Daniel Kjellén - Say Goodbye to the Service Formerly Known as Banking – A Case Study on the Changes We Expect to See Across Europe

Hi, I'm Donna Vivian, I'm CEO of the mobile banking service tech. One of two founders and take is a two unit business, basically where we provide consumer banking services, direct consumers in Sweden through an app. And we're also BTO be business business, where we provide technology services to banks like or AVM or clar throughout Europe today, obviously have to talk about the Swedish consumer business. And just the short background think is with 500,000 users in Sweden. We do everything in house.

I think we're producted engineering company at heart, and yeah, looking so forward to, to take you through that, that journey. So first the state of this mobile banking market or the, the consumer banking market, how I see it, or have seen it over the past, maybe five or 10 years in Sweden, but also elsewhere. It's been a market where switching costs has been extremely high. We've had very low transparency, and I think we've ended up in a market where we've had an enormous of a mismatch between products, good products and the consumers that should consume them.

I think there's three distinct reasons for why we ended up here. The first one being monopoly on viewing people's finances. So the only place where you could view your finances, check your balance, et cetera, would be with the, the bank that you bandwidth. Then you kind of get a monopoly on, on mass market advisory. Cuz if you wanna do mass market advisory, you need to see transaction data, valid data, financial data. And thirdly banks have had a monopoly on transferring money transferring fund.

And I think that joint together with, with a distribution model, that's being physical and hard to compete with has been like a perfect setup. And I think it's, it's though about to change some, some part of that will change due to legislation like these two and some would be, be unlocking unlocked because of new technology. So financial times 2013 had the, the headline banking is heading towards its Spotify moment. I don't know, it's been famous and people are questioned. When is that coming?

The Spotify moment being referred to, you know, the moment in time where a complete industry is being blown away and, and replaced by something new. I don't think we've seen at large scale, the Spotify moment in banking.

I see, I think that over the past decade we see internal processes being redefined or, or make made more efficient like back office or interaction with, with our cost customers. But you know, that completely blown away moment. We haven't seen to looking at at other industries such as travel before we had, you know, the local travel agencies in each single city. And if you wanted to go to Italy, you went to, into these travel agencies, I want to go to Italy and they presented five hotels in Italy and said, you want to go there?

Well, don't you have anything else? No. Then you have to go somewhere else. And the kind of the most important thing for the hotels was obviously to, to make sure that my hotels was picked and distributed through those physical travel agencies and then came home, does not call a trip advisor and anything, blow it away and said, you can compare hotels and you can book, book them online with us and everything changes.

And the entire industry was kind of recalibrated to deliver customer value, cuz all of a sudden doesn't matter anymore for the hotels if they were picked by the travels, but they needed fantastic reviews. It didn't matter if you had, you know, the lowest prices or the best location. If you get got rated two out of 10 or something afterwards, you'll have absolutely zero customers the next week or the next year. So then I think it's amazing how new technology kind of unlocked the market for the benefit of consumers, obviously, but equally much for the good banks.

And it wasn't a lot of people in banking are answering or asking the questions is the future only gonna be low prices looking at most consumer verticals, you have everything from like, you know, the apple of banks and good show banks do something else. Or in, in the case of hotels who had the most expensive ones and super cheap ones. And the only thing that mattered was can they deliver customer value? So I think that what we see now with, with the mega wave of open banking throughout Europe, a lot of people are answering or, or have the questions, will this be the Spotify moment for banking?

And I see maybe now first in the UK where we have open banking, just being implemented. The rest of us, most of us have to wait for another one and a half year before the open APIs would be available, but they ask or they ask or they, they ask a few questions that, that I would see the most important being one will companies or consumers trust these new services that are emerging, the fintechs and the likes of them.

Secondly, will these companies, the fintechs will they steal the customer interaction from the banks. And thirdly with banks be, be turned into dumb high pipes. They just product providers. And I know that a lot of people are now turning to Sweden because for a few different strange market characteristics that we've been fortunate to have for a few years, that's kind of simulated open banking. And I think that that a deep dive into Sweden will give us maybe part of the answers to these. I think important questions.

So Sweden has had one of the highest mobile banking, eruption rates in the world. We've had a national identification system. That's built entire phones, which is so used by all banks, but also by all authorities in Sweden, it's virtually a cashless society myself. I haven't even touched the bill over maybe one or two years and it's not me being strange. Anyone will owe 60 has literally stopped using cash. There's a national peer to peer sending money instantly system commonly owned by by the banks.

So I think that, and the last thing, maybe the most important thing services such as tin reversed engineered the non-public APIs of the banks back in 2013, basically replicating what is now to become piece two. So I wanna walk you through basically these questions about trust, about consumer facing interaction and the down process and, and taking think as a, as a case example. And I think we shouldn't focus too much as of think, but you know, see us as proxy of maybe what's to come elsewhere.

So take launched back in 2013 in Sweden, we reversed in India, the non public APIs in the bank and allowed you to aggregate data from virtually all financial institutions in Sweden. And here comes the trust Christ. So for the first six months, the only articles we had in the papers were about you shouldn't trust them. They're not secure enough. And basically every single bank says it's illegal to use think, and it will have severe consequences if you continue. And then we had our first a hundred thousand users and things started to change.

I don't think that trust is something that should give to anyone the same, you know, but the thing is the inception thing. We didn't deserve any trust and you can't go out to the public and say, well, give us trust. You just need to, whenever they give you some trust, you, you just need to, to be sure that you're professional every single day today with half a million users and to be thinking a household brand in Sweden trust or security would be an absolute non issue compared versus banks. Obviously I think that that we need to serve that trust every day and serve those banks.

But I don't think that that the consumers makes much of a difference. The second thing we did a year later after we launched was that we also started doing payment initiation. So we initiated payments through the same APIs, basically that anyone do transfer bill payments inside tin, but executed by your regular bank. So you are actually allowed to court cut your bank and people increasingly have done so over the past two years.

And I think there are a few distinct reasons why one is how we enrich the data, how we empower the consumer to be in the front seat of their finances that we do with the multi-bank and that we do it with a very nice, intuitive UI. So I would say on the question, will there be competition when you now can take your bank and deploy it in another service and bank elsewhere, no matter where the account is held? Yes. I think it's gonna be definitely up for competition. Not saying that that people won't stay with the banks. I think that you have equally good opportunities of billing.

These services, building aggregation and building payment initiation from other financial institutions. Last year, we did took maybe the biggest step that we've done. We went from only providing real, only advice for the use of base to make those advice actionable. So instead of you saying, well, we see you have 10,000 euros on the 0% interest account, we say open a new better account. You have 1% do the KC and onboarding in real time. Insight. Think it's incentive there with a partnering bank.

And you can also then from within the think app transfer money from 0% to, to 1% we do the same with mortgages. We collect all the data, the property value, exact term structure, loan sizes credit for you and provide up to two partnering banks. So they can come back with an exact price. This is how much you would pay with us. And we remortgage insight fee team costs, then be FSA regulated these days.

And, and I think that if you would've asked banks 3, 4, 5 years ago, they would never, ever have accepted situation to be price compared or to be well, you know, considered down pipes. And sometime during these years, you know, 500,000 users today, we have 20, they have on aggregate 25 billion euros on more with mortgages, with a majority of those S being wrong priced because it's been negotiated with a bank in a local branch office. The opportunity when I go to two banks, the best that I want to work with and say, I want you to provide better offers to my customers.

It's a fantastic opportunity for them. It's not that they feel any chance that they're down by if they're making extremely rational decision, because they know that the switching market is not there screening this technology is the only way to unlock this market. And the customer acquisition cost is a fraction of the TV answer that they would've spent. And they know that whether they lose customers from other providers, this is the key to benefit from PST two and open banking.

So yes, banks have become dumb pipes, but I'm quite sure that I don't believe them to be dumb pipes. I don't think they're dumb pipes. And I think looking at how this market would change, I think there will be a fantastic niche market. We're saying I want be the pipes providing more, just current account credit cards to the lives of team or Amazon or Facebook. Obviously modules will be lower, but volumes will be extremely high. So what do we think that whenever answer these questions?

Well, people will trust new services. If they deserve it, they will interact with these services and court cut the banks. If those services can provide something better or more, more efficient. And thirdly banks will, to some extent, some of them be able to provide products into these nerve services acting as pipes. How do we think this will redefine this market? I think firstly, I think we go to a market where we, where, where new technology and legislation will bring transparency.

It will move tons of power from consumers to also that way around, obviously from banks to consumers, I think that consumers will pick and choose their banks rather than inherit it. And I think it's the mega winners of this is not going be the FinTech, but it's going to be the fantastic banks.

The banks should provide good services at good prices that haven't got the number of users that they deserve over the past 10, 20, 30 years, because the only way to get new customers basically to sit and wait for your current customers to make and hope that their new kids 18 years from now will, will pick the same bank. And I mean, that must have been dreadful situation. And I think it's gonna be, be the most rewarding situation to be a banker in our lifetime. When this European consumer market is gonna be reshuffled, obviously being the first one out, say, I want that user. I want that user.

They are wrongly price. They have the wrong products. Currently is gonna have be an enormous opportunity.

I think, as I said, the beginning, we're gonna see the good show banks and apple event gonna be lifestyle products picked and loved by users paid 10 times more. You're gonna have the cheap choice of banks and you're gonna have everything in between.

I think, as I said, it's gonna be the most exciting time. I think it's going be rewarding for those who deserve. And the one who fall behind obviously is gonna have a tough time. If you have a question about our technology, how we can do this in Germany or elsewhere, please finally outside. But thank you very much for having it Questions. Yes. Question. Thank you. Very nice presentation. Very captured. My attention question I have is obviously went through the journey.

You said today, you have all the banks connected, but there was a time where you probably start with 1, 2, 3, et cetera. So I wonder from customer perspective, how important was for them to have a view, you know, full, full suit of, of banks available rather than just few at the beginning and how you went around that, you know, convince them to start using your product. Even though there wasn't a few suit. And the second relate to this is, you know, I can understand this is very nice value position for the banks that as you said, struggle, don't have enough of customers, et cetera.

How about leading banks? You know, those that really, you know, today are living in the market.

They, they have big market share and they don't want really to prompt their customers to even start thinking, to lose their, to leave a bank. So, so first when we launched the screen, I think we had 15 banks, which would represent maybe 95% of the market. And today I think we're at 50 or something. So adding every single credit card, et cetera, you know, most customers add one or two banks. I think that the majority of the value is actually what we do with the data rather than to have the holistic picture. But obviously those combined is, is, is valuable.

Second question was yes, about the incumbent bank. So the banks, so the, the, the, the same as accounts, partnering banks, they would be like newcomers and, and the challengers. Whereas the, the mortgage banks are both market 80 banks.

I mean, they're number, I think number three and number five in terms of size in Sweden. And I think the reason why they do it is because this doesn't affect their downside with open banking. They lose customer whether they wanted or not with open banking, if the competitors do stuff like they challenge the banks or other incumbents, this is technology is only channeling customers that want to come to them. And it's kind of unlocking. So basically I know what they're most overpay customers, where their competitors are paying, you know, exactly.

And I can just cherry pick them for them and say, these are the segment where you have extremely competitive offers, and there's no way for you to find these customers in efficient way. Do you want to do it? You want to send, you know, individual targeted offers. So it's not really cannibalizing in any way their existing customer made space or, or position in the market.