The World's Biggest Clicks-and-Mortar Bank - Finland's Nordea Leads an e-Banking Revolution

Nordea, the product of several mergers among Scandinavian banks, is only the fifteenth largest bank in Europe. But this small Helsinki-based unit has managed to establish itself as the world's leading Internet banking institution. Senior Affiliate Professor of Marketing Charles Waldman and Affiliate Professor of Technology Tawfik Jelassi recount Nordea's quite remarkable foresight in seeing the potential of offering e-based financial services and solutions - many of which are just now catching on with even its biggest competitors.

by Charles Waldman, Albrecht Enders,Tawfik Jelassi
Last Updated: 23 Jul 2013

Nordea, the product of several mergers among Scandinavian banks, is only the fifteenth largest bank in Europe. But this small Helsinki-based unit has managed to establish itself as the world's leading Internet banking institution. Senior Affiliate Professor of Marketing Charles Waldman and Affiliate Professor of Technology Tawfik Jelassi recount Nordea's quite remarkable foresight in seeing the potential of offering e-based financial services and solutions - many of which are just now catching on with even its biggest competitors.

Bo Harald, Nordea's head of electronic banking, brought his expertise from the Union Bank of Finland, which as early as 1984 was offering clients both telephone voice commands and PC-based services. He maintains that the secret of Nordea's impressive regional success - 45% of Scandinavians now have either a main or secondary account with it - is due in large part to keeping customers satisfied by keeping things as simple a possible, especially for older, far less tech-savvy users.

While gaining support from top management for e-banking initiatives was often hard going at first, Harald was afforded enough leeway to be able to install a great deal of "e-trust" in the security and reliability of Nordea's online services, and took pains in helping clients get in the "e-habit" of using the internet for almost all routine banking activities. Solo, Nordea's Internet banking unit, handled around 124 million payment transactions in 2002 - twice as many as Wells Fargo, Citibank and the Bank of America combined.

Harald would be among the first to admit that "e-banking" in itself is now industry standard. But Nordea sees being able to offer a very wide range of e-banking services to e-businesses as the way forward. And while he may claim that e-banking and traditional "bricks and mortar" retail services have never been in competition with each other at Nordea, the number of branches in Finland has shrunk by over two-thirds, and staff numbers by over 50%, during the past decade.

The bank's approach to marketing also makes it something of a contrarian amongst most continental online competitors. It has refused to spend heavily on marketing its internet initiatives, although this was partially because its large size and head-start in e-banking schemes meant that it could make convincing existing clients to use online services, rather than trying to gain new customers, a priority.

Nordea is not without its critics, however. Many of these are customers who feel that its service prices are too high - to which Harald replies that there is no reason why the value added by introducing so many new applications should be free.

Profs. Waldman and Jelassi detail the benefits the bank has obtained through being able to exploit the best from the various technological platforms of the original individual banks that merged to form Nordea. (Although maintaining the different IT infrastructures among the 17 different banking systems within the Nordea group is a major ongoing expense.) Harald also explains why he sees little real threat coming from purely online-based rivals; where he sees Nordea's best growth potential lying, and why making every effort to ensure that Europeans embrace e-banking is nothing less than a social duty to help make the continent more productive and competitive.

INSEAD 2004

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