Digitalisation at Nordea – Time to Cash Out?

The digital payments revolution is challenging traditional banks to remain relevant to their customers.

Payments solutions in the digital landscape

When was the last time you used cash to transact? If you are from the Nordic region, it is likely you cannot even remember. In the Nordics, the share of transactions conducted in cash was 27% overall and only 15% among consumers aged 30-39[1] in 2016 (versus an EU-wide average of 60%[2]). In the retail sector, an astonishing 95% of transactions are handled digitally and most outlets no longer accept cash[3].

The move towards a digital economy and alternative payments solutions offered by financial technology players such as PayPal and Apple Pay pose a significant threat to traditional banks’ profitability model. Up to one-third of Nordic banking revenues are at risk by 2020 due to lost market share and pressure on spreads and commissions[4]. As a result, banks face pressure to completely overhaul their payments solutions supply chains and rethink their legacy business models to stay up to date with their customers’ needs. The good news is that the move away from costly cash supply chain activities such as ATMs and over-the-counter cash services also presents opportunities for substantial cost savings.

Nordea’s digital transformation journey

Nordea, the Nordic region’s largest lender, is directly impacted by these trends and has established a new Group Digital Unit to drive the digital agenda across the firm[5]. The bank acknowledges that this process is “not only strategic and transformational, but absolutely essential[6]. The CEO has stressed the need to think more like a financial technology start-up, and the bank is investing nearly EUR400m per year on simplification and digitalisation of its front- and back-end systems[7].

One example of Nordea’s digital transformation in Sweden is the development of an e-commerce transaction app called Swish, which is co-developed with five other large banks. The app, which lets consumers seamlessly use their smartphones to make payments and transfer money to someone else’s bank account, was launched in 2012 and has grown to over 6m users (over 60% of the country’s population) in less than five years[8]. This app represents a joint industry effort to counteract the threat of competitive payment methods and leverage the banks’ strong customer base and knowledge of their home markets.

Another part of Nordea’s move towards digital banking is the sharp reduction in cash services and ATMs provided to its customers. For example, Nordea Norway completely abandoned cash services in 2015 which the country manager described as “an important strategic step into the digital world” since “customers want to do as much as possible online or on mobiles”[9]. Nordea operates over 20 purely digital e-branches and over 20% of customer meetings are held online. This migration to digital platforms and closing of branches is expected to yield total annual cost savings of over EUR250m which can be reinvested in further development of the digital agenda[10].

‘Tis only the beginning…

Nordea acknowledges that this is only the beginning of the digital revolution. The bank has launched the “Nordea Open Banking” initiative, inviting programmers to co-develop its future application programme interfaces (APIs) in order to level the playing field with more agile FinTech players[11]. This new initiative should focus on turning customer “big data” into actionable insights, such as accurate risk-adjusted pricing and more personalised interactions and offerings[12]. Traditional banks sit on a wealth of customer data but have historically been very slow to benefit from the insights hidden therein. Nordea would be well advised to prioritise this area going forward to safeguard their market leading position.

In order to successfully implement this digital agenda in the medium to long term, Nordea needs to stay at the forefront of the war for digital talent. Software developers and digital product designers are very sought-after commodities on the job market, and the bank needs to ensure that it offers competitive benefits and recruits in the right talent pools to attract the requisite talent. The alternative options for FinTech developers are plentiful, and only by positioning itself as an attractive place to develop payments solutions software will Nordea establish itself as a leading player in this field.

This digital revolution does not come without inherent risks. Less digitally savvy customers risk being left behind, and more vulnerable customers dependent on cash transactions might be cut off from the financial system. How to strike a balance between the preferences of the many and the needs of the few and vulnerable remains an open question, and as a market-leading bank with deep national heritage Nordea needs to address these concerns. Similarly, it is not certain the bank can guarantee an adequate level of cyber security to support a fully digital economy, and critics might make the argument that certain “manual inefficiencies” in the system are warranted to prevent a systemic blackout caused by a targeted cyber-attack.

Word count: 793 words

[1] “Payments in the Nordics”, data from the European Payments Card Statistical Yearbook 2015-16,

[2] “European Cash Report 2016”, latest available data,—g4s

[3] Credit Suisse (2015), “We Don’t Accept Cash”,

[4] Accenture (2015), “Digital Disruption in Nordic Retail Banking”,

[5] Nordea press release (2016),

[6] “Are you neglecting the internal digitisation?”, Alvaro Garrido, Nordea Group CIO vlog (2017),

[7] Nordea Transformation Presentation (2017),

[8] Swish press release (2017),

[9] The Local newspaper (2015),

[10] Nordea Q3-2017 results release,


[12] Accenture (2015), “Digital Disruption in Nordic Retail Banking”,


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Student comments on Digitalisation at Nordea – Time to Cash Out?

  1. Awesome article, Simon! An element that is also great about the “cashlessness” of the nordics is that as an average (nordic) Joe, you do not need to worry about losing cash (e.g. if you lose your wallet). However, something that worries me about the migration to digital payments is the lack of transparency into the underlying service from a consumer’s point-of-view. As a consumer, your relationship with the financial institution becomes weaker as your touch points become less personal- in this case I would argue that digital touch points are among the least personal. This means that financial institutions’ levers for improvements in customer service becomes fewer and fewer, which in turn drives consolidation of services in the industry and limits competitive pressure. This trend is highlighted by Danske Bank’s recent decision to switch off MobilePay in Norway, and instead partner up with its main competitor, Vipps (developed by DNB). Let’s hope our Scandinavian governments are as succesful in managing this risk as they are at operating SAS!

  2. Great article, Simon! I absolutely agree that the development of the Swish app was a great first step. However, I worry that the (Nordic) banking industry may struggle with innovating quickly enough to meet the needs of consumers and stay competitive. With the emergence if bitcoin and other crypto-currencies as well as roboadvisors like Acorns and Betterment, banks are become less and less relevant as you mentioned. While I agree recruiting top talent is an essential focus on Nordea and others, the industry may be better off patterning with or acquiring companies that are already established in this innovative, fintech space. With the EUR250m they will be saving by closing down several branches, these cashflows may suffice in acquiring companies that are at the cutting edge of fintech. If Nordea and the broader banking industry take this approach, a challenge they will need to overcome is allowing the acquired companies to stay true to their culture and innovative roots. That being said, this is a trend that is just beginning as “Betterment has joined forces with Goldmans Sachs and Blackrock.” Only time will tell if this will be a successful collaboration.

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