrated part of the company, or an autonomous subsidiary, loosely connected to the parent company. At the same time, both see it as vital to know exactly which segment of the bank’s customers are targeted with their products. “Gathering insights, generating ideas and, most importantly, challenging status quo is vital and a large part of our work in MobileLife. Even the most excellent idea will lead to nothing if there isn't a great focus on the practical work as well − which is also a part of making a new product,” Haldrup says. In just a few years, MobileLife has gone from one product and four employees to four products and over a hundred employees. Even if the startup is a part of the parent company, it is important to keep the two apart and provide enough space for both of them to do what they are good at, according to Madsen. “It is essential for a startup to look at the parent company from the outside because this is how it can find the potential for improvements. It has to look at the company through the eyes of the customers in order to realize what their needs are and constantly improve the services to meet those needs. For us, that is the meaning of being successful in our startup investment,” Madsen concludes.

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Without “ great content,

you can't break through to the customers ...

Michael Plimsoll, Industry Marketing Director, Adobe

Tags: customer experience, artificial intelligence, data analytics, regulation

Better Customer Experience?

It's All About Data

Don’t look at regulation as a barrier. It can actually help you focus and leverage existing data according to Adobe.

“I

t is necessary to address your customers in a personal and relevant way in order to stand out,” says Michael Plimsoll, Industry Marketing Director at Adobe. Given his current work at Adobe, where he advises clients of adopting a data-driven marketing strategy, and his previous work with data analytics, he knows the value customer data can bring in different scenarios. Content + data-driven insights “Bring together all the information you know about the customer whether it is CRM-data, behavioural data or social

data so you can use clever algorithms with AI and machine learning to predict what the next best action or message should be,” says the experienced digital marketer with a passion for data analytics. He adds that when the needs of the customer are identified, including context, location, device and other temporal and behavioural variables, then you can send out a message tailored to the needs of that specific customer. “Without great content, you can't break through to the customers. Without data-driven insights you can't target, you can't measure or get the results

you need. Content and data working together creates the great experience they need.” AI and machine learning – when? All this about AI and machine learning sounds fantastic, but how far is the financial sector in applying these technologies? Well, the potential of the technologies is acknowledged, but the actual, widespread implementation is still a few years off. According to a report titled “2017 Trends in Financial Services and Insurance: Customer is Priority,” only 4 percent of financial service com-

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panies see “using artificial intelligence/ bots to drive campaigns and experiences” as the most exciting opportunity for 2017. However, a full 33 percent see it as the most exciting opportunity for 2020. Fintechs, like Moneyfarm, are already leveraging this new capability to great effect and it will not be long before the traditional mainstream players follow suit. Management of data is crucial This doesn't mean, however, that personalised experiences are off the table. According to the report, which was written by Econsultancy in association with Adobe, the top priority in 2017 for financial companies is targeting and personalisation. As Plimsoll points out, 2017 is all about building a foundation of data that complies with regulations and meets customer experience demands. “We have to identify where the data is, bring it together and put it into the right format so we can anticipate, predict and deliver what the customers want almost before they ask for it. We need to do all these things whilst considering and respecting their privacy,” he explains. And what about regulation? Regulations, such as the EU General Data Protection Regulations (GDPR) which will come into effect in May, 2018, are aimed at protecting individuals' privacy and can be perceived as inhibition on innovation – though they don’t necessarily have to be. GDPR is stressing the importance of data management, which will accelerate the work of identifying data and make sure it is available to the right people at the right time, thereby enhancing the establishment of a data infrastructure necessary for data-driven insights. Similarly, with the Payment Service Directive 2 (PSD2) to be implemented by January, 2018, financial institutions can feel almost besieged by regulatory frameworks. Plimsoll acknowledges the compliance burden, but believes that this regulation can also be used in innovative ways. “The financial service industry is under massive pressure and subjects such as privacy and security make it a highly regulated industry. The regulation, however, is helping to drive change. PSD2 with open API's will

drive more competition, but also make banks leverage their data better. In many ways, it will speed up progress,” Plimsoll predicts. Incumbents, startups and innovation Plimsoll mentions financial institutions such as RBS and Aviva which have digital startup labs in order to set innovation free so they are not constrained by traditional barriers. “We will see more rapid innovation and leverage of data with PSD2 as well as more fintech partnerships aimed at more and better use of data,” he says. Establishing small, agile labs more or less shielded from the mother company is one thing, turning the mother organisation itself around is quite another. Many financial institutions with legacy systems and technology stacks face challenges, which is reflected in the fact that only 64 percent of financial organisations claim to have “access and control over customer and marketing application data” – significantly lower than the average of 75 percent across other sectors. Better usage of data Financial organisations are well aware that improved data analytics will be a crucial component of better customer experience, but they also admit that their capabilities lag behind their ambitions. A full 99 percent of respondents consider “improving data analysis capabilities” to be a key element in better understanding customer experience requirements, and more than half of respondents plan to increase their marketing analytics budget over the next year. Financial organisations are already data rich and have smart, data savvy people who have put the data to good use in instances such as fraud detection. We will see the same happen in data-driven marketing and engagement with existing customers. “How do we get the right quote? How do we predict what the right account is? We must look at the individual customers and make the right product or service available to them. Forget about the product, and focus on the customer. Once you’ve got a sufficient data infrastructure in place, you can begin to focus on delivering data-driven customer experience that will differentiate you from your competitors,” Plimsoll concludes.

Which three digital-related areas are the top priorities for your organisation in 2017? Targeting and personalisation

33%

Customer journey management

31%

Content marketing

25%

Social media engagement

23%

Multichannel campaign management

21%

Brand building / viral marketing

20%

Marketing automation

19%

Mobile app engagement

18%

Conversion rate optimisation

18%

Mobile optimisation

14%

Video content

13%

Search engine marketing

13%

Joining up online and offline data

11%

Customer scoring and predictive marketing

10%

Programmatic buying / optimisation

Social media analytics

Real-time marketing

None of the above

52 Sponsored content

Tags: insurtech, sharing economy, insurance

A new branch of fintech startups is quickly attracting attention and money. The branch is called insurtech and, as the name implies, the startups are disrupting the insurance business through business models from the sharing economy.

Trend: Social business models disrupt the insurance business Journalist: Simone Okkels

t is not just banks and the financial sector that gets disrupted by fintech. Since the emergence of the term in the 21st century, fintech has grown to become one of the hottest sectors to invest and to start a company in. Fintech has expanded into several sub-industries: wealthtech (investing), proptech (property), regtech (regulatory) and insurtech (insurance), among others. Denmark has startups in all of the above categories. The last one, insurtech, is very hot right now, according to Thomas Krogh Jensen, CEO of Copenhagen Fintech, the umbrella organization for the fintech sector in Copenhagen. “Globally, there's a lot going on in this area, especially in the UK and US where investments are massive. Insurtech is rising rapidly everywhere, but Denmark is just catching on,” Krogh Jensen says. To get an advantage in insurtech, Copenhagen Fintech entered into a new partnership this spring with TIA Technology, a Danish insurance software solutions provider that works in 30 countries. “Insurtech is definitely a big part of the future of fintech. There's a lot of experimenting going on and insurtech opens up to a whole set of new business models,” Krogh Jensen says.

A social business model that saves you money goBundl is one of the insurtech companies residing at Copenhagen Fintech Lab, the first coworking space in the Nordics dedicated to fintech. The idea behind goBundl is simple: The policyholders form small groups with people whom they trust and share their insurance with

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goBundl team

each other. If only a few claims are made by the members of the group, everybody gets a bonus. However, if the claims exceed a certain amount, the group won’t get any money back. It is a social business model, inspired by the sharing economy. “At its core, insurance is sharing economy. It only works because a lot of people put a lot of money into one pool,”says Jakob Vang Glud, co-founder and CEO of goBundl. Because most people lose money by buying insurance, goBundl wants to give you some of that money back. According

to penge.dk, an online financial magazine, insurance fraud makes up almost 10 percent of all action for damages. In addition to that, policyholders have lost the initial sense of community when it comes to insurance, Vang Glud says. goBundl uses data to improve the services provided to the policyholders and to turn the tables in a business that has looked the same for many years. “We want to make insurance more transparent and reduce the number of insurance fraud cases. We give the policyholders a yearly bonus which traditionally would be earmarked for fraud. If you know the other people in the group, if it consists of your friends, family or coworkers, it's harder to commit insurance fraud,” he says and adds that if someone knows that the extra numbers they put on the bill gets taken from their mother they usually think twice. And if one chooses to commit fraud, the money they get will be taken from the yearly bonus that they would get a piece of anyway. “It makes a difference. You are accountable to people you have actively chosen to bundle up with,” Vang Glud concludes.

...

Examples of Danish insurtech startups according to Copenhagen Fintech spring 2017 • • •

goBundl Gigga Next

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- now part of

Tags: financial planning tools, automation, digital assistants

Being holistic about finances Financial planning gives a feeling of security in daily life, and, according to the experts, 360-degree planning tools will make this both easier and more convenient in the future.

...

Jesper Essendrop, CEO, Schantz

“W

hether planning our pension or getting a loan to buy a house, we all need a full estimate of our economy - incomes, mortgages, pensions, assets, etc. For most people getting a complete overview of their finances and total wealth may be challenging, however, financial planning tools can be of great help,” says Jesper Essendrop, CEO of Schantz, a Danish fintech company which has just become part of Keylane a European market leader in insurance and pension software. With the assistance of financial planning tools, banks and pension providers can easily work out an analysis of the customer’s current and future financial situation. The tools provide a holistic overview and are able to accurately simulate the impact of various financial actions in the short and long term and thereby improve customer experience radically. How to plan across financial institutions “By using advanced financial planning tools, banks and pension providers can give their customers a true 360-degree financial overview. At the end, it is up

to the customer to decide how detailed the overview must be, in this respect the planning tools are essential in making the right decisions,” Essendrop says. Most financial institutions aren’t able to give the customer the same holistic overview of their finances as a planning tool can, because they fail to look at the customer's entire financial situation which often spreads over several financial institutions. “The risk a customer faces today is that a bank may end up giving inadequate advice, because it doesn’t take into account assets the customer might have in other financial institutions. By assessing all the financial aspects, the financial institutions are better equipped to advise and present a financial strategy to the customer,” Essendrop says, and goes on to point out that financial planning software is easy to use. Even with limited information such as a customer’s income, address and number of children it is possible to provide an accurate financial plan. Save time and money Technology doesn’t only present new possibilities for customers to gain great-

er insight and control over their financial situation. It also speeds up the long bureaucratic processes they have to deal with when interacting with a bank or pension provider. “We're interested in developing cognitive solutions that improve the interaction between banks and customers e.g. by machine learning technology. If the customer can get a full overview of his/ her economy by using a smart app or web solution, there's no need for an hour-long meeting with a banker. I imagine most of us would rather skip those meetings anyway,” Essendrop adds with a smile. There are practically endless possibilities for applying the constantly growing technological advances to personal banking. “Currently we are working on designing a digital assistant that will ensure financial institutions to always be one step ahead of their customers by intelligent monitoring of their customers’ finances to help them make proactive choices. This will make everything – banking, pensions, mortgages and all the rest – so much easier, so much quicker,” Essendrop concludes.

54 Sponsored content

Crowdfunding: A success and failure Alternative financing is taking off in Denmark Tags: crowdfunding, peer-to-peer marketplaces, investments, financing

More and more companies are avoiding banks and seeking alternative financing like crowdfunding. Peer-to-peer lending is becoming especially popular among companies in need of smaller loans. Journalist: Elías Lundström

hen the financial crisis hit back in 2008, banks were reluctant to lend money to companies. Although the trend has somewhat reverted by now, smaller companies are still facing the same resistance from banks as they did during the peak of the crisis, according to an analysis from 2016 by state fund Vækstfonden. This situation has given birth to a new range of alternative financing models also known as crowdfunding, where it is large groups of people and not banks that put the money on the table. In Denmark, crowdfunding has been growing more than exponentially for the last couple of years. In 2016 alone, Danish companies and individuals raised around 120 million kroner through crowdfunding, which is a substantial increase compared to the 50 million kroner the year before. “There has been an impressive growth in the crowdfunding market. Overall, we follow the international trend,” says Frederik Ploug Søgaard, chairman of Danish Crowdfunding Association. There are numerous success stories in the Danish crowdfunding industry. E-bike producer MATE recently took home over 30 million kroner through the international crowdfunding platform Indiegogo. It represents a part of the 25 percent of Danish companies that are seeking financing and using alternative funding sources such as crowdfunding. Crowdlending moves the most money The most successful branch of crowd-

funding in Denmark is crowdlending. In short, it is an alternative way of financing loans, through which a group of individuals lend money to either companies or other individuals and get a return on the interest rates. In 2015, Danish startup Ageras used crowdlending to finance two loans totalling several million kroner through the Flex Funding platform. They are part of an increasing number of companies that choose crowdlending over bank loans. In 2016, Danish companies and individuals borrowed 60 million kroner through crowdlending platforms, which is 133 percent higher than the figures of the previous year according to Danish Crowdfunding Association. “Crowdlending is the most popular choice at the moment,”says Henrik Vad, founder and CEO of Flex Funding. It is the small companies that are especially eager to borrow money through crowdfunding platforms. “The banks have been crushed by capital requirements after the financial crisis. Therefore, they are primarily focusing on companies with the best ratings and lowest risk, which means that the market is open for other possibilities,”adds Vad. Each month, his platform facilitates five million kroner worth of loans to companies. Their investors get an average 7,4 percent return on investment, according to the CEO. Obstacles to crowdfunding growth Although crowdfunding growth is promising, its fate has yet to be de-

...

Henrik Vad, founder & CEO, Flex Funding

cided. Crowdfunding platforms in Denmark are still struggling to turn a profit. “The future of equity and reward crowdfunding in Denmark is questionable,” says Søgaard, adding that it’s still to be seen, whether their business model will work in a market as small as Denmark. The same can be said about crowdlending. Despite being one of the biggest Danish platforms, Flex Funding’s numbers are still red – though CEO Vad is optimistic and expects the company to turn a profit next year. Part of his plan is to expand internationally using the technology in other European markets. If the size of the Danish market is, indeed, in the way of growth, offering Danish platforms outside the borders could be a way forward.

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Festina Finance

...

Mikael Braagaard, CEO at Festina Finance

...

A fintech company originating in Denmark with offices in several European cities. Established in 2007, the company develops cutting-edge advisory solutions for personal financial management.

Casper Gjerris, CIO & COO at Lån & Spar Bank

Tags: financial advice, banking, pension, automation, wealth management

Engaging customers with a user-friendly system and the right data A variety of data sources and an intuitive user interface is helping financial advisors communicate clearly with their customers.

n 2013, Lån & Spar Bank was drawing up plans about the future customer experience for its clients. “We decided that all data about a customer's financial situation should be available in an easily accessible form when meeting with that customer. Our vision was that it should be easy to play around with different financial scenarios together with the customer,” explains Casper Gjerris, CIO & COO at Lån & Spar Bank. Gjerris and his staff thought they had to build a new advisory system on their own, but a demonstration of the Advisor system from Festina Finance in 2014 changed their minds. “We realised immediately that there was a very good match between our requirements and their system,” Gjerris says. From Wealth Management to Financial Advice The only challenge was that the system was not directly targeting banking. “The Advisor system is based on several iterations from the founder Morten Schantz' more than 25 years' experience in developing advisory sys-

tems for the insurance and pension industry,” explains Mikael Braagaard, CEO at Festina Finance. Despite this, Lån & Spar Bank found the features of the system very compelling, so a cooperation between Festina Finance and the bank began. User-friendly interface and smart data collection One of the most attractive features of Advisor is the high number of publicly available data feeds. Pension systems, the Danish Tax Authorities and other data sources feed financial data into Advisor after the customers have given their consent. This data is topped up with data from other sources (e.g. Statistics Denmark), which give Advisor a very powerful data foundation for creating different kind of “what if” scenarios. “The customer and the financial advisor do not have to enter a lot of information. They get instant feedback on how different financial scenarios would play out for a household. What happens if they buy an apartment in Copenhagen? What if they want a bigger car?” Gjerris explains. One of the visual feedbacks of the sys-

tem is a speedometer that veers between green, yellow and red to indicate how financially stretched a household would be in different situations. “Quick and easy simulation means the customer can be engaged in a dialogue. Both our customers and employees are happy with the system,” Gjerris says. Denmark, Nordics, England..? Today, Lån & Spar Bank’s IT-hosting and -services company, SDC, is offering the solution to more than 120 Nordic banks. Besides SDC, Festina Finance has also signed a partnership with Edlund for pension companies. In England, Festina Finance is cooperating with the Building Societies Association. “We have to ask the customer to enter a bit more information as we can't automatically retrieve as much information from public data sources as we can in Denmark. We do, however, plan to interface with Land Registry, Experian and other sources,” Braagaard says. Festina Finance are currently implementing Advisor together with a large building society and is in dialogue with several other companies in the UK.

58 Sponsored content

Tags: startups, competition, entrepreneurship, corporations

It only takes 54 hours to launch a fintech startup 80 would-be entrepreneurs gathered at Startup Weekend in Copenhagen to solve issues ranging from young people’s debt to expensive pension plans in just a weekend. The big financial companies were watching the competition closely for new ideas. Journalist: Elías Lundström

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Tags: payments, card fraud, artificial intelligence, automation

Artificial intelligence is the new weapon against card fraud Nets prevented an additional 150 million kroner of fraud last year. While criminals get increasingly sophisticated, Nets is now using artificial intelligence on a massive scale to prevent card fraud.

ever before has our payment card information been stored in so many different places as today. From the digital newspaper subscription to the online store, where you bought a pair of sneakers, card information is often stored in databases, with a risk of getting compromised. In other words, criminals have an unprecedented amount of opportunity to steal card information and trade it on the black market among other things. For just two and a half years, monthly fraud attempts have tripled in Denmark from about 4,000 cards in 2014 to 12,000 cards in the summer of 2016. "Criminals have become more aggressive and have been especially good at not just stealing card information, but also misusing them afterwards," says Kaspar Kock Kristensen, Senior Vice President for Fraud & Dispute Services at Nets. Previously, criminal activity was mainly limited to misusing card information by manually buying expensive goods − such as TVs or software − in online stores and then reselling those products. Today, however, the techniques are much more sophisticated, according to Kristensen. Using robot software, the criminals are now buying goods and services automatically in many different online stores at the same time. This way each store only sees a few transactions, which

doesn’t look suspicious. Across several stores, however, the card may be used for 30 purchases a second. “The technologies behind card fraud have become more advanced and that compels us to get even better at preventing the fraud from happening,” Kristensen says. For the last couple of years, Nets has been working hard to do just that by rolling out its latest weapon against card fraud: artificial intelligence. The efforts are paying off, it seems. Automating fraud prevention Detecting card fraud before it happens can be rather complex. There are, of course, the most obvious cases, when a card is being used at a physical store in Brazil and then five minutes later in China – something a regular shopper would never be able to do. Analysts at Nets make logical rules to block payments that fit these kinds of usage patterns. Yet, the challenge grows when criminals find new and clever ways to implement their fraud schemes using automated software. Nets have already developed over 700 different logical rules that block fraudulent behaviour – but they are getting increasingly complex to maintain and finetune. “We have to adapt our systems to detect new patterns of fraud at an ever faster pace. This all points towards using artificial intelligence in combination with

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Kaspar Kock Kristensen, Senior Vice President, Fraud & Dispute Services at Nets

huge amounts of data if we are to catch up with them,” Kristensen says. As one of the leading anti-fraud services providers in the Nordics, Nets is handling payments from over 19 million cards. This gives them a unique insight into the behaviour and patterns that explains not only how criminals abuse the system but also the way each of us buy things. Payment data is now being used in a neural network, which is a way of artificial intelligence, to detect patterns in a complex system. It understands the unique payment behaviour of each cardholder and triggers an alarm when some-

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Our goal is to make sure “ that legal users are unaffected

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Kaspar Kock Kristensen, Senior Vice President for Fraud & Dispute Services at Nets.

thing falls outside of normal spending patterns. Combined with the logical rules, the neural network allows Nets to detect a larger number of fraudulent payments even before they happen. “The system works in real time and allows us to immediately reject a payment that looks suspicious,” Kristensen says. Since the implementation of fraud prevention with neural network capabilities, fraud attempts have already started to lessen. Monthly fraud attempts went down again from 12,000 cards last summer to 8,000 cards in the first quarter of 2017, according to Nets. “We prevented an additional 150 million kroner worth of card fraud in 2016 compared to 2014 in Denmark alone,” Kristensen says. The white noise challenge Detecting and stopping criminals is not the only difficult task fraud prevention faces. It is also supposed to avoid block-

ing payments that look suspicious but really are genuine cardholder payments − a concept known as white noise. Perhaps you normally use your debit card to pay for groceries and other small purchases, but what about the moment you decide to buy an expensive holiday online for the first time? The neural network might consider it an anomaly, block the payment and ultimately block the card. Because of scenarios like this, Nets still uses human agents to decide if a payment card should be cancelled. “Our goal is to make sure that legal users are unaffected,” Kristensen says while explaining that achieving this gets easier with more data: “Our agent performance is already three times as good as when we started, because we now have a more detailed insight into how they perform and which rules work and which don’t.” In the end, businesses, banks and consumers all end up saving money, when fraud prevention improves on a large scale.

When a card gets misused, the merchant covers the bill in 80-90 % of the cases, while the bank covers the rest. Additionally, banks and me rchants have administration and dispute handling expenses for each fraud case. This highlights the issue of online payments, where around 80 percent of fraud cases happen, according to Nets. On the Web, security can be scarce and payments are often authorised by their users simply typing in the card number. This is gradually changing as more online stores implement the 3D Secure standard, requiring consumers to type in a pin sent to their mobiles before paying. “Regular consumers shouldn’t be too worried about fraud, since it only happens in about 0.05 percent of the cases,” Kristensen says. “However, I still believe, that criminals will continuously force us to keep improving our technology to be able to prevent fraud in the years to come.”

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Tags: bitcoin, blockchain, startups, banks, money laundering, compliance

Chainalysis, a Danish startup, is pioneering efforts to make bitcoins compliant with regulations.

Making bitcoins attractive for banks

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Michael Grønager, cofounder & CEO, Chainalysis

Journalist: Dan Mygind

onsidering that modern banking has its roots in the Renaissance and that the world's oldest existing bank, Monte dei Paschi di Siena, was established in 1472, six years is an infinitesimal time in the history of banking. In the world of virtual blockchain-based currencies such as bitcoin, however, six years equals centuries’ worth of development. For Michael Grønager, CEO and co-founder of Chainalysis, it was the beginning of a new era when, in 2011, he joined a crowd of delegates interested in bitcoin at the world's first bitcoin conference in New York. Now, six years later, he and his company is spearheading efforts to make bitcoins palatable for banks. Professional compliance in the bitcoin ecosystem For outsiders, bitcoin still has a bad reputation and is being associated with criminals. Bitcoin was a popular currency on Silk Road, an online black market, which the FBI shut down in 2013. As a result, the US authorities started to regulate bitcoin-related activities, with special focus on combating money laundering. Financial Crimes Enforcement Network (FinCEN) drafted guidelines in 2013 that

made it clear that parties dealing with “decentralized virtual currencies” qualify as Money Services Businesses (MSBs) under US law. MSBs must register with the federal government, collect information about their customers, and take steps to combat money laundering committed by their customers. Michael Grønager got interested in this work. “I realised that compliance in the bitcoin ecosystem had to be professionalised,” he says. In 2014, that realisation led to founding Chainalysis with two other bitcoin-enthusiasts in order to ensure financial transparency in the bitcoin world. Transparency and transaction tracking Chainalysis offers solutions to analyse patterns in bitcoin transactions in order to find indicators of money laundering, human trafficking and other criminal behaviour. Those solutions got the attention of Barclays, one of the world's biggest banks. Barclays’ compliance division started a cooperation with Chainalysis in 2015 so the bank could form partnerships with bitcoin-based companies. In 2016, Barclays entered a partnership

with Circle, which, at the time, facilitated buying and selling bitcoins on its platform. “We had to ensure that the bitcoins were not used for money laundering purposes,” Grønager says. One of the solutions Chainalysis is offering to identify money laundering is Activity Monitoring Reports. “We are monitoring transactions and help banks comply with regulations. If some of the transactions deviate from the expected patterns, our tool will generate alerts,” Grønager explains. The cooperation with Barclays has since led to working with other financial institutions. In February, Bank of Montreal partnered with Chainalysis in order to identify bitcoin transactions used for financing human trafficking. The latest addition to Chainalysis' client list of financial institutions is Nets, a Danish electronic payment provider, which offers services to more than 240 financial institutions in the Nordic region. Six years after Grønager's attendance at the world's first bitcoin conference and 545 years after the world's oldest bank was established, it seems that bitcoins are getting traction in the banking sector.

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Robots don’t kill jobs, corporations do The adoption of fintech is predicted to destroy a huge number of jobs in finance, but mass layoffs are bound to backfire, warns Kent Petersen, chairman of Finansforbundet, the Financial Services Union in Denmark. Journalist: Mathias Caspersen

ver the next decade, more than a third of all banking jobs in Europe will disappear as new fintech services are adopted. This prediction was published in the recent Digital Disruption report from US-based Citigroup, one of the largest financial corporations of the world. It’s just one of a series of reports predicting how technologies such as robotics and automation will destroy jobs in the financial sector. Similar reports anticipate even bigger numbers of job losses. Are workers in the Danish financial sector in fact dinosaurs waiting for an inevitable meteor to exterminate their livelihood? Not necessarily, according to Kent Petersen. He argues that Danish financial institutions would be wise to think twice before replacing a bulk of their staff with robots. “If we want a well-functioning industry in 10 or 20 years, we’ll need skilled people. All reports show this – that the biggest barrier for future growth is lack of qualified people. Thus, companies are digging their own graves when laying off people to save money in the short term,” Petersen says. The bigger picture He by no means suggests that financial institutions should avoid adopting new technologies. They are essential, he says, for companies to compete in a global economy where numerous startups are gaining ground with more effective administrations and business models. He does, however, urge companies to see the bigger picture. “Everyone has to realize we’re in this together. No Danish corporation is big enough to handle this development alone. The new technologies will have massive implications on our industry and society as a whole. There’s a huge potential here but also a huge risk. It’s up to us to make sure that the potential works in our favour and not against us,” Petersen explains.

He calls for corporations to enhance the qualifications of employees instead of laying them off. But does he really want financial corporations to invest in their staff even if this would put their immediate competitiveness under pressure? “In the bigger picture it makes sense. Companies like to talk about CSR but this right here is one of the biggest opportunities to show some social responsibility. The new technologies will reshape our society in a big way in the following years, and the corporations will be a key factor in deciding whether they will make us weaker or stronger,” Petersen says. “We have to solve this in unison, so everyone needs to see themselves as part of a whole. The corporations, the public sector, the professional organisations and the universities – we all have to sit down together and work out sustainable solutions; we need to develop new partnerships and new ways to handle this challenge,” Petersen adds. He disregards the notion that human labour will simply be redundant in future financial businesses. “A few years ago everyone thought online shops would destroy all retail jobs. As it turns out, a lot of companies are opening up flagship stores and showrooms to showcase their products, because people still want to talk to other people. We, humans, want the human contact and counselling. So I don’t believe that classic financial skill sets will suddenly go out of fashion,” Petersen concludes.

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Tags: talent attraction, love, Denmark as a brand, culture

For love and fintech: Why Omar Shaikh moved to Copenhagen What makes financial talent move from one of the most vibrant fintech hubs in the world to the city of Copenhagen? Omar Shaikh, CEO of Cocoa Invest, took the plunge â&#x2C6;&#x2019; a decision he never regretted. He did it out of several reasons. One was love. Journalist: Simone Okkels

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Tags: pension, automation, it development, startup

Small startup makes core system for pension giant Nes Technology, a startup with a team consisting of only 15 people, got the assignment to make and implement a large IT system for private pension provider Skandia – a system Skandia’s business must rely on for many years to come.

ith a core system dating from 1998, Skandia’s decision to get a new one wasn’t surprising. The surprise was their pick of provider: a small startup, called Nes Technology, which had never previously implemented a complete core system for anyone. “The new system will improve things for our customers, partners and ourselves. It brings down our costs while adding convenience and simplicity for our customers. Nes Technology’s system was to a higher degree designed with user experience in mind than their competitors’,” says Pelle Wahlström, CEO of Skandia Denmark. The new system will give users access to more self-service with a modern look and feel. New technology and architecture make the system more flexible and it automates processes, which Skandia expects will give them a competitive advantage. New player in a conservative industry A core system is the digital foundation of a pension provider. The system keeps track of all the funds entering the system: who they belong to and how they are invested. At the same time, the system must keep up with new regulation, which is a constantly changing factor in pension management. “It’s hard to get permission to make a core system – especially in pensions, because it’s so complex. There are many factors to keep track of, and we have a huge responsibility for the performance – there can easily be 100 billion kroner

to manage in a system like this,” says Alfred Joensen, founder and CEO of Nes Technology. The core system has been in development since 2007, when Joensen founded the company. He thinks the long process to obtain their first enterprise customer for a full implementation is largely due to the fact that the industry picks its IT providers conservatively. Nes Technology is a new player with a team of 15 people, and when they compete with companies that have hundreds of employees and a multitude of systems implemented, the industry usually picks what seems safe. “Things take time in fintech, but if you have a small team which understands what the challenge is about, you can make great solutions. A project like this doesn’t lie, and proving yourself is everything in a conservative industry,” Joensen says. An IT project on time and budget After a longer due diligence than normal, Skandia ended up feeling safe with Nes Technology as their new core system provider. “Nes Technology is a different provider with an approach and edge dissimilar to traditional providers. What they offer and the way they run projects is better aligned with how we see the world in the future,” Wahlström says.

“They are a small, dedicated and highly technical team, which constantly listens to our needs. I have to say that they work in a smart and modern way. We are on time and budget, and the parts we’ve tested so far look very promising,” he adds. The project is running until 2018, but already the CEO has great expectations for the new system. “The automation will make us more effective and user experience will also be improved: the interface is more modern and customers will be able to do so much more directly in the app. When it’s fully implemented I expect to see a great return on investment,” Wahlström concludes.

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Alfred Joensen, founder and CEO of Nes Technology.

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