Financial products are a big part of our daily lives here in Northern Europe. We use credit cards and mobile payment for everyday purchases, amortise and pay interest on loans and mortgages, and use various banking services to manage our finances. New ways of buying and managing personal finance products have notable effects on consumers’ lives.

According to KPMG, the Nordics has established itself in financial technology market: the region created three of the top 10 global fintech deals in the first half of 2018. The buyout of Nets in Denmark is the third biggest deal worldwide. iZettle and Nordax Group deals in Sweden, respectively, are the fifth and 10th biggest deals globally. This adds up to $8bn spent in the region.

The Nordics has been held up as an example for others to follow in fintech for a long time now. That is due to the high degree of collaboration between the governments, regulators, financial institutions and businesses, and a history of technical innovation – Ericsson, Nokia, Skype and Spotify, to name a few.

The banking and financial services industry is in the midst of a big transformation

We listed several key trends that are shaping the way people buy and manage their personal finances in the Nordics.

1. Digital-only banking

The number of players in the financial market with a fully digital presence is growing at a speedy pace. Interesting examples include Revolut, N26 in basic banking services, Stabelo and Hypoteket in mortgages, and FellowFinance and Bank Norwegian in consumer lending.

These providers meet the client online and offer an excellent customer experience through fast onboarding and application processes. For consumers, this means easier and faster access to various financial products and better products through increased competition.

We think that digital-only banks are great for customer onboarding and the competitive environment. However, the new system means less face time (and sometimes less shared information through discussion) between banks and consumers. This is especially true for the elderly and digitally non-savvy banking clients.

2. Customer journey digitalization

Many of the incumbent market players in the Nordics (e.g. Nordea, Danske Bank, and OP) are investing heavily on automating and digitalizing their existing processes. These developments will mean shorter product application processes and better digital channels to manage personal finances. For instance, by automating credit decision making processes and leveraging blockchain for smart contracts, consumers do not need to visit banks or send documentation regarding mortgages. This is already possible in Finland through, e.g., the newly launched digital real estate platform Dias.

We think digitalizing customer journeys are great and it will improve the way people buy and manage personal finances. However, rarely algorithms and digital setups are perfect in the beginning and can fully replace human insight during banking customer journeys.

3. Better tools for decision making

Regulation around the banking industry is also changing, resulting in better access to data. The new payment service directive (PSD2) accompanied with Data analytics and eventually, AI is a good example which will provide banks and third-party service providers with a way to offer much more personalized services for consumers, based on their banking data. There are great examples in the Nordics, e.g., Enfuce, Tink, and Instantor, who are developing the needed infrastructure for this to be a reality already this year.

We see this as a groundbreaking transformation as consumers will get larger ownership of the usage of their banking data. Of course, there will be concerns about privacy that are likely to form opposition groups to this development and put pressure on the service providers’ reliability and data safety policies.

4. Mobile services

Mobile is taking a share of how people do payments and take care of their everyday financials. Investments to many technologies such as biometrics and cyber security will transfer banking from brick and mortar to pockets. Recent introductions of various mobile wallets (Nordea, Aktia, ApplePay) and personal finance management services is a good indication of how many of the current physical banking services are transforming towards mobile-first strategies.

We consider this development astonishing because it improves the approachability and convenience of personal finance products and services to consumers. Also, as these services are often still optional, it takes into account different customer groups, such as seniors and those who still do not own a smartphone.

5. Simplifying the way that Finns consume and manage their personal finances

The consumers’ opportunity cost for comparing financial banks has been high due to the lack of supportive services and information, and simply because it requires a big effort. Consumers have not had access to innovative services, like Ebookers or TripAdvisor in traveling, that would have helped them to look for advice, compare options and select a product from one platform in a cost-efficient way.  

“Financial products constitute the largest part of our monthly expenses. What is interesting, is that consumers are very familiar with comparing flights and other easy-to-understand products and services. We like making informed decisions regarding our purchases. However, when it comes to personal finances, instead of comparing and selecting the best product, we tend to stick with the familiar. The problem is that the current system consumes too much time and effort, and there is not enough transparency. What lacks is an objective view on different financial products,” explains Jussi Valsta, CEO of financial comparison website VertaaEnsin.fi.  

That is why VertaaEnsin.fi has built a comparison website for financial products. The mission of the company is to simplify the way that Finns consume and manage their personal finances. VertaaEnsin.fi created a platform that offers options for people to buy and manage their personal finances in a clear and transparent way. In addition to creating transparency and more options for consumers, VertaaEnsin.fi wants to improve financial wellbeing.

“The problem is that not everybody wants, or has time or patience, to dive deep into the world of finances. Having services that support the way to financial wellbeing is essential here. Financial wellbeing implies managing personal financial situations and budgeting within the confines of your own earnings – and doing it in a confident and secure way. Smart finances give you freedom,” Valsta concludes.

Jussi Valsta is the managing director of VertaaEnsin.fi that has a mission to simplify how people buy and manage their personal finances. You can try the service here.