The march towards banking service automation is continuing apace in Norway, where an estimated four out of five adults now use BankID electronic signatures to purchase products and services from their financial institutions. Dan Jones spoke to two early pioneers, DnB NOR and BN Bank, about their latest innovations.
In what is fast becoming one of the most innovative retail banking markets in the world, Norwegian banks are continuing to roll out simple, efficient and user-friendly customer processes based on the innovative BankID electronic signature system. It is fast revolutionising the way customers bank in the country.
Leading the charge are two institutions at opposite ends of the scale: DnB NOR, the country’s largest bank, with a domestic retail customer base of 2.2 million; and BN Bank, a small direct bank with retail customer numbers totalling 55,000. Both banks have plans for further expansion of their automated processes.
The success and market penetration of the BankID system in Norway has taken a further step forward, for instance, with the launch of BN Bank’s automated account switching facility.
Developed by Norwegian IT firm EDB, the service allows its customers to open new accounts online in a matter of seconds. DnB NOR, meanwhile, has begun automating parts of its loan process; both banks have a view to providing the same service for mortgage customers by early 2010.
“We are the first bank in Norway to come up with this service,” said Erlend Drilsvik, head of retail banking at BN Bank, speaking to RBI about the account-switching service. “We wanted to introduce something really simple to take advantage of the current trends in Norway”.
DnB NOR is similarly proud of its own BankID innovations. “We do not know of any other banks that can offer borrowers and co-borrowers the option to sign the same documents electronically,” said Britha Rosseland, project manager for the automated credit process at DnB NOR, speaking to RBI.
On the liabilities side, the trend spoken of by Drilsvik is similar to that seen in many countries: a strong desire among consumers to change banks, coupled with a reticence to actually follow through with such desires.
Figures from the Norwegian Financial Services Association cited by BN Bank show that in 2008, some 60 percent of Norwegian banking customers considered changing bank, yet only 6 percent ended up doing so over the course of the year. Further, BN Bank estimates that one third of customers who begin the process of changing bank do not complete the task.
According to Drilsvik, BN Bank’s new product should eradicate that reluctance among consumers.
“The basic idea behind this new product is that we are experiencing high opticals for changing banks in Norway – it is a very simple service, and an account you can have besides your primary account. We wanted to have a solution where customers can establish an account with the BankID they already had in their primary bank.”
A very simple process
For Norwegian customers interested in switching to BN Bank’s EkstraKonto savings product, the process is indeed simple.
To open an account, a customer must enter their personal details on an encrypted web form, at which point the bank produces a new customer agreement which can be accessed and signed via BankID and an electronic code calculator respectively. At that point, according to BN Bank, the customer is immediately able to log in to the online banking service.
Removing the need to visit a bank branch, receive customer agreements via post or visit a post office to collect a digital passport or pin code card, will attract considerable interest in the EkstraKonto product, the bank believes.
“The goal is to accrue NOK1.5 billion [$265 million] in new money through the service next year,” said Drilsvik.
That target is in line with a new business strategy adopted by BN Bank earlier in 2009 following the appointment of new managing director Lisbet Nærø in January.
Owned by a group of Norwegian savings institutions (who in turn share products and services with their subsidiary), BN Bank said in its third quarter report that its retail focus is to be a “direct services bank with the emphasis on self-service, simple products and competitive terms. The bank’s focus will be on recruiting new customers, developing the customer base, cost-effective operations and low risk”.
Significantly, however, the report also warned of the “continuing, extremely tough competition in both deposits and home loans”. BN Bank says it is one of the largest mortgage lenders in the Norwegian market, and it is this segment on which it intends to focus its innovations in 2010, said Drilsvik, with the emphasis again being on BankID. Increased efficiency could be crucial to the bank’s success given the continued pressure on liability-based interest income.
“Margins will be under more pressure next year, at least on loans and mortgages… We have a goal of establishing the same automated service for mortgages in the second quarter of 2010,” Drilsvik revealed.
“The online mortgage service will be our primary focus next year, and we will also be doing our best to make all our services, all our accounts, automated in 2010.”
A fully automated process
DnB NOR also envisages a fully automated banking service becoming a reality in the near future. In May, Jarle Mortensen, head of retail banking at DnB NOR, told RBI that the bank had scope to roll out a paperless, fully electronic delivery service across its entire range of lending and savings products (see RBI 612).
The next step in that process came in October when DnB NOR went live with a solution offering customers the opportunity to refinance their loans electronically using BankID. The move marks both an attempt to tap into the sizeable refinancing market in Norway as well as the first step in a full-scale automation of the home loan application process.
“It will save time and resources for both customers and the bank. Customers will save time as they will not have to print, collect or receive documents by post and subsequently deliver them in person or return them by regular mail,” said Rosseland.
“In addition, the loan will be disbursed more quickly. This will also ensure higher quality, as electronic signing minimises the risk of errors such as missing signatures or signatures in the wrong places.”
Rosseland added that around 1,000 customers had so far signed their loan documents electronically. It is anticipated the majority of loan customers will begin using the service over the course of the next two years.
But it is not just convenience for both bank and customer that the automated approach offers: it also presents a valuable marketing opportunity.
“The increased use of BankID and the shift to electronic processes will ensure significant environmental gains,” said Rosseland. “Once half of DnB NOR’s retail customer loans are signed electronically, the reduction in the group’s paper consumption will represent a 130-metre high pile of paper.”
The bank is also currently cooperating with the Norwegian Mapping and Cadastre Authority, an organisation primarily dedicated to cartography, on best practice for the electronic mapping and registration of mortgage certificates.
“Once electronic mortgage certificates are available in early 2010, customers will no longer be required to have witnesses sign new mortgages, as they will then be able to both identify themselves and sign electronically by using BankID. Thus, this offering will also be relevant for customers raising loans based on new collateral,” DnB NOR said in a statement.
Multiple signature solutions
In the meantime, developments continue apace. One crucial obstacle to loan process automation has already been removed, earlier in 2009, with the development of multiple signature solutions allowing a document to be signed by more than one signee – for example, a husband and wife – even if one of them is a customer of another bank.
With 80 percent of all Norwegian adults now having a BankID, it is not just retail financial institutions that are keen to hurry along technological innovations.
A regulation issued by the Norwegian ministry of finance in April 2009, permitting banks to use electronic authorisation to open a new customer relationship with a financial institution, enabled the country’s banks to further their march towards automation.
There do, however, remain some barriers which must be overcome if the likes of DnB NOR are to achieve their goal of automating all lending activities.
“Establishing a service to take up a loan to refinance a new house will take some time as it is not yet possible to sign deeds of transfer electronically,” said Rosseland.
“This will require a legislative amendment. Today, real estate brokers are responsible for registering deeds of transfer and collateral.”
For now, at BN Bank, the focus is very much on the liabilities side of the business, in terms of automation at least. It is new customer relationships that BN Bank is looking to establish with its account switching innovation.
The EkstraKonto service is marketed as an account for customers seeking a “straightforward, profitable and transparent alternative home for their savings”, and constitutes a 100 percent self service account offering an interest rate of 3.2 percent.
Low key marketing
Promotional activity launched in conjunction with the new account switching innovation has so far focused on print and online marketing and has been relatively low key.
But, said Drilsvik: “We will spend a lot more next year – so far we have done print and online, and next year we plan to couple that with TV commercials. But overall we will spend about 70 percent of the marketing budget on the internet.”
Such targeting is unsurprising given the focus on both electronic signatures and the institution’s status as a direct bank. And despite its own automated ambitions, DnB NOR, with its broader distributive focus, continues to believe in the virtues of all channels.
“New distribution channels and an increase in self-service options free up resources which we are now using to increase the capacity of our advisory services,” said Rosseland.
“However, customers are still welcome to visit our branch offices. It is in branches, and not just on the telephone or via email, that we wish to advise our customers on how to use the new solutions and explain which services will be most expedient.”