Nordic Fintech Magazine Jan-Mar 2024

JAN-MAR 2024

Top Five Practical Applications of Large Language Models (LLMs) in Banking Today p. 42-45

p. 24-26

Driving Fintech Forward: The New Gear in Auto Industry p. 32-35

Redefining Retail Payments: Insights from Coop p. 38-39

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NFM’S NORDIC FINTECH DISTRIBUTION COMMUNITY Nordic Fintech Magazine exclusively works together with selected Nordic Community Partners for insights and distribution, giving us unparalleled reach with audiences across the Nordics and Baltics

Editor in Chief: Chris Crespo Journalists: Jakob Frier, Paulo Delgado Layout: Vratislav Pecka Production: Ditte Gerner Dyhr Published by Nordic Fintech Magazine Contact: Stian Faber, Head of Partnerships stian@nordicfintechmagazine.com

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Thank you to all the Fintech heroes contributing to this magazine!

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Content

p. 8

p. 10

Straight Talk and Real-World Insight: Cutting Through the Hype of Fintech Trends

Transformative Collaboration: Industry Leaders Co-Creating the Future of Finance

p. 12 Lithuania’s Fintech Strategy Supercharging its Ecosystem

p. 14

Loan Clampdown Challenges SMEs: Worldline Offers Vital Support through Growth Finance

p. 16

Global Payments That Empower Aid

p. 18 Banking Reimagined: The Global Digital Wallet Revolution

p. 22

Tier 1 Fintech Law Firm Unpacks the Fintech Scene in the Baltics

p. 24

Driving Fintech Forward: The New Gear in Auto Industry

p. 26

Fintech Drives the Future

p. 28 Driving Commerce: Vehicles Shift to Smart Digital Wallets

p. 30

“We’re an ECB-licensed bank with an entrepreneurial mindset”

7

p. 32

Redefining Retail Payments: Insights from Coop Norway’s Kristian Bjorseth

p. 36

Oracle Offers Banks All the Fintech Solutions They Need - Minus the Competition

p. 38

Financial Defense Armored With AI

p. 40

New EU Instant Payments Legislation Has European Banks Scrambling

p. 42

Top Five Practical Applications of Large Language Models (LLMs) in Banking Today

p. 46 Banks Harness AI for Future-Proof Financial Services

p. 50

eIDAS: The Catalyst for Making Digital Signatures Mainstream

p. 54

AI Act: High Stakes for Credit and Beyond

p. 56 Rising Stars: The Must-Watch Fintech Innovators in 2024

p. 58

Empowering the Future of Payments: Shift4’s Commitment to Nordic and European Partners

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Straight Talk and Real-World Insight: Cutting Through the Hype of Fintech Trends As 2023 closed with high anticipation for what new fintech developments 2024 would bring, the task of curating content for our Q1 magazine is both exciting and challenging.

By Chris Crespo

9

Editorial

T

he fintech landscape, in the Nordics and Baltics, is packed with jaw dropping innovations

and developments. From AI-driven financial services to novel integrations

Chris Crespo Chief Editor & Head of Contentat Nordic Fintech Magazine

between fintech and other industries, the pace of change is rapid and relentless, making our job of selecting the most relevant pieces to report on, the more testing.

But we are not complaining, having too much content to cover and too few pages to do so is a privilege rather than a problem. The insights you’ll find in the pages of this issue are the result of careful consideration and passionate exploration.

We have dedicated a significant portion of this publication to bring you a primer on Generative AI and its relevance in our industry. If you are anything like us you’ve sifted through reports, whitepapers, blogposts, and articles on the subject, so what can we say that hasn’t been said before? we hear you ask. We wanted to speak to the people on the frontline, the ones deploying Generative AI and Large Language Models (LLMs) in their organizations who can validate the true power of its application on the field. This isn’t just about theoretical understanding; it’s about real-life applications and tangible outcomes, offering you insights that are grounded, relevant, and genuinely transformative for our industry.

This primer therefore brings you exclusive insights beyond the hype and without the fluff. Use cases of current and relevant deployments of LLMs in financial institutions, the powerful advances of AI in fraud prevention and the legal considerations to bear in mind as regulation catches up with the trend, we think they will help you inform your understanding of what the technology can and cannot do. Spoiler alert, it cannot help you

solutions and lending are expanding

opportunities for anyone invested in

refinance your mortgage so that you

their reach beyond traditional bound-

the future of financial technology to

aries of financial services.

stay at the cutting edge of what’s to

can afford that small villa in Marbella, at least not yet.

As we anticipate a fintech-filled

come. And we will be there, sifting

February with key events like Fintech

through the hype to bring you the

to highlighting the convergence of

Day in Vilnius, Lithuania, on the 8th,

most relevant and transformational

retail and payments emphasizing how

and Stockholm Fintech Week in Swe-

developments of the industry.

these two can combine in integrated

We have also given special focus

den on the 14th and 15th, the excite-

Join us in this issue as we shine a

end-to-end process that offer cus-

ment continues to build up, offering a

spotlight in the continuously-evolving

tomers brand new purchasing expe-

prime opportunity to engage with the

and exhilarating world of fintech, and

riences. Furthermore, we explore the

forefront of industry developments.

the forward-looking trends that are

intersection of fintech and mobility,

These two events launch the 2024 fin-

shaping the dawn of a new era in

showcasing how digital payment

tech conference season with essential

financial services.

Image generated using a Generative AI Large Language Model.

10

Transformative Collaboration: Industry Leaders Co-Creating the Future of Finance Our Chief Editor and Head of Content Chris Crespo had the unique opportunity to sit down with Kasper Sylvest, one of the most authoritative voices in Financial Services. Our comprehensive discussion with Kasper who is an Executive Director at Danske Bank and also Chair at Mobey Forum, covered plenty of the multifaceted world of financial services. As Chair of Mobey Forum, Kasper orchestrates a vibrant hub of innovation, bringing together industry leaders and experts.

This interview spanned a broad spectrum of topics, reflective of Mobey Forum’s extensive coverage areas. Kasper, a repository of knowledge, shared his profound insights in a session that both intrigued and captivated us with his deep understanding of the most pressing trends in the financial industry.

By Chris Crespo

Kasper it’s a pleasure meeting you.

domains, creating a transparent,

banking services into broader contexts,

Can you tell us about your current

collaborative environment.

potentially increasing transactions and enhancing customer experience.

roles and how they intertwine?

I’m an Executive Director at Danske Bank, focusing on payment sector

What are some of the critical trends you observe in the financial sector?

What impact has open banking had in recent times?

collaboration. In addition, as Chair at

The industry is witnessing rapid

Mobey Forum, I’m involved in steering

developments in several areas. AI is

Open banking has initiated a change

discussions on mobile financial services

transforming customer services and

in the banking landscape, particularly in

and shaping industry advancements..

internal processes, open banking is

the area of account information

evolving into open finance, and digital

services. While there’s been some

Could you provide an overview of

assets like cryptocurrencies are gaining

hesitation around payment initiation

Mobey Forum?

prominence. These trends are reshap-

services, the shift in mindset towards

ing the financial landscape.

embracing these changes is evident.

technology across major organizations.

How are banks adapting to

What’s the significance of digital

Now, it’s a significant association with

embedded finance?

identity in the current financial

Mobey Forum, established in 2000, initially connected pioneers in mobile

over 50 members, mainly focusing on

Banks are strategically aligning with

mobile financial services. We facilitate a

the changing value chain of finance. It’s

rich network of specialists across various

about finding innovative ways to embed

landscape?

Digital identity is becoming a cornerstone of financial interactions. The

Kasper Sylvest Executive Director at Danske Bank

11

Our Chief Editor and Head of Content Chris Crespo had the unique opportunity to sit down with Kasper Sylvest, one of the most authoritative voices in Financial Services.

move towards a unified digital ID

The possibilities with AI are incredibly

sync with what’s happening in the

across Europe represents a significant

exciting due to their vast potential for

market. We form working groups on

shift, offering interoperability and

improving customer experiences and

relevant topics like embedded finance

potentially reshaping customer rela-

efficiency. Equally intriguing is the

and AI, ensuring that our discussions

tionships with financial institutions.

aspect of standardization in payment

and outputs are immediately actionable

processes, which can pave the way for

for our members.

How will the European digital ID

more innovation while reducing

scheme affect the banking industry?

operational complexities.

As Chair at Mobey Forum, what is your vision for the future of financial

The introduction of a European digital ID could significantly change how

Could you elaborate on the future of

customers interact with their banks. It’s

embedded finance?

services?

My vision is to foster an environment

likely to integrate various functional-

Embedded finance has immense

where collaboration and knowledge

ities, including payments, which might

potential to revolutionize the industry.

sharing lead to innovative solutions. By

reduce the frequency of traditional

For example, consider the integration of

staying abreast of industry trends and

banking app usage. However, there are

payment methods directly into vehicles

addressing challenges collaboratively,

still several questions to be answered

for electric car charging – it’s about

we aim to drive the financial services

regarding how banks could implement

creating seamless, intuitive financial

industry forward.

wallets that leverage European digital

solutions.

ID infrastructure.

How does Mobey Forum align its What excites you about the current industry trends?

priorities with industry trends?

At Mobey Forum, we’re always in

For more information on Mobey Forum visit mobeyforum.org

12

Lithuania’s Fintech Strategy Supercharging its Ecosystem An interview with Vaida Česnulevičiūtė - Markevičienė, Vice Minister of Finance.

In an enlightening interview, Vaida Česnulevičiūtė - Markevičienė, Lithuania’s Vice Minister of Finance, discusses the nation’s rise as a top European fintech hub. She explores the country’s strategic approach to fintech and green finance, emphasizing Lithuania’s innovative fintech ecosystem, collaborative strategies, and global influence in e-money and payment institutions.

By Chris Crespo

I

n an exclusive interview with Vaida

Lithuania to the forefront of the Europe-

But in its expanding role as a main

Česnulevičiūtė - Markevičienė,

an fintech scene, with an emphasis on

fintech hub, Lithuania has sought

Lithuania’s Vice Minister of Finance,

IT services and global exports.

further opportunities to cement its

the conversation turned to Lithua-

The recent Lithuania’s fintech

importance in the industry. In 2023,

nia’s flourishing role as a leader in the

strategy, according to Česnulevičiūtė

Lithuania placed a bid to host the

European fintech sector. Česnulevičiūtė

- Markevičienė, displays a maturation

anti-money laundering agency, AMLA,

- Markevičienė oversees Lithuania’s

from the previous yearly fintech indus-

proposing Vilnius as its new home,

investment policy and financial market

try development plans which focused

amidst bids from other markets like

development, with a special emphasis

on volume. In the new document, the

Paris, Dublin, Riga and some other.

on fintech and green finance, areas cru-

country’s ecosystem has tilted its focus

With a serious focus on security and

cial for the country’s economic growth.

towards growth and scalability, aimed

compliance, Lithuania has proactively

Lithuania has emerged as a top fintech

not just at attracting fintech companies

established an Anti-money laundering

hub, recognized for its innovative

but enabling their qualitative growth,

Center of Excellence, a public-private

ecosystem and supportive regulatory

maturity, security, expansion, and

partnership with specialists in compli-

framework. “We’ve successfully created

international reach. She explained the

ance and anti-money laundering. This

a fintech ecosystem, making Lithuania

strategic focus on expanding the sec-

is a great example of collaboration

the number one fintech hub in Europe”

tor: “Our new five-year strategy aims

between the Ministry of Finance, the

notes Česnulevičiūtė - Markevičienė,

to position Lithuania as a high-value

Bank of Lithuania and the country’s

a spot that the country has held since,

fintech destination.” This strategy

financial sector that combine the

with the highest number of fintech

also underscores the importance of a

expertise, knowledge, and good

licenses issued.

conducive regulatory environment and

practices of public and private sector

The Vice Minister described Lithua-

strong infrastructure. “Česnulevičiūtė

experts. Česnulevičiūtė - Markevičienė

nia’s fintech strategy as a response to a

- Markevičienė notes that the new

highlighted Lithuania’s ranking among

concentrated banking sector, seeking

strategy puts emphasis not only on

the top 10 globally for the least money

to introduce competition through fin-

activities of regulated entities but also

laundering risk,its thriving AML Center

tech. This approach has led to the cre-

on those that provide tech solutions to

of Excellence, and a unique certifica-

ation of a robust ecosystem, propelling

other market players”

tion program for

13

Vaida Česnulevičiūtė - Markevičienė, Vice Minister of Finance

Our new five-year strategy aims to position Lithuania as a high-value fintech destination.

Vaida Česnulevičiūtė - Markevičienė Vice Minister of Finance

AML and Compliance specialists as Lithuania’s commitment to maintaining a low-risk financial sector.

The Ministry of Finance has prepared the Lithuanian Green Finance Action Plan for 2023-2026, which provides for allocation of public and private investor funds to green, environmentally neutral projects. The plan provides a significant boost in increasing the competitiveness, resilience and sustainability of the Lithuanian economy.

Also in order to promote the development of the country’s green finance, the plan envisages the creation of a centralized sustainability database that would allow data-based decisions to be made regarding the environmental impact of companies or projects.

Last autumn The Green Finance Institute has been established for the smooth transition of Lithuania to a green economy, for the creation an ecosystem that would help mobilize both public and private funds and to become a regional leader in the field of green finance. Institute is responsible for consultations, research, education and outreach, connection between public and private sector, advice to the policy makers, leading the promotion of Lithuania as a jurisdiction for sustainable finance.

Taking the lead in the region by giving consulting services, the Green Finance Institute would significantly increase Lithuania’s advantage in the region.

One of the unique aspects of Lithuania’s fintech ecosystem, is its collabora-

rative approach is hard to replicate and

for fintech business expansion.” she

highlighting its proven value in serving

is built on trust among institutions and

confidently stated. Česnulevičiūtė -

a significant portion of the EU’s adult

market players.

Markevičienė also emphasized the

population.

Looking ahead, Česnulevičiūtė -

value of events like Fintech Day in

proach to co-developing the sector the

Markevičienė envisions continued

bringing together the financial sector

value, serving one in every ten Europe-

Vice Minister added: “Our ecosystem is

growth for Lithuania’s fintech industry.

and regulators, fostering understand-

ans, a significant portion of Europe’s

closely knit and collaborative... involv-

The goal is to support company growth,

ing and promoting innovation through

adult population. With a regulatory

ing a wide range of stakeholders.” The

attract innovative firms, establish a

open and honest dialogue that drive

framework that fosters innovation, a

development of the fintech strategy

skilled talent pool, and maintain a low-

progress in the industry.

relevant infrastructure, and a talent-rich

involved various stakeholders, ensuring

risk environment. “With our innovative

Finally, Česnulevičiūtė - Markev-

environment, Lithuania is an ideal

a co-developed approach that serves

regulatory framework and rich talent

ičienė urged companies and talents to

location for business expansion in

the fintech sector’s needs. This collabo-

pool, Lithuania is an ideal environment

consider Lithuania’s fintech ecosystem,

Fintech” she concluded.

tive nature. Discussing its open ap-

“Our Ecosystem has already proven its

14

Loan Clampdown Challenges SMEs: Worldline Offers Vital Support through Growth Finance Regulations and a shaky economy are forcing the banking sector to tighten credit policies. SMEs are suffering because of it, and Growth Finance is exactly what the SMEs need.

By R. Paulo Delgado

T

he phrase “SMEs are the

are tied by the combination of an unsta-

backbone of the economy”

ble economy and increased restrictions

isn’t a trite truism. It’s a da-

since the COVID-19 pandemic.

ta-driven fact. A 2019 survey

A product like Growth Finance might

found that 98.9% of EU businesses in

be exactly what SMEs and the econo-

the non-financial economy are busi-

my need right now.

nesses with fewer than 50 employees, employing nearly 50% of the non-finan-

Why traditional Lenders struggle

cial workforce, and contributing more

to loan to SMEs

than a third of Europe’s value added.

In the eurozone, the progressive tight-

In Denmark, 99% of all businesses fall

ening of credit standards has resulted in

into the SME category, reports Dansk

“significant weakness in lending dynam-

Industri, Denmark’s largest business

ics,” says the European Central Bank’s

organisation. High-growth companies

report for its July 2023 bank lending

within this category—companies whose

survey (BLS). Banks simply don’t have

average value added increased by

the option to dive into risky loans as a

at least 10% in the last three years—

result of “their cost of funds and balance

contributed DKK 100 billion (USD 14.7

sheet situation,” the report says.

billion), and 7 out of 10 of these companies have fewer than 20 employees.

In Denmark, things got so bad that businesses started moving their business banking offshore, especially to the UK where regulations were less restrictive” Head of Inside Sales Nordics, Worldline

pandemic, especially in Denmark, says

The lack of historical credit data

Mette Lykke Vibe, Worldline Head of

for new businesses makes it virtually

Inside Sales Nordics. Governments

impossible for traditional lenders to easily

introduced regulations to prevent a

and accurately assess the loan’s risk. To

rash of bad loans from destabilising the

to finance options when it comes to

overcome this, lenders demand a lengthy

economy. The regulations were intended

finance, particularly urgently needed

business plan, years of financial records,

to salvage the macroeconomy, but they

finance. The lack of options stems from

and collateral just to apply. The procedure

also put individual SMEs at risk.

a combination of an unstable economy

can take weeks, adds burden to the small

and increased restrictions since the

business, and is unlikely to succeed.

COVID-19 pandemic. Rather, their hands

Things got worse during the COVID-19

Head of Inside Sales Nordics, Worldline

Mette Lykke Vibe

has been underserved when it comes

Unfortunately, this dominant segment

Mette Lykke Vibe

In Denmark, things got so bad that businesses started moving their business banking offshore, especially to

Gustav Birgersson Product Manager, Growth Finance, Worldline

15

Another customer, this one a gentleman’s clothing store, moved to larger premises but needed more capital for the renovations. The store owner knew that a business loan from a bank wasn’t an option. “What you often must do is take out personal loans that you then lend to the company.

However, there are limitations, and credit checks have become stricter,” the owner said. The store turned to Growth Finance product and repaid the loan off rapidly because its new location resulted in significantly higher revenue.

Automatic repayments mean less administrative hassle. For micro-entities with few resources and where “time is money,” the lack of administrative burden often equates directly to productivity and revenue.

“It’s extremely important for us to give back to society,” says Birgersson.

“We feel the best way to do that is to develop great financial and paythe UK where regulations were less restrictive, says Lykke Vibe.

which allows them to take on the small

ment products that cater to this vital

ticket loans,” Birgersson tells NFM.

segment.”

The squeeze on credit isn’t confined to Europe. It’s a worldwide phenomenon. In a single year, US small business owner opinion flipped from 77% confident to 77% unconfident in their ability to get a loan, according to a survey by Goldman Sachs.

Worldline fills the gap Worldline, Europe’s leading payment provider, identified this gap in 2018 and recognised that it was in a position to solve it.

The product Worldline developed is called Growth Finance and ties in directly with Worldline’s existing payments solutions, which include on-site

Growth Finance’s success—a stag-

For small businesses, a loan of DKK50,000 [USD7,350] can be a game-changer. The customer knows what their fees will be and the total repayment amount, and they can choose the time period over which they want to repay the loan.”

Gustav Birgersson Product Manager, Growth Finance, Worldline

terminals and online payments.

“The user experience when apply-

Easy, transparent loans with big results

gering loan portfolio growth rate of

“For small businesses, a loan of

over 70% in the last year—is testament

DKK50,000 [USD7,350] can be a

to both the product’s user-friendliness

game-changer,” says Birgersson. Con-

and the demand that exists for it.

versely, the lack of these microloans can lead to catastrophe, as evidenced

The economy needs products like

by the spate of businesses that failed

Growth Finance

after COVID-19 because of a lack of

Growth Finance is only available in the

cash flow.

Nordics. However, given the ever-tight-

“We’ve also focused heavily on being

ening policies of banks worldwide,

transparent,” Birgersson says. “The cus-

it’s not unreasonable to believe that

tomer knows what their fees will be and

similar products will start appearing in

the total repayment amount, and they

other areas.

can choose the time period over which they want to repay the loan.”

Repayments are painless because

Banks must understandably maintain stability of the macroeconomy to avoid the levels of bad debt that threw

Worldline simply deducts a percentage

us into the financial tumult of 2008.

from each transaction made through

That means clamping down on loans.

Worldline’s system.

Unfortunately, the tourniquet solu-

ing for a loan is extremely easy,” says

log in to their Worldline portal and

Gustav Birgersson, product manager

can immediately see their credit

for Growth Finance. “Loans typically

score. Applying for the loan is as easy

restaurant where even the Swedish

makes up almost 100% of non-financial

get approved within two to eight hours,

as clicking a button and filling in a few

Prime Minister occasionally eats, was so

businesses. The solution might end up

and the money arrives in the customer’s

minor details.

pleased with the solution that he took

becoming the problem as these small

out three consecutive loans—the first for

businesses start to fail because of a lack of cash flow.

bank account within a day.”

To achieve this seamlessness, World-

One customer, the owner of a small

tion severely impacts a segment that

Worldline can offer such speeds

line partnered with Swedish fintech

new furniture, the second for renovations,

because its decisions are data-driven.

Froda, which handles all backend as-

and the third for two new refrigerators.

Credit evaluations are based on the

pects of the loan itself, including fraud

When Worldline asked for feedback, the

fill a gap. It adds much needed

merchant’s transaction history and

assessments.

Worldline does more than merely

customer said, “It’s so easy to take out the

support for those merchants who are

turnover from Worldline payment

Partnering with a fintech instead of a

loan. You don’t really notice it because

forced to tighten their purse strings

solutions the customer is already

bank was necessary because of the risk

repayments are deducted automatically

for now until the economy is back on

using. Existing Worldline customers

aspect. “Froda aggregates the loans,

from your daily turnover.”

steady ground.

16

Global Payments That Empower Aid Enhanced cross-border payment platforms are accelerating and reducing the cost of international transactions, a boon for humanitarian organisations to channel aid effectively. Leveraging advanced technology and a firm grasp of global regulatory standards, Inpay offers simple, compliant financial transfers, fostering broader economic participation in regions with emerging banking systems.

By Jakob Lindmark Frier

Our network makes these traditional complex and often costly transactions as simple as a local bank transfer” Thomas Jul CEO of Inpay

Asia, or other places where traditional international money transfers often

Inpay is a Danish company that aims to enhance global connectivity through its payment network, making cross-border transactions faster, simpler, and more secure.

A

struggle to reach, and local banking infrastructure may not exist,” says Thomas Jul, CEO of Inpay.

Inpay is a Danish company that aims to enhance global connectivity

s international trade,

essential to promoting financial inclusion

through its payment network, making

e-commerce, and remote

and supporting global trade and eco-

cross-border transactions faster, sim-

work grow, efficient, secure,

nomic growth in developing countries

pler, and more secure.

and fast payment systems

with less immersive financial infrastruc-

are needed to support these activities.

ture than most Western countries.

For example, Inpay has partnered with the Red Cross in Denmark,

Traditional methods often involve high

“In conventional banking, sending

enabling efficient international fund

fees, slow transaction times, and com-

money abroad is often slow, unreliable,

transfers. This partnership results in

plex regulatory compliance.

and associated with high fees. This is

significant savings for the Red Cross,

Providing optimised cross-border

a huge challenge for NGOs to receive

allowing more funds to be allocated

payment solutions encompassing a

funds for people in need of human-

directly to humanitarian efforts.

wide range of regions and countries is

itarian aid in countries within Africa,

“Our network makes these

Thomas Jul CEO of Inpay

17

traditional complex and often costly

As demand grows, Inpay is well-posi-

always screen the regulatory environ-

transactions as simple as a local bank

tioned to tackle complex payment chal-

ment first. We continue to track devel-

transfer,” Jul says.

lenges in collaboration with its partners,

opment and deepen our understand-

reinforcing its commitment to improving

ing of current and expected future

Building payment pathways

financial transactions in an interconnect-

regulations to serve our customers

While some regions possess robust

ed global economy.

best. We use local and international

infrastructure, that is not the case for

experts in our research, a key pillar of

many. Achieving a global environment

Born with compliance at heart

where cross-border payments empower

Understanding the complex web of fi-

Incorporating blockchain and

individuals and businesses requires a

nancial regulations is a cornerstone for

digital currencies is critical for Inpay

robust blend of technology, compliance,

companies entering new international

to enhance its security, efficiency, and

and networking, all hard to build.

markets. Scaling their operations re-

inclusivity while maintaining a com-

“We aim to rapidly connect organisa-

quires a meticulous approach to these

petitive edge in the evolving financial

tions and individuals worldwide within a

diverse legal landscapes to maintain

landscape.

payment network, facilitating seamless

compliance, safeguard operations

fulfilment of their needs. Our approach

from legal repercussions, and uphold

esting tool in the toolbox, and we follow

integrates technology, compliance, and

customer confidence.

it closely, including testing out its best

our success,” Jul says.

“Blockchain technology is an inter-

networks to innovate cross-border pay-

This strategic foresight is integral

uses. And with the MICA initiative being

ments in an increasingly interconnected

for seamless market entry and secure,

passed on EU-level, we are ready to

world, making them fast, simple, and

cross-border financial services.

engage when the regulatory environ-

secure,” Jul says.

“When we enter new markets, we

ment is ready,” Jul concludes.

18

Banking Reimagined: The Global Digital Wallet Revolution Digital wallets are revolutionising the banking industry, from altering transaction methods to improving personal financial management using AI and data analytics to a more inclusive global economic landscape. This transition to digital wallets marks a pivotal change in financial services, presenting banks with challenges to overcome and opportunities to innovate in a rapidly digitising world.

By Jakob Lindmark Frier

W

e’ve come far since

forming items like cards, coupons,

always bring: your phone. And will be

one of the first

and membership cards into digital

integrated into other smart devices in

e-wallets from PayPal

forms. However, the transformation

the future. Digital wallets influence the

allowed users to store

continued; the advantages of speed

way people interact with their money

and transact money online. According

and convenience have propelled the

daily and usually with a big boost in

to the 2023 FIS Global report, digital

transition from physical to digital.

convenience.”

wallets have become the most popular

Marina Repo, a noted expert in this

Repo represent Mobey Forum,

payment method globally, leading in

field, sheds light on the multifaceted

where she is leading an expert group

e-commerce transactions and point-of-

nature of digital wallets and their po-

on digital wallets of around 30 finance

sale locations.

tential impact on consumers:

professionals.

According to Repo, digital wallets can

Initially, digital wallets were de-

“A payment is a feature and not a

signed to mimic the contents of a

product. A digital wallet is desired since

also be a catalyst and supplementary

physical wallet, effectively trans-

it empowers the most loved device you

motivator for conventional banking

Marina Repo Digital Wallets expert, Mobey Forum

19

banking,” says Sindre Ekanger, Senior Innovation Specialist at DNB Bank.

However, banks have considerable opportunities to utilise digital wallets to improve customer engagement

A digital wallet is desired since it empowers the most loved device you always bring: your phone.

And will be integrated into other smart devices in the future”

and offer more personalised banking experiences.

Ekanger points to a major advancement involving data analytics to offer highly tailored financial services. This includes budgeting tools that monitor spending habits, propose savings tactics, and add gamification elements to financial experiences.

“Another key area is the integration of

Marina Repo

rewards and loyalty programs directly

Digital Wallets expert, Mobey Forum

into digital wallets. These programs incentivise customers to use digital wallet services by offering transaction rewards and points,” Ekanger says.

Repo envisions banks can significantly enhance customer engagement and offer more personalised experiences through digital wallet technology by adopting similar strategies in other industries.

“Multiple touchpoints for personalisation are key, including in-app content, messages, push notifications, emails, and website interactions. If banks want to gather and use the data to improve the customer experience, it must be done responsibly, ensuring consumer consent and adherence to regulatory and legal standards. Transparency and information is key,” she says.

Banking on identity security Establishing and managing identity in banking is crucial, with transactions and societal trust relying on data verification in a self-sovereign identity model.

“Digital wallets can be used to issue, share and verify digital proofs securely and privately. In some regions, bank collaborations around a national digital iden-

Personalisation is key

tity have existed for a long time, and that

forms the foundation of a wallet, with

Traditional banking still holds its ground

identity can be used in several places in

many services linked to it being

for more complex and significant finan-

society. In other areas, nothing of that sort

finance-related.

cial decisions where expert advice and

exists,” Repo says and continues:

services. Typically, a bank account

“The wallet services are instant and

comprehensive services are valued.

“The EU initiatives like EIDAS are trying

cutting edge developments often oc-

“For the more significant, life-altering

to address the identity challenge and

cur in this space by banks since wallets

events such as a mortgage, planning for

interoperability. Your identity should be

can also be an enabler and additional

retirement or navigating complex invest-

interoperable. The digital wallet will likely

driver for traditional banking offerings.

ment strategies, users may gravitate to

become a vital tool for individuals in

So wallet capabilities often also compli-

the advisory services offered by tradi-

electronic interactions in various fields,

ment the services you get in your tradi-

tional banks, with the depth of knowl-

such as proving their age, student card,

tional banking services such as paying

edge, personalised advice and sense

driver’s license, vaccinations, loyalty,

invoices and investing,” she says.

of security that comes with established

KYC, PoA and insurance certificates.

Sindre Ekanger Senior Innovation Specialist, DNB Bank

20

Banks of all sizes will benefit from having a digital wallet strategy to meet consumer demands for mobile payments and maintain competitiveness in the future.

Banks wallet-size future strategy

Ekanger concurs that the competi-

are high on the agenda for banks, with

Banks of all sizes will benefit from

tion is still wide open. To him, numerous

a significant focus on managing

having a digital wallet strategy to meet

questions arise in the competitive world

sensitive customer data. It is essential

consumer demands for mobile pay-

of digital wallets. A primary point of

to securely store large volumes of

ments and maintain competitiveness in

concern is whether one, two, or a few

personal and financial information, as

the future. This involves collaborating

digital wallets will achieve global dom-

customers’ trust in banks and digital

with global and local digital wallet

inance or if a varied ecosystem with

wallets heavily relies on their belief in

providers in various regions that attract

several participants will emerge.

these institutions’ capacity to protect

customers with appealing features.

Privacy, security, and fraud prevention

data privacy.

“Each bank must decide its role in the

“The possibility of cross-cultural adoption of digital wallets raises in-

According to Ekanger, advancements

digital wallet ecosystem. While some

triguing questions: Will the Asia-Pacific

in digital wallet technology are enhanc-

may opt for compatibility with major

region adopt wallets popular in the

ing fraud prevention and overall security.

wallet providers, others might pursue

West, or vice versa? Or will regional

“For instance, tokenisation ef-

their digital wallet to enhance customer

preferences continue to shape the

fectively secures data by replacing

engagement and directly manage this

digital wallet market? “

sensitive elements, such as card

critical touchpoint,” Repo says.

numbers, with nonsensitive equivalents. Additionally, the progress in

According to her, it is still a very open race on which strategy will prevail.

The importance of local banking know-how is another key element. Banks with a thorough understanding of the

“With new developments such as ac-

nuances of their local customer base and

biometric verification and two-factor

count-to-account transactions, instant

market conditions might use this knowl-

authentication, significantly improves

payment, and requests to pay, it seems

edge to develop digital wallet services

the security of both digital wallets and

that account payments are becoming

specifically tailored to local needs,

banking platforms,” he says.

significantly stronger,” Repo Says.

thereby obtaining an edge over more

authentication methods, including

21

generalised, all-encompassing offerings.

actively manage budgets and provide

customer. The question is whether com-

“I believe the future will likely see a

advisory services, making personal fi-

mercial banks or other financial players

combination of these trends. Big Tech

nance more intuitive and personalised,”

will provide these wallets,” she says.

companies are expected to intensify

he says and adds that alongside AI, the

competition in the financial sector, push-

rise of central digital currencies and

digital wallets isn’t just limited to trans-

ing banks to innovate more aggressively.

other forms of digital currency could be

actional convenience; it’s about financial

This could lead to strategic collabora-

a game-changer:

empowerment. As Ekanger puts it:

tions between banks and fintech firms,

“As these currencies gain accep-

But the technological adoption of

“In regions where traditional banking

leveraging their strengths to enhance

tance, we may expect digital wallets to

infrastructure traditionally has been

innovation and better understand local

adapt accordingly, supporting a wider

spare or non-existent, digital wallets

consumer preferences,” Ekanger says.

range of digital assets.”

are not just a luxury but a necessity;

For Repo, potentially integrating Cen-

they are enabling people to partici-

Cashing in on AI revolution

tral Bank Digital Currencies and digital

pate in the global economy, accessing

In the evolving digital finance land-

identity within digital wallets will signifi-

essential services, and in so, improving

scape, Ekanger believes that the future

cantly affect European consumers.

financial well-being.”

of digital wallets holds exciting possi-

“The digital euro is expected to be

This access isn’t just about making

bilities, especially with the integration

the European digital means of payment

transactions easier; it’s about improving

of advanced AI, which could enhance

accepted throughout the euro area. It is

financial well-being and enabling partici-

the experience of personalised financial

expected to provide financial inclusion

pation in a broader economic context.

management (PFM), among others,

and privacy. Supervised intermediaries

Thus, the evolution of digital wallets

to offer increasingly sophisticated and

are likely to distribute the digital euro

symbolises a shift towards more

user-friendly experiences.

managing customer relationships.

inclusive, empowered, and personalised

Wallets are needed to bring it to the

financial experiences.

“AI-driven digital wallets could pro-

22

Tier 1 Fintech Law Firm Unpacks the Fintech Scene in the Baltics The Baltics are on the move when it comes to fintech. Each of the three Baltic states—Estonia, Latvia, and Lithuania—is highly digitalised, has phenomenal internet speeds, and has a strong local workforce of skilled and educated people. The zone’s relatively small size means its regulators are approachable, and it has numerous private and public sector initiatives to bolster the ecosystem.

By R. Paulo Delgado

ithuania grew its Fintech num-

L

The massive influx of Fintechs

recognised crypto assets, mass adop-

ber from a handful to over 250 in

means the Lithuanian regulator must

tion has a better chance of occurring.

a few years. Estonia is renowned

now keep their eye on risk, so licence

for having the most unicorns per

approvals are fewer. “New entry into

companies because of the building

capita in the world and a strong IT sec-

the Lithuanian market is more difficult

blocks it has put in place,” says Eņģelis.

tor. And Latvia has emerged victorious

than it used to be,” says Rūdolfs Eņģe-

“It’s also an excellent choice for firms

from a comprehensive AML crackdown

lis, a partner at Sorainen, a full-service

working in capital markets because

that makes it one of the best choices for

business law firm with offices in all

Estonia’s capital market is the most

compliance expertise.

three Baltic states. “We’ve learned

developed.”

However, deciding which Baltic state

valuable lessons while advising

“Estonia has its advantages for crypto

At the same time, Estonia has also

to set up a new Fintech in isn’t a simple

numerous licensees on what works

seen its share of hiccups in the cryp-

Yes or No question. Although outsiders

best, and these lessons can be applied

to-sector, so potential entrants might

tend to consider the Baltics as a single

universally in the other Baltic regions.”

also want to consider Latvia, which

entity, each state has its own unique history and know-how.

“In the professional market, the Baltics

emerged from recent crackdowns with

have a good general knowledge of

a “clean slate,” an enthusiastic regula-

compliance topics, especially in Latvia,”

tor, well-organised crypto industry, and

Which Baltic state should you

says Eņģelis. “For new businesses want-

a dedicated association—the Latvian

choose for your Fintech?

ing to gain a licence, that’s probably the

Blockchain Association.

A licence in the Baltics is passport-

most important test to pass.”

How Sorainen advises companies

able to the rest of the EU, and foreign Fintechs looking for a European base

High interest in crypto licensing

Sorainen obtains no advantage for

often think first of Lithuania. After Brexit,

Since the emergence of MiCAR—Eu-

recommending one state over another. It

Revolut moved its headquarters there.

rope’s crypto regulation—Sorainen has

has offices in Riga, Vilnius, and Tallinn.

By the end of 2022, 32 other UK Fintechs

been receiving more and more requests

The firm looks at the company’s busi-

had their headquarters in Lithuania, as

for assistance with crypto licensing ap-

ness model, compares it to the current

well as 16 US companies.

plications. Now that Europe has officially

market and recent experiences,

23

Rūdolfs Eņģelis, Partner at Sorainen, Tier 1 Fintech Law Firm

showcase its Fintech abilities.

and then advises what it feels is the best move for the particular Fintech.

Sorainen has seen it all. Last Decem-

That might mean choosing a different

ber, Chambers and Partners recognised

state, modifying the business model,

Sorainen as a Tier 1 FinTech Law firm in

or improving compliance.

“Right now, Latvia is probably the best place overall for new Fintechs,” Eņģelis says. “But that comes with a caveat: The regulator is only interested in companies that can prove they know what they’re doing. It’s a question of quality rather than quantity.”

Yet the other two Baltics should also not be overlooked. Lithuania is still at the top of the Fintech scene, even if new entries may prove complicated to achieve. And Estonia is also keen to

In the professional market, the Baltics have a good general knowledge of compliance topics.

For new businesses wanting to gain a licence, that’s probably the most important test to pass.”

Rūdolfs Eņģelis Partner at Sorainen, Tier 1 Fintech Law Firm

Lithuania for the fifth year in a row. The firm has been in the Fintech ecosystem from the beginning of the “Baltic Boom”— when the licensing pace was lightning-fast—to now, where compliance should be the top priority for all Fintechs.

“It’s a great time to move to the Baltics,” says Eņģelis. “As the market expands, regulators will likely become more picky. Setting up a relationship with the regulator early and showing that you’re serious about compliance will give you better chances in the future.”

24

Driving Fintech Forward: The New Gear in Auto Industry The advent of digital technologies has led to the evolution of the contemporary automobile into a more intelligent and interconnected device. This advancement allows original equipment manufacturers (OEMs) – known as traditional car manufacturers in the mobility sector – to offer various supplementary services.

By Jakob Lindmark Frier

T

hese services include imme-

ingness to pay a minimum of 10% extra

“Modern cars have screens in all

diate breakdown assistance,

monthly for the ability to swap vehicles

seats. If the passengers are bored on a

insurance, geographically

during their lease term. Additionally, over

long car ride, there is already the option

tailored travel and entertain-

60% indicated they would agree to pay

to book entertainment and pass the

ment options, and a broad spectrum of

at least 10% more for options to pause or

time - and it’s on-demand, with a click.

financial services.

terminate their lease contract. Owners

We are very excited about further de-

According to a McKinsey & Co.

of premium vehicles showed a particular

velopments in this area,” Nico Kersten,

survey in 2023 based on 4,000 cus-

interest in vehicle swap flexibility, with

CEO of Mercedes Pay, says.

tomers across France, Germany, and

17% prepared to pay an increase of 20%

the United Kingdom, consumers in

or more for this option.

This approach could offer users a more personalised and flexible experi-

the automotive finance sector strongly

The option to swap vehicles or pause

prefer new, flexible features in leasing

contracts could emerge as a significant

preferences towards usage-based

agreements. They value options like

factor in the decision-making process

payment structures.

swapping vehicles during the lease

for leasing. However, it’s important to

term and services like automatic CO2

note that the survey reflects self-re-

offsetting for non-electric vehicles.

ported inclinations. When looking at

Additionally, a notable portion of car

ence, aligning with evolving consumer

AI drives the future It is forecasted that by 2026, the

real-world data from subscription ser-

artificial intelligence sector within

owners are willing to pay a premium,

vices, the actual frequency of vehicle

the automotive field will exceed $12

sometimes more than 10 per cent

swaps during a lease is less than the

billion, indicating that AI has become

over the standard leasing rate, for the

expressed interest suggests. Therefore,

a major commercial enterprise in the

convenience of these flexible options,

the survey concludes that implement-

automobile industry. Some AI-driven

including the possibility to pause or

ing these features’ actual cost and

functionalities have been integrated

alter their contracts. This trend high-

feasibility remain fully ascertained.

into consumer vehicles, with additional

lights a growing demand for adaptable

Mercedes-Benz recognises the arriv-

features undergoing rigorous trials and development phases.

and personalised automotive financing

al of pay-per-use services as a fleet-

solutions, as 20 per cent are willing to

ing trend but a realm brimming with

pay for in-car pay-per-use add-ons like

substantial possibilities. They perceive

towards the era of autonomous vehi-

seat heating.

The automotive industry is advancing

this model as a promising avenue for

cles capable of making independent

The same survey revealed that cus-

growth and customer engagement. It

decisions and managing their functions.

tomers will pay additional fees for certain

is an adaptable solution that could re-

While the focus may be predominantly

lease flexibility options. Specifically, about

define how customers interact with and

on developing self-driving technology,

65% of respondents expressed a will-

value their products and services.

the role of AI extends beyond mere

25

Survey respondents particularly valued the ability to switch vehicles during the lease contract.

Share of respondents willing to pay 5-10% more on their monthly leasing rate for add-on services, % of respondents who lease a car

Option to switch leased car during lease period 34

Automatic CO2 offsetting per kilometer driven 31

Free rental car outside hometown 29

Integration of shortdistance mobility sharing options (eg, bike sharing) 22

In-car bookable pay-per-use add-ons (eg, seat heating) 20

Source: McKinsey Mob lay Consurr, cr Pulse Survey, 2022, r = >4,000 cusi,:rn,, in France. Germany, and LK

navigation. It also can enhance safety, comfort, and entertainment within the vehicle’s interior.

Driver Monitoring Systems (DMS)

Group explains how embedded finance is reshaping auto finance industry.

A notable example is Volkswagen,

An article about the survey explains how Porsche-branded credit card offers its users a range of travel benefits,

the renowned German automotive

including preferential parking in cities

are being developed to mitigate this

company. It operates its banking institu-

and airports, travel upgrades, and

by real-time monitoring and analys-

tion and extends various financial prod-

membership in Avis’ Preferred loyalty

ing the driver’s facial expressions to

ucts to its customers. These products

program. Porsche generates income

gauge attention and mood, enhancing

include not just vehicle loans but also

from this card through a significant

in-cabin safety and experience. These

comprehensive car insurance options.

annual fee, interest on the balances

systems employ various computer vision

According to an article in the Financial

carried, and a portion of the transac-

technologies to assess the driver’s state.

Times, Volkswagen’s financial services

tion fees.

They can take corrective actions, such

are offered in over 45 countries, indicat-

Similarly, Tesla, known for its emotive

as suggesting breaks or altering the car’s

ing a significant global footprint in the

brand appeal, tailors insurance products

speed if signs of fatigue or intoxication

automotive finance sector.

for Tesla vehicle owners. Leveraging its

are detected.

This approach showcases how tradi-

unique access to consumer data and in-

Mercedes-Benz is already integrating

tional car manufacturers are expand-

sights into its technology, Tesla can offer

ChatGPT into vehicles in a beta version

ing their business models to include

insurance at rates up to 30% lower than

in the US. Kersten envisions a scenario

financial services, offering a more

traditional insurers, providing added

where the AI in the vehicle not only

holistic customer experience beyond

value to its customers.

learns the driver’s daily habits, like order-

just selling vehicles.

ing a latte macchiato on the way to work,

Other prominent car manufacturers

However, the potential of embedded finance extends even further. Tesla, for

but also actively assists in maintaining

such as Alfa Romeo, SEAT, and Re-

instance, also provides subscription

those routines even when deviations

nault have also ventured into finan-

services like music streaming and video

occur, such as a change in the driving

cial services. These companies offer

on demand. This model allows OEMs to

route. The AI would proactively offer to

various financial products through their

broaden their offerings into more diverse

place the order at a convenient time and

dedicated financial divisions, includ-

travel-related financial services, such

location for a break and coordinate the

ing vehicle lease agreements and

as currency exchange, travel expense

timing so the purchase is ready upon

hire-purchase options.

tracking, or booking services for hotels,

the driver’s arrival.

This perspective implies that AI could

Embedded finance allows OEMs to foster more profound and enduring

restaurants, and events.

Given the growing consumer

significantly streamline and personalise

customer relationships. Beyond mere-

interest in environmental sustainability,

the in-car payment experience, making

ly facilitating a car’s initial purchase or

there’s also an opportunity for OEMs to

it more intuitive and integrated into

insurance, embedded finance enables

introduce financial products that

drivers’ daily lives.

OEMs to integrate more consistently

support eco-friendly initiatives. An

into their customers’ financial eco-

example of this approach is the

The auto finance revolution

systems, potentially acting as their

sustainable banking app Tomorrow. It

The practice of Original Equipment

primary banking institution. This

contributes to rainforest conservation

Manufacturers (OEMs) providing finan-

integration leads to increased cus-

with each transaction, illustrating a

cial services to their clients is well-es-

tomer interactions, enhanced reve-

novel way for OEMs to align with

tablished. A survey done by Handels-

nue streams, and greater long-term

consumer values and expand their

blatt Research Institute and Solaris

customer value.

financial service offerings.

26

Fintech Drives the Future Fintech innovations are crucial in enhancing the carsharing industry by facilitating easier, more flexible payment options and streamlining the user experience for efficient vehicle access. The Latvian carsharing startup OX Drive catalyses industry innovation with fintech integration.

By Jakob Lindmark Frier

C

arsharing is experiencing

in Latvia that offers Tesla vehicles for

a significant rise, mirroring

as low as 0.19€ per minute.

digital and card-free methods.

Fintech’s integration at OX Drive has notably improved the carsharing

trends in the sharing econoFintech paves the way

experience, with a focus on users less

for flexible and cost-effective transpor-

OX Drive’s adoption of fintech has greatly

versed in traditional financial dealings. By

tation options drives this growth.

enhanced its carsharing service’s ease

adopting fintech innovations, OX Drive

The emergence of carsharing is

and overall experience. Streamlined

has made its services more accessible

reshaping the landscape of leasing and

payments, flexible subscriptions, and

and intuitive, specifically targeting the

purchasing. This new model, exempli-

a digital onboarding process make the

needs of these users.

fied by services like the Latvian startup

service approachable and straightfor-

OX Drive, offers a more adaptable

ward, especially for those who need to

Ahead of the curve

and economically viable option than

become more familiar with conventional

Looking to the future, OX Drive is

traditional car ownership. It aligns with

financial methods.

actively engaging with the latest

my. An increasing preference

the increasing popularity of mobili-

“Fintech integration streamlines the

fintech innovations to transform the car

ty-as-a-service (MaaS), providing the

payment experience and onboarding

leasing and buying journey. Gailuma

advantage of vehicle access without

process for carsharing users,” Gailuma

emphasises the team’s commitment

the long-term obligations or financial

says and explains:

to incorporating cutting-edge trends

strains of owning a car.

“Our service offers a cost-efficient

“By offering various payment options, such as pay-per-use and monthly sub-

into our operations to maintain industry leadership.

scriptions, along with a digitised docu-

“We recognise the potential for

mobility. It not only helps users save

mentation system, we cater to different

decentralised platforms to disrupt tra-

on vehicle ownership costs like insur-

preferences, simplifying the process

ditional financial intermediaries, and we

ance and maintenance but also ad-

from sign-up to drive-off for a wide

are exploring opportunities to leverage

dresses urban challenges by reducing

demographic of customers.”

DeFi for aspects such as transparent

and sustainable solution for urban

traffic congestion and emissions,

OX Drive also features a mobile wallet,

fostering a more eco-friendly trans-

enabling effortless and secure payments.

portation model,” says Egija Gailuma

This streamlines the checkout experience

CEO of OX Drive, a car rental service

and meets the needs of users who favour

and decentralised lending processes,” Gailuma says.

OX Drive is actively exploring the cutting-edge concept of asset

27

The four founders of OX Drive. From left: Kristiāns Karlsons, Egija Gailuma, Juhan Kaarma and Kristaps Vasiļjevs.

tokenisation to offer fractional owner-

proach to embracing digital currencies,

“We are exploring collaborations

ship of vehicles, which would democra-

catering to a tech-savvy user base and

with insurtech companies to imple-

tise the ownership of high-end cars and

providing secure, alternative transac-

ment advanced risk assessment

open new investment channels.

tion options.

models, personalized insurance plans,

Simultaneously, the potential integra-

Also, insurtech innovations offer

and expedited claims processing for a

tion of cryptocurrencies as a payment

opportunities to revolutionise insurance

more seamless user experience,”

method reflects a forward-thinking ap-

processes.

Gailuma says.

28

Driving Commerce: Vehicles Shift to Smart Digital Wallets The traditional automotive business model centred around vehicle design and service, is poised to shift as cars transition into smart devices capable of conducting in-car financial transactions. This innovation elevates vehicles to dynamic e-commerce platforms, reflecting a broader industry trend towards integrating technology to meet evolving consumer demands.

By Jakob Lindmark Frier

T

he automotive sector has

enables Mercedes-Benz customers to

The emphasis on integrating ad-

relied on a singular business

connect conveniently and easily with

vanced technologies into its vehicles

paradigm for a century—

their environment - similar to using a

is set to ensure the longevity and rel-

crafting, manufacturing, mar-

smartphone,” Nico Kersten, managing

evance of Mercedes-Benz’s products

keting, and maintaining vehicles. Yet, a

director and CEO of Mercedes pay

for future generations.

transformative shift is on the horizon.

GmbH, says.

“It is a demand from the future

Cars are rapidly evolving into inter-

In March 2023, Mercedes-Benz

connected, intelligent devices capable

debuted Mercedes pay+, a native in-

by such possibilities. These early

of performing financial transactions

car payment system utilising biomet-

adopters talk to their cars, control

such as paying for fuel, tolls, parking,

ric and vehicle hardware for secure

everything by voice and try out every

and drive-thru orders directly from the

two-factor authentication, simplifying

technical possibility. Others are only

vehicle’s interface, turning them into

the purchase of goods and services

slowly getting to grips with new tech-

moving digital wallets.

directly from the car.

nologies. Our task is to find a good

This development represents a

generation. Some people are amazed

and sensible balance between what

significant shift in how vehicles are

Next-gen vehicles

is feasible and what the customer

perceived and used, transcending

Integrating digital wallet features

wants,” Kersten says.

their traditional role as mere modes of

enhances the driving experience by

A significant evolution in in-car

transportation.

adding convenience and efficiency

commerce is taking shape, with vehi-

“In a digital world, the vehicle is in-

and paving the way for more innova-

cles emerging as a vital e-commerce

creasingly transforming from a classic

tive uses of technology in personal

platform. According to numbers from

automobile into a smart device. This

transportation.

Juniper Research, global in-car

29

Nico Kersten, managing director and CEO of Mercedes pay GmbH

payment transactions will surge

vehicles comes a great deal of com-

convenience of in-car payments is

from 87 million in 2021 to over 4.7

plexity. However, according to Kersten,

set to become a standard feature for

billion by 2026. Fuel payments will

Mercedes-Benz is in a strong position

Mercedes-Benz customers, mirroring

dominate this sector, comprising

to overcome the challenges this new

the expansion of digital transactions in

nearly half of all in-vehicle payment

paradigm presents:

the automotive sector.

“At Mercedes-Benz, we’re in the po-

The company’s charging service

“In-car payment can be seen as

sition of being able to combine state-

exemplifies its commitment to provid-

the next step in a natural evolution of

of-the-art technology and software

ing comprehensive solutions, boasting

payment methods for refuelling: from

with great hardware, the vehicle.”

one of the world’s largest networks

transactions in the coming five years.

cash to card payments, then to smart-

Expanding upon this integration,

phone payments, and now to in-car

Mercedes-Benz aims to proliferate in-

charging points. In Germany alone,

payments,” Kersten adds.

car services across a wide spectrum.

over 34,000 charging locations are

As it stands, native in-car payments

available to Mercedes-Benz drivers,

Charging ahead

are possible at approximately 3,600

where the vehicle autonomously

With harnessing cutting-edge tech-

out of 14,500 gas stations in Germa-

handles payment transactions,

nology and leveraging the inherent

ny, with aspirations to expand these

allowing drivers to charge their electric

capabilities of their high-quality

services to a broader market. The

cars with unparalleled ease.

with over 1.4 million integrated

30

“We’re an ECB-licensed bank with an entrepreneurial mindset” - EMBank Head of Global Sales and Member of Management Board How FinTech-friendly European Merchant Bank provides Fintech-specific banking services with a partnership mindset.

By R. Paulo Delgado

T

he Fintech boom as we know

Fintech or newly established business,”

it emerged out of the ashes

says Güven Aytaş, Head of Global Sales

and Fintechs do other things well,”

of the 2008 financial crisis. In

and Member of the Management Board

Aytaş tells NFM. “We want to combine

those days, many Fintechs

at European Merchant Bank (EMBank).

the best of both worlds at EMBank.

positioned themselves as a revolt

“Unfortunately, traditional banks might

We’re bankers by mind but entrepre-

against the status quo. However, 15

give them only a bank account and

neurs by heart.”

years later, this dynamic has changed.

maybe a little more. We saw a gap

Banks are now turning to Fintechs to help them provide agile solutions, and Fintechs are turning to banks

“Banks do certain things very well,

Güven Aytaş

where the bank could better serve the

Fintechs need more than a bank

needs of Fintechs.”

The 2008 crisis gave rise not only to

The solution was EMBank, founded

Fintechs but also to the regulatory be-

for everything from business bank

by bankers with an entrepreneurial

hemoth that often frustrates fast-think-

accounts to financial advice.

mindset. Aytaş’s own experience in

ing and fast-acting startups. As burden-

global banking spans over 25 years,

some as those regulations might feel,

with successful stints at HSBC and Citi.

general sentiment for regulations has

“Every business needs a bank account, regardless of whether they’re a

changed for the positive recently.

“Fintech founders generally tend to be great tech people but often lack the financial background to run a Fintech,” Aytaş says. “One core area they often need help with is regulatory compliance.”

Sincere Fintechs wanting to do the right thing can easily be tripped up by conflicting regulatory frameworks. An experienced regulatory advisor is table stakes for any Fintech wanting to enter the game in 2024. EMBank, as a regulated bank, helps them become compliant.

Another gap exists when Fintechs approach traditional banks: Fintechs often need more than one type of bank account, depending on their business model. These could be accumulative accounts for authorised capital, segregated accounts to maintain client funds separate, or safeguarding accounts, which are mandated for any financial institution that holds customer funds.

Global Head of Sales and Member of the Management Board at European Merchant Bank UAB

31

We’re bankers by mind but entrepreneurs by heart.”

Güven Aytaş Global Head of Sales and Member of the Management Board at European Merchant Bank UAB

EMBank provides all of these, in addition to other Fintech-specific services, such as: •

A banking-as-a-service platform that Fintechs can plug into so they can offer embedded banking solutions immediately.

•

Consulting and advisory services across all Fintech needs, including investment, compliance, and innovation.

Part of the Lithuanian Fintech boom from the beginning EMBank received its banking licence from the ECB at the start of the Lithuanian Fintech boom in 2018.

For Fintechs wanting to establish a presence in Europe, Lithuania—where EMBank is based—is often their first choice. The small, dynamic country with an approachable regulator attracted numerous Fintechs after its first Fintech strategy, which was driven by the Lithuanian Central Bank. Today, that ecosystem is self-perpetuating, with both public and private institutions working together to achieve Lithuania’s next five-year Fintech strategy.

As a testament to Lithuania’s success, 2022 saw almost 4.5X more funds raised for Fintechs than in 2020, according to the “2022-2023 Fintech Landscape in Lithuania” report produced by Invest Lithuania. The country has over 250 Fintechs, and its licences are fully passportable to the rest of the EU. At the end of 2022, nearly 50% of Fintechs were revenue-funded.

Fintechs considering a move to Lithuania will need a Lithuanian bank account. When they sign up with EMBank, they get a partnership as well.

“We consider the Fintechs who are banking with us as clients and partners,” says Aytaş. “We would like them to succeed, and we provide all the support necessary to help them grow.”

32

Redefining Retail Payments: Insights from Coop Norway’s Kristian Bjorseth Fintechs and Financial institutions are deeply involved in critical aspects of life, constantly optimizing networks and systems for seamless financial transactions, while prioritizing the security of their customers’ money. Amidst the industry focus on regulatory compliance and operational efficiency, it’s crucial to occasionally shift perspectives, looking beyond internal processes to understand how customers perceive and interact with the financial services the industry works so diligently to provide.

33

By Chris Crespo

R

ecognizing that financial ser-

areas in stores to exploring ‘soft POS’

solutions is a key strategy for Coop.

vices are simply a means to a

solutions, Coop is at the forefront of

Bjorseth points out, “Merging our

broader end is key. It’s not just

redefining the shopping experiences

membership card with our app created

about mortgages, payments,

in retail. “We’re looking into making pay-

a Coop universe, enhancing customer

loans, or investments, but what cus-

ments more seamless, integrating them

loyalty and personalization.”

tomers aim to achieve through them. In

into our customers’ journeys,” Bjorseth

this piece we’ve expanded our scope to

states. This focus is not just about cus-

the payment process represent a

understand consumer priorities in retail,

tomer convenience, it extends to the

significant advancement in retail and

how retailers meet these needs, and the

entire payment process, from transac-

customer relationship management.

factors driving financial service devel-

tion to reconciliation and accounting.

Loyalty programs not only streamline

opments in this sector. This broader per-

Under Bjorseth’s leadership, Coop

the purchasing process but also offer

spective is vital for aligning our services

Norway has implemented cutting-edge

a more personalized shopping

with real-world customer aspirations

payment technologies not only at the

experience. When linked with pay-

and the evolving retail landscape.

point of sale, but spanning across the

ment methods, loyalty cards can

entire shopping experience. He notes,

automatically apply discounts,

A seamless shopping experience.

“We’ve seen a significant impact from

accumulate points, or offer rewards

We travelled to Oslo, to understand

technologies like contactless payments

based on the customer’s purchase

how Coop, one of Norway’s largest

and mobile wallet solutions in our

history. For retailers, it provides

retailers, integrates payments into

stores.” Coop’s own mobile wallet, with

valuable data on customer preferenc-

their broader operations to enhance

over one million users in Norway alone,

es and buying patterns, which can be

the shopping experience for its cus-

exemplifies their commitment to inno-

used to refine marketing strategies

tomers. “Our aim is to streamline the

vative payment methods and to rethink

and improve inventory management.

checkout process, reducing queue

how customers shop.

“By combining loyalty rewards with

Loyalty programs integrated with

payments, we not only enhance

times and ensuring a smooth payment flow,” explained Kristian Bjorseth, Head

Loyalty and Customer Engagement

customer convenience but also

of Payments and Store Technology

But payments are just a part of it. Inte-

gather valuable insights to tailor our

for Coop Norway. From self-service

grating loyalty programs with payment

offerings.” Bjorseth adds.

Kristian Bjorseth Head of Payments and Store Technology for Coop Norway

34

to create our own solution.” This joint

This has led to innovations in areas like

cards into the payment process

venture addresses the gaps left by

unmanned stores and integrated pay-

creates a win-win scenario for both

traditional PSPs, focusing on tai-

ment solutions like Coopay, a solution

customers and businesses, fostering

lor-made payment solutions that are

that allows customers to pay directly

loyalty and driving sales.

both customer-centric and support-

from Coops digital wallet.

Essentially, the integration of loyalty

ive of the intricate needs of retailers’

Identification goes beyond mere

Retailer-Driven Payment Solutions

operational systems. This proactive

transactional necessity; it plays a pivot-

The discussion with Kristian Bjorseth

approach highlights a significant

al role in personalizing the shopping

signals a paradigm shift in the retail

movement in the retail sector toward

experience and enhancing customer

payment industry, with retailers like

self-sufficiency and enhanced control

loyalty. For Coop, integrating strong

Coop taking greater control of cus-

over the payment process.

customer identification with payment solutions has been transformative.

tomer interactions. Coop’s decision

By linking customer identity with

to establish its own Payment Service

The Importance of Customer Identification

Provider (PSP), in partnership with

For Coop, customer identification is a

purchasing behaviors, Coop crafts

a major competitor, exemplifies this

cornerstone of modern retail strategies.

customized marketing strategies,

emerging trend. As Bjorseth points

“Identifying customers is vital for legal

enhancing customer engagement and

out, “We wanted a PSP that under-

compliance and for creating a seamless

loyalty. This approach underscores the

stood retailers’ needs, which led us

shopping experience,” Bjorseth states.

growing trend in retail where

35

deep customer understanding,

ful collaboration can lead to innovative

through effective identification, and

solutions, meeting specific needs that

large data processing is central to

standard market offerings don’t

delivering superior service and

address. The right partners understand

maintaining a competitive edge.

Building Collaborative Relationships A crucial aspect of advancing payment solutions is effective collaboration between retailers and payment

We wanted a PSP that understood retailers’ needs, which led us to create our own solution”

service providers. “The key is understanding each other’s needs and finding common ground for successful partnerships,” Bjorseth advises. This

and align with a retailer’s vision, contributing to superior customer experiences and operational efficiencies. Partnerships, in the eyes of the retail giant, are not just about technology but also about a shared commitment to understanding and serving

Kristian Bjorseth Head of Payments and Store Technology for Coop Norway

customers better, “We value partnerships with PSPs that understand the retail perspective… a successful

collaborative approach is essential for

partnership for us, is that in which two

developing solutions that benefit both

plus two equals five, a result of four

parties and ultimately the customers.

would render the partnership ineffec-

Coop’s journey shows that success-

tive” he concludes.

36

Oracle Offers Banks All the Fintech Solutions They Need Minus the Competition The question is no longer if banks will move to the cloud but how. Between security concerns and the burden of unwieldy legacy tech, banks are several steps behind nimble fintechs who are hungry for market share.

By Oracle

A

ccording to a 2024 report by

loan officers to analyse loans against

relevant, banks must be ready with an

global IT services and con-

requirements in seconds, leading to

ecosystem that’s always available, agile,

sulting firm Accenture, banks

an increase in the bank’s share of the

frictionless, and scalable.”

initially failed to leverage the

market. Several other banks are also

full potential of cloud services because

implementing GenAI solutions.

To provide that scalable and agile solution, Oracle’s Banking services offer

However, transformer technology

microservices and a component-based

models to match new cloud paradigms.

needs powerful data centres, in ad-

architecture to help banks weather the

“Instead of ramping up to cloud speed,

dition to data security. It’s generally

unknown, and transition away from

they forced the cloud to operate at

understood that the best way to run AI

monolithic and legacy environments.

bank speed,” the report says.

solutions is in the cloud.

they didn’t change their operating

That’s changing now. In 2022, the num-

AI tech is moving too fast to run it

Instead of partnering with multiple competing fintechs, banks can partner

ber of tasks banks ran on cloud servers

in-house. By the time a bank builds

with a single technology company

doubled compared to the year before.

its own data centre and hires a team

whose primary interest is not to enter

of data scientists, the technology will

the market but to deliver leading tech

AI and ML breakthroughs will drive

likely have advanced far ahead of the

from an innovative application till a

banks to the cloud faster

bank’s investment.

secure and resilient metal.

No competition—and a single vendor.

Recent breakthroughs in AI and ML have tipped the scale in favour of the cloud.

Oracle Financial Services: Fintech for

Although the banking sector has used

banks, minus the competition

Designed to scale

ML and AI since the 1980s, particularly in

Oracle Financial Services, a fintech sub-

Oracle has designed its banking plat-

credit scoring, the snowballing AI devel-

sidiary of the tech giant Oracle, provides

form to be both scalable and adapt-

opments of the last few years are due to

the full gamut of banking services in a

able. The system exposes over 3,000

an entirely new deep learning architec-

cloud-ready manner to empower any

microservices and open APIs across its

ture based on a paper from 2017.

financial institution to migrate toward

platforms, which are designed to be in-

next-generation banking. The company

teroperable and secure across systems,

er” machine learning model, which al-

has centred the design of this full-stack

gateways, and regulatory interfaces.

lows AI algorithms to process enormous

product around the customer, and the

“Banking should be invisible and em-

amounts of data in parallel and extract

suite’s purpose is to help banks adapt.

bedded within the customer’s life,” says

context and meaning from that data.

“Sooner rather than later, Banking

Khambalikar. “Today’s customer wants a

Virtually every “wow” product and

Services will become almost invisible,

service in AI recently was based on this

indiscernible, unnoticed, and intangi-

model, and generative AI depends on

ble,” says Prasad Khambalikar, Regional

Designed for continuous innovation

it. One Polish bank implemented a gen-

Director and Head of CEE at Oracle

Oracle Financial Services leverag-

erative AI (GenAI) solution that allowed

Banking and Financial Services. “To stay

es enterprise innovation to quickly

The paper introduces the “transform-

Lifestyle Bank.”

Prasad Khambalikar Regional Director and Head of CEE at Oracle Banking and Financial Services

37

Barclays, Citi, Santander, Luminor Group, Banca Intesa Group, Banca Transilvania, MBH, Unicredit to Neobanks & EMI Innovators like European Merchant Bank, FinXP, W1TTY, Trust Payments, and many more.

Customer Spotlights EMBank challenges traditional banking models by offering innovative Fintech solutions, expanding services to support alternative banking payments, and aiming to introduce instant payments next year.

Partnering with Facilization and Oracle, EMBank leverages a composable framework hosted in Oracle Cloud, enabling adaptability, API integrations, and a secure mobile experience.

W1TTY chose Oracle Banking for its comprehensive suite.

Founder Ammar Kutait emphasises Oracle’s scalability to support W1TTY’s global ambitions in delivering tailored offerings based on customer financial situations, life circumstances and goals. finXP, a fintech specialising in B2B payments in Europe, focuses on delivering faster and simplified payments for next-gen businesses.

According to Jens Podewski, CEO and Co-founder of finXP, by choosing Oracle, finXP aims to provide agile and versatile payment solutions. deploy early-market and indus-

Suisse, we need few other examples of

Fuelled with the right skills,

try-leading technologies, like cloud

how vital it is for a bank to stay afloat. Reg-

expertise, and experience of the

services, to stay ahead of disruption.

ulations and treading with caution have,

partner Ecosystem

For example, banks have quickly

so far, worked excellently to achieve that.

Oracle’s Partner ecosystem is a well-

deployed use cases such as approvals on wearables, peer-to-peer payments, voice-assisted transactions, and microtransactions via Quick Response (QR) codes, an internal company document says.

To stay relevant, banks must be ready with an ecosystem that’s always available, agile, frictionless, and scalable”

Cloud-ready

Prasad Khambalikar

Oracle Financial Services offers cloud-

Regional Director and Head of CEE at Oracle Banking and Financial Services

ready solutions on Oracle’s advanced cloud infrastructure, with a growing range of cloud-native applications,

the unique needs of European Union

giving banking customers the flexibility

(EU) organisations.

Going “all in” on agile solutions

needs of the local market while

done with the wrong partner. New, im-

ensuring successful delivery and

mature fintechs rarely make the grade.

ongoing operations of the banking

That’s why partnering with a solid

Agility at the cost of stability is not an

ecosystem.

Banking leader that’s been going and

Established in 2009, Facilization is a

growing for more than three decades

key player in Oracle’s Partner ecosystem.

makes sense.

Equipped with the right blend of skills, expertise and experience,

As of 2024, Oracle’s financial services

Facilization complements Oracle’s

numbers speak for themselves:

market-leading solutions with custom-

•

Oracle Financial Services Manages

er-centric services to comply with local

$200 billion in revenue for banks

regulatory requirements and meet the

and payments processors.

unique needs of Fintech institutions, as

It processes transactions for more

well as leading the way for greenfield implementations.

to choose deployment methods that suit their preferences.

oiled engine to address the specific

represents a massive risk for banks if it’s

•

Adaptability, security, and compli-

option. Oracle’s customer accolades

than 730 banks and financial

ance are prioritised to ensure the safety

and numbers prove that it offers both.

institutions across 160 countries

and security of customer financial data.

Between outright corruption, such as

worldwide.

With a successful track record of 200+ projects across 7 countries, including the Baltics, Facilization is a

Oracle has also made a significant in-

what occurred in FTX, or poor risk man-

vestment in Oracle EU Sovereign Cloud

agement (among other things) that led to

Oracle’s clientele spans the spectrum

trusted partner in core banking, digital

regions, specifically tailored to meet

the fall of Silicon Valley Bank and Credit

global and Regional giants like HSBC,

banking, and integration services.

38

Financial Defense Armored With AI In the evolving battlefield of financial crime, AI stands as a beacon of innovation, offering critical tools that enhance detection, analysis, and compliance amidst a landscape of increasingly complex threats.

As institutions embrace these technologies, they not only streamline operations but also forge a stronger shield against the financial crimes of tomorrow.

By Jakob Lindmark Frier

T

he rise of money laundering

AI transforms financial crime fighting

investigations. The advent of Gen-

has become a significant

With fraud, money laundering, and cy-

erative AI has greatly improved the

threat to national security and

bercrimes rising, traditional approaches

integration of external data sources

societal stability. In 2022, the

to these threats are rapidly becoming

and contextual information into case

UK witnessed a 67 per cent increase

obsolete. AI brings pivotal changes to

management.

in fraud losses, highlighting a trou-

this critical fight, marking a new era

bling trend mirrored across Europe.

against financial crime.

The growing sophistication of these

“AI’s impact on combating financial

economic crimes, often intertwined

“This integration significantly improves financial crime investigations and regulatory reporting, notably

crimes can be seen through its trans-

reducing investigation times from an

with cybercrimes, challenges traditional

formative applications in both public

average of 2 hours and 30 minutes to

financial institutions.

and private sectors. In the public

less than 30 minutes,” Mainez says.

Financial institutions typically operate

arena, state Financial Intelligence

According to Mainez, AI surpass-

with segregated functions for prevention,

Units (FIUs) leverage technologies

es rule-based systems in quickly

detection, and investigation, a structure

like Natural Language Processing

identifying anomalies and enhancing

increasingly inadequate against criminals

(NLP) to automate the extraction of

investigation response times. However,

who blend diverse techniques without

critical information such as entities,

significant behavioural shifts, like those

such organisational boundaries.

timelines, events, and locations,”

seen during events like the COVID-19

Mainez says.

pandemic, pose challenges, necessi-

“Financial crimes that are on the rise include fraud, money laundering, hu-

The automation significantly en-

tating swift model retraining. It’s crucial

man trafficking, and human smuggling.

hances the speed and accuracy of

to maintain an updated typology library

At the same time, bad actors combine

identifying potential financial crimes.

and have a function dedicated to mon-

different techniques and modus ope-

Mainez explains that financial institu-

itoring external behavioural changes

randi, as organisational constraints do

tions on the private side have wit-

to adapt models accordingly. Relying

not limit them,” says Francisco Mainez,

nessed a revolution in their operational

solely on internal data with external

Head of Financial Crime and Regulatory

processes, particularly in areas like

context risks being prepared for major

Affairs at Lucinity.

transaction monitoring, detection, and

social or geopolitical events.

Francisco Mainez Head of Financial Crime and Regulatory Affairs, Lucinity

39

Explainability is a crucial element in implementing AI for financial crime detection. A key approach involves aligning AI detection models directly with the specific regulatory requirements of the countries in which they are employed.”

Francisco Mainez Head of Financial Crime and Regulatory Affairs, Lucinity

Complexities in financial crime prevention Implementing new AI technology in the context of financial crime detection and prevention presents several challenges.

Incorporating AI into current IT infrastructures can be complex. Existing systems might be outdated or incompatible with new AI technologies, requiring significant modifications or complete overhauls.

“You also need to ensure that the data flows are fully functional but over and above, making sure the business processes are correctly mapped and reflected in the system workflows,” Mainez says and continues: “AI systems need to be supported not just from a technology point of view, but the compliance teams will also need to update their financial typologies library and make sure there’s alignment with the AI models so the data makes sense once it’s been analysed.”

When it comes to ensuring compliance with the constantly changing regulatory landscape in financial crime prevention,

As fraud, money laundering, and cybercrimes escalate, traditional defenses against these threats are quickly becoming obsolete. AI brings pivotal changes to this critical fight, marking a new era against financial crime.

Mainez point to an important factor.

“Explainability is a crucial element in implementing AI for financial crime detection. A key approach involves aligning AI detection models directly with the specific regulatory requirements of the countries in which they are employed.

This alignment not only ensures that the models operate within legal boundaries but also assists during audits or reviews, where there is a need to articulate the precise functioning of the system in detecting anomalies,” Mainez says.

40

New EU Instant Payments Legislation Has European Banks Scrambling.

Banks had six years to implement SEPA Instant Payments.

Many didn’t. New EU legislation now gives them nine months.

By PPI

D

espite its introduction in 2017,

set up the infrastructure for customers

•

Interbank communication.

adoption of SEPA Instant

to receive SCT Inst payments and 18

•

Settlement.

Credit Transfers (SCT Inst) by

months for customers to send pay-

•

Immediate reconciliation.

ments. Non-Euro banks have 33 and 39

•

Notifying that funds have arrived.

European banks has been

slow. For those that have implemented

months for the same, respectively.

it, SCT Inst payments are, on average,

The system also needs to run 24/7—

five times more expensive than SEPA

The burden behind implementing

ideally backed by on-call customer

Credit Transfer counterparts.

SCT Inst payments

support.

The percentage of banks that have

“There are plenty of upfront costs

implemented SCT Inst is high in some

when implementing instant payments,

The new legislation adds even

countries, such as 100% in Slovenia

but no direct monetary return for the

more challenges

and 98% in Austria. In other countries,

transaction itself,” says Dr. Hubertus

As if the existing challenges weren’t

however, adoption has been dismal—

von Poser, member of the manage-

enough, the new legislation adds at

Danish banks had one of the lowest

ment board of PPI AG, a leading

least three new ones:

adoption rates at 2% by June 2022,

payments consultancy and solutions

1.

Throughput.

“beaten” only by Hungary and Croatia

provider based in Germany. “Also, it’s

2.

Forex.

with 0%.

risky because you’re implementing a

3.

And privacy challenges.

As a result of the higher costs and lack of adoption, only 14% of all SEPA Credit Transfers (SCT) were instant

new system over one that has years of reliability behind it.”

Throughput: If users can send a

An instant payment is defined as a

payment instantly instead of one that

payment that moves from the payer’s

takes 24 hours, at the same cost, why

account to the recipient’s account

would they choose the slower option?

legislation in October 2022 to mandate

within 10 seconds. A lot needs to hap-

They won’t.

the standardised implementation of

pen in those 10 seconds, including:

payments by May 2023.

The European Commission proposed

instant payments. In November 2023,

“The SCT Inst system is going to experience a massive surge in through-

The European Parliament and Council

•

Verifying funds exist in the account.

put as this rolls out,” says von Poser.

agreed on the Commission’s proposal.

•

Fraud checks.

“Even banks that have SCT Inst imple-

The legislation mandates that all banks

•

AML (Anti Money Laundering)

mented need to review their systems

checks.

to ensure they can handle the load.

CTF (Counter Terrorism Financ-

Market participants expect a threefold

ing) checks.

increase in transactions.”

that offer normal SCTs must also offer SCT Inst—at no additional charge.

Eurozone banks have nine months to

•

41

Forex: Instant payments must also

action fields for steps to be taken.

be possible in foreign currency ac-

“Implementing SCT Inst was never

counts held in European banks. “That

easy, which is why many banks haven’t

opens up a whole new set of challeng-

done it yet,” says von Poser. “Now, they

es,” says von Poser. “Retail forex trades

don’t have a choice. Our IPaaS solution

don’t occur after five PM, so banks

makes it possible for them to meet the

don’t know yet how to finalise these

nine-month deadline, and our readi-

transactions during those hours.”

ness check ensures that already-im-

Fintechs like Wise and Revolut offer

plemented solutions are compliant.”

the appearance of instant off-hours forex trades, but these aren’t truly

SEPA Request to Pay (SRTP)—a new

instant payments, as per the EU’s regu-

business model opportunity

latory definition.

The new legislation also drives new opportunities.

Wise also has legalese in place that allows it to renege on a “guaran-

Complementing the new regulation

teed rate” if the rate changes by more

is the EU’s new SRTP messaging func-

than 5% once markets re-open. In the

tionality, which allows payees to initiate

EU legislation, an instant payment is

the payment workflow electronically,

finalised at the time of the transaction.

supporting the end-to-end process.

There’s no going back.

SRTP doesn’t mandate the payment scheme—you can offer instant payment

GDPR: Under new rules, payment

or another method to fulfil the payment

providers must match IBANs to an

workflow. However, using SCT Inst

account holder name. The question is:

makes the most sense, given the new

How much? Overager matching opens

regulations that will put them on an

the door to a privacy nightmare as

even playing field with SCT payments.

As one example, you could combine

crooks develop tools to check thousands of IBANs and so exfiltrate the

SRTP with SCT Inst and implement a

names of account holders. Whereas

mobile instant payment solution con-

too little checking risks violating the

nected with the user’s phone number.

new EU law.

In such a service, the payer sends a payment request to a mobile number,

PPI’s “Instant Payments Readiness

and the user can approve or disap-

Check” and “TRAVIC-Instant-Pay-

prove on their phone. Using SCT Inst,

ments-as-a-Service” offer a solution

funds are transferred instantly.

PPI offers a white-label solu-

PPI’s experience in payment consulting solutions spans decades. The

tion called PAYCY that seamlessly

company is also the leading provider

integrates SEPA Request-to-Pay

of solutions for EBICS—a banking

functionality inside a bank’s existing

communication protocol mandated

infrastructure using standard APIs. As

for all banks in Germany—and FinTS, a

a white-label solution, payers and pay-

bank-independent protocol also used

ees deal only with the bank’s front-end

in German banks.

solutions, such as the online banking

Long before instant payments

interface or the bank’s mobile app.

became mandated, PPI recognised the

Under the hood, PAYCY ensures

challenges banks faced and devel-

compliance with the SRTP standard,

oped an Instant Payments as a Service

enabling banks to offer additional

(IPaaS) solution. The IPaaS is geared

value to customers by implementing

toward banks that don’t yet offer instant

SRTP before latecomers.

payments. The solution offers a fast im-

For payers, the value-add includes

plementation in a modular fashion, and

bypassing costly card schemes by using

banks can choose to connect to either

Dr. Hubertus von Poser, member of the management board of PPI AG

USP is combining RTP with specific

operated by the European Central Bank—or RT1, Europe’s other real-time system for retail-level transactions.

PPI’s IPaaS also complies with the latest EU regulations.

a local, instant payment method instead.

PAYCY isn’t just an RTP platform. Its

TIPS—a real-time settlement system complete, checking a bank’s technical

use cases such as eInvoices, which

Inst implemented, PPI offers an Instant

requirements and potential risks. It

existing platforms and the SEPA

Payments Readiness Check service.

then provides a visualisation of affect-

Request-To-Pay (SRTP) Scheme

The service takes only three weeks to

ed systems, areas, and interfaces, with

Rulebook don’t cover.

For banks that already have SCT

42

Top Five Practical Applications of Large Language Models (LLMs) in Banking Today Generative AI is transforming the financial sector with diverse applications. Banks are exploring AI from basic trials to full-scale implementations.

Case studies showcase the use of the technology to enhance customer service, automate software development, aid in complex query resolution, strengthen fraud detection, and personalize financial advice. These innovations signify a shift towards more technologically advanced, efficient, and customer-centric banking services.

By Chris Crespo

43

T

he transformative capacity of Generative AI is profound, potentially altering our daily lives, professional activi-

ties, banking habits, and investment strategies. The conversation around the potential of Large Language Models (LLMs) in Financial Services continues to take center stage at major financial services conferences in 2024 and with good reason. The integration of LLMs like custom-tailored versions of ChatGPT is a significant development as these specialized models, trained on specific financial data, offer unique capabilities in handling unstructured content and facilitating user-friendly interactions with complex data systems.

As the attitude of financial services institutions evolves from skepticism to acceptance of new technology, there is a growing recognition of its potential impact on various aspects of financial services operations throughout the industry. We are witnessing an increasing number of practical applications that demonstrate how this technology can enhance and transform the sector.

Despite initial reservations and a warranted prudent approach, financial institutions have begun exploring and experimenting with Generative AI. Examples include ABN Amro, Goldman Sachs, Danske Bank, and Morgan Stanley amongst countless other whose exploration of the technology range from dipping their toes in the AI waters, all the way to taking a big plunge. These organizations are testing and developing AI technologies, indicating a readiness to progressively adopt this tool, at least In controlled environments, away from the ambiguities present in the existing regulatory frameworks.

Augmenting Customer Service:

1

Customer service stands at the forefront of the banking experi-

ence. Chat-GPT’s AI-powered tool empowers banks to provide instant responses to customer inquiries, effectively reducing waiting times and offering round-the-clock assistance.

This tool efficiently handles a multitude of queries, ranging from account balances to fund transfers. This not only enhances customer satisfaction but

44

also optimizes resource utilization.

customer data, and provide personal-

ABN Amro, the third largest bank

ized responses. This not only improves

in the Netherlands uses Generative

customer service experience but also

AI technology to automate customer

significantly reduces response times,

interactions and data collection. Remi-

allowing banks to cater to customer

niscent of the boldness of early adopters

needs more effectively and promptly.

of disruptive technologies, ABN Amro

Íslandsbanki, a leading bank in

is deploying the technology within 20

Iceland, has innovatively employed

of its contact centers, enabling agents

generative AI to enhance customer

to summarize customer calls and thus

service efficiency through an online

spend more time focusing on solving

chatbot. The AI-driven chatbot, named

customer issues.

Fróði, has demonstrated remarkable proficiency, successfully handling 50%

Software development automation:

2

of all customer queries online. The

Generative AI is increasingly

impact of Fróði is further underscored

being used by banks to auto-

by its impressive user satisfaction rate,

mate software development. The

which stands at 90%. This high level of

technology assists in generating code,

satisfaction indicates that customers

reducing the time and effort required

are finding the interactions with the

by developers. It enables faster creation

chatbot to be helpful, accurate, and

of foundational software, upon which

user-friendly.

more complex functionalities can be built. This not only improves efficiency

Fraud Detection and Prevention:

but also allows software engineers to focus on more intricate and innovative

4

aspects of development. By integrating

ing transaction data, detecting anoma-

generative AI, banks are streamlining

lies, and triggering alerts for potentially

their software development processes

fraudulent activities. This proactive

and enhancing their technological

approach mitigates financial loss and

capabilities.

safeguards the bank’s reputation.

Chat-GPT strengthens banks’ ability to combat fraud by analyz-

Goldman Sachs is leveraging gen-

Danske Bank, the second largest

erative AI to enhance the efficiency of

bank in the Nordics has effectively

its software engineering processes.

integrated AI and deep learning into its

Emphasizing a technology-driven ap-

fraud detection systems. By adopting

proach, the bank has been experiment-

AI and deep learning solutions, Danske

ing with AI tools that aid in automatical-

Bank achieved a significant reduction

ly generating code. By using generative

in false positives and an increase in

AI, developers have managed to

true positives. This AI driven approach

automate about 40% of their coding

allows the bank to focus resources on

tasks. This technology is also employed

actual cases of fraud. The AI model

in testing processes, further streamlin-

identifies potential fraud cases while

ing the software development lifecycle

avoiding false alarms, with analysts

at Goldman Sachs.

stepping in for further investigation when needed. This approach has

Answering complex queries:

3

enhanced the bank’s ability to combat

Morgan Stanley is innovating in

The deployment of advanced

sophisticated fraud techniques and

wealth management by introducing an

AI-driven chatbots to handle

keep customer’s money safe.

advanced chatbot, created using Ope-

complex customer queries with

nAI’s latest generative AI software. This

enhanced efficiency and accuracy is

Personalizing Financial Advice:

tool, named the AI @ Morgan Stanley

also gaining momentum amongst

5

The ability of Chat-GPT to

Assistant, is designed to support the

banks. These advanced chatbots are

provide tailored financial advice

bank’s financial advisors by providing

equipped to comprehend and respond

has the potential to transform customer

easy access to a vast database of

to a wide range of customer needs,

relationships. By analyzing vast

research and data. It enables advisors

from basic account inquiries to more

amounts of data, individual’s financial

and their teams to quickly analyze

intricate financial advice. By leveraging

history, income, and investment

large amounts of content and data,

natural language processing and

preferences, banks can offer personal-

with answers sourced directly from

machine learning, these AI chatbots

ized service that was previously

Morgan Stanley’s wealth management

can understand context, analyze

unattainable.

content. The implementation of this

45

AI assistant aims to improve client

former, from where the acronym GPT is

they do not replace the need for

interactions, increase efficiency in advi-

derived, to access information about his

human oversight. These models are

sor practices, and allow advisors more

bank account and recent transactions.

tools that enhance, rather than

time to focus on client service.

This exploratory tool, rather than signal-

replace, human expertise in financial

ing the arrival of AI enabled customer

operations and strategy. As the

At the same time, technologists are

facing banking, points at a future where

financial industry continues to navigate

pushing the boundaries of AI in finance.

AI and open finance could fundamental-

this technological advancement, the

Mike Kelly, recognized as a key figure in

ly change the financial industry, making

balance between AI capabilities and

fintech, has developed the “BankGPT”

it more integrated into our daily lives,

human insight remains a key factor in

plug-in, which represents a significant

responsive to our needs, and capable of

the successful integration of these

step beyond mere experimentation. The

proactive decision-making.

technologies into the processes

tool, which is not available for public

While LLMs significantly boost

through with banks and other financial

adoption, enabled its developer to inter-

efficiency in data processing and

institutions continue to serve the

act with a Generative Pretrained Trans-

analytics, it’s crucial to remember that

needs of their customers.

46

Banks Harness AI for Future-Proof Financial Services Generative AI’s emergence in early 2023 marks a transformative period for industries, offering significant value and new challenges. With the potential to add trillions to the global economy, banks are leading AI integration, boosting efficiency and customer service while navigating the complexities of data privacy and ethical usage. These banks are creating a future where AI supports staff, refines products, and reshapes the banking experience within a rigorous governance and innovation framework.

By Jakob Lindmark Frier

47

G

enerative AI has made a significant entry into the global market in early 2023, with promising outcomes

Ramtin Matin Head of Innovation, SpareBank 1 SR- Bank

and the introduction of new potential challenges for organisations.

According to estimates by the McKinsey Global Institute, genera-

tive AI could contribute an immense annual value of $2.6 trillion to $4.4 trillion across various applications.

Banking, in particular, is poised to reap substantial benefits, with a yearly potential value ranging from $200 billion to $340 billion, which translates to 9 to 15 per cent of operating profits, predominantly through productivity enhancements.

The positive economic effects of generative AI are expected to permeate all banking areas, with corporate and retail banking sectors seeing the most significant gains.

At Spare Bank 1 SR-Bank (SR-Bank), they are actively integrating generative AI technologies into multiple facets of its operations; as emphasised by Head of Innovation Ramtin Matin, the bank was among the first banks to make a version of GPT widely available to all employees, a move that underscores its commitment to innovation and positions it as a leader in AI adoption.

“We are motivated by the desire to enhance efficiency across the organisation, with initiatives aimed at assisting staff, advisors, and management.

We utilise AI to condense extensive data sets and written content to accelerate the pace of evaluation and decision-making. While synthesising information from physical meetings presents a more challenging application, we are optimistic about achieving a use-case in the future,” Matin says.

By providing faster and higher-quality responses, most inquiries are handled with great satisfaction to our customers,”

AI elevates banking

The bank has realised savings

AI has been one of the strategic focus-

exceeding 40 million NOK in conversa-

es for the past 5-7 years at SR-Bank to

tional AI, marking substantial operational

enhance customer service and personal

efficiency gains. However, Matin is con-

banking experiences. Initiating with

fident that recent forays into generative

conversational AI technologies in 2016,

AI, initiated in August, will significantly

the bank has successfully integrated

exceed these figures.

chatbots as a core component of cus-

At Íslandsbanki, they embraced

tomer service operations - benefiting

Generative AI, focusing on low-risk,

both customers and staff.

high-impact applications like sen-

“By providing faster and higher-quality

timent analysis, prioritising Icelan-

responses, most inquiries are handled

dic-native models for optimal per-

with great satisfaction to our customers.

formance. The release of ChatGPT,

Also, our employees have gotten better

featuring Icelandic-trained models,

day-to-day work quality since the tasks

significantly influenced their strategy,

Ramtin Matin

have shifted from repetitive tasks to

resolving issues faced during their

Head of Innovation, SpareBank 1 SR- Bank

more purposeful tasks,” Matin says.

initial proofs of concept.

48

“Sentiment analysis has been integrated into our CRM to categorise requests and assess urgency, streamlining customer service and

Riaan Dreyer Chief Digital and Data Officer, Íslandsbanki

reducing call centre load. We’ve also developed a platform to ensure marketing content aligns with brand standards, voice-enabled chatbots for accessibility, and implemented AI in development to boost coding efficiency and innovation,” says Riaan Dreyer, Chief Digital and Data Officer at Íslandsbanki. Íslandsbanki utilises traditional regression and machine learning models for risk assessment and management, prioritising explainability to ensure transparent and regulatory-approved decisions. The most significant efficiency gains from Generative AI have been in development, with 15% to 30% productivity improvements. At the same time, other areas are cautiously approached and are still in the preliminary phases of integration, Dreyer explains.

Balancing innovation with ethical standards Banks must navigate complex regulations and maintain customer trust while harnessing AI’s capabilities, necessitating rigorous compliance measures and ethical considerations in AI deployment. This is compounded by the fast-evolving nature of AI technology and the need for continual adaptation of privacy measures to protect sensitive financial data.

SR-Bank strongly emphasises trust and the ethical deployment of AI, which

We’ve developed a platform to ensure marketing content aligns with brand standards, voice-enabled chatbots for accessibility, and implemented AI in development to boost coding efficiency and innovation”

is central to its AI implementation strate-

The bank restricts sensitive information

gy and the selection of use cases.

from public models, utilising secure

“We comply strictly with privacy

models within their Azure tenant. It is

regulations affecting both custom-

developing a dedicated Generative AI

ers and staff, and its AI initiatives are

platform for using advanced models in

developed in close cooperation with

a controlled environment.

the data protection officer, compliance

The bank has also revised its data

officer, and legal department to ensure

governance policies to incorporate the

comprehensive compliance and a bal-

evaluation of training datasets for biases

anced application of the technology,”

and ethical issues, recognising the com-

says Martin.

plexity and the need for ongoing policy

Íslandsbanki approaches data privacy and ethical AI use by ensuring all train-

evolution. Dreyer explains: “Emphasizing the importance of this

Riaan Dreyer

ing data align with customer consent

issue, we have established clear use

Chief Digital and Data Officer, Íslandsbanki

parameters or are entirely anonymised.

policies, organised training for aware-

49

ness, and strengthened data loss

will make the journey more complex.

prevention, opting for regulated use

“That is why we are spending time

rather than a complete ban due to the

now to design a platform and gover-

lenges during our first implementa-

impracticality of tracking the constant

nance process that is fit for the new

tion of the whitelisted GPT version for

emergence of new models.”

reality. We see the biggest benefits

our employees. Those were related

in the short term within augmenting

to the maturity and understanding

New reality of service and innovation

current staff and improving service and

of the technology,” Matin says and

Dreyer expects that AI will significantly

product offerings,” he says.

concludes:

identifying potential applications.

“We solved some of the main chal-

impact banking as a whole. Íslands-

SR-Bank also aims to expand the

“Furthermore, management and

banki is setting its sights on reshaping

use of generative AI over the next year,

employees’ social acceptability, trust,

its operation through AI, focusing on

leveraging widespread internal sup-

and culture are needed to embark on a

innovative solutions and meticulous

port and a clear plan for deployment.

journey like this. The support in the

data management. Rethinking what is

They anticipate harnessing tools like

organisation at all levels is at an all-time

possible, how to build solutions and,

Microsoft Co-Pilot to automate indi-

high. So, I would say that the enabler far

more importantly, how to manage data

vidual employee tasks and are already

surpasses the challenges.”

50

eIDAS: The Catalyst for Making Digital Signatures Mainstream The arrival of the European Union’s electronic Identification, Authentication, and trust Services 2.0 (eIDAS 2.0) regulation marks a pronounced shift in the fintech sector, enabling a new era of digitalized financial services. Its impact on electronic signatures, identity verification, and regulatory compliance is profound, offering both challenges and immense opportunities. As the industry progresses towards a more digital future, understanding and adapting to the nuances of eIDAS 2.0 will become crucial to anyone wishing to stay at the forefront of the industry.

By Chris Crespo

E

lectronic Signatures are a large

on the type of electronic signature

viding a reliable third-party verification

and complex topic, so let’s

used as well as the applicable laws and

of the signer’s identity.

start by defining the different

regulations in each jurisdiction.

Then you have digital signatures, a

Different types of Digital Signatures

specific type of electronic signature

Further typologies of digital signatures

that employs cryptographic tech-

provide an increase in security and

The definition and differences

nology to create a digital certificate,

assurance. “Advanced Electronic Sig-

Arvid Vermote

between an Electronic and Digital

offering proof of identity. Valid digital

natures (AES) and Qualified Electronic

CISO, GlobalSign

Signature

signatures offer an assurance that

Signatures (QES) are digital signatures,

An electronic signature is a digital rep-

the document remains unaltered and

which are backed with cryptography

resentation of an individual’s intention

originates from a distinct individual,

and provide security assurance of vary-

to sign a document or agreement. The

thus strengthening the trustworthiness

ing levels,” states Arvid Vermote, CISO at

use of electronic signatures has be-

of electronic transactions.

GlobalSign, a leading provider of identity

types of signatures that will be

discussed in this article.

come increasingly common in various

Digital signatures are widely used

industries due to its efficiency, conve-

for secure and authenticated commu-

Qualified signatures necessitate the abil-

nience, and the ability to streamline

nication, especially in situations where

ity to uniquely identify the signing party,

document workflows. It’s important to

the authenticity and integrity of the

ensuring a transparent link between the

note that while electronic signatures

signed document are critical. Further-

signature and the individual behind it.

provide a digital alternative to tradition-

more, the involvement of a Certificate

The criteria for establishing this

al signatures, the level of security and

Authority (CA) enhances the trustwor-

identity in an advanced signature are

legal recognition may vary depending

thiness of the digital signature by pro-

more lenient compared to a qualified

and security solutions. Advanced and

51

one. In the case of a QES, every

a convenient option for businesses

aspect related to the identification and

to promptly enable all their employ-

the secure storage of identity informa-

ees to use AES for signing without

tion is tightly regulated. QES is the only

the need for extensive identification

standard recognized as a full replace-

processes. This is made possible by

ment for a handwritten signature, even

leveraging the existing identification

in cases where the law mandates a

data the company maintains for its

written form requirement.

employees, in conjunction with their

However, “Qualified Electronic

official email addresses.

Signatures are far more than just digital renditions of traditional sig-

The Future of Digital Signing

natures,” states Roni Oeschger, CEO

Digital signatures are at the forefront

and co-founder at Skribble, a Swiss

of the financial industry’s ongoing

Electronic signature software provider.

evolution, unlocking a world of inno-

“They are sophisticated legal con-

vation and authenticity. Their ability to

structs comprising of a digital signa-

streamline processes brings with it a

ture, an electronic identification (eID),

host of benefits, including enhanced

and a supporting legal framework like

convenience, heightened security, and

eIDAS,” he adds. This intricate combi-

significant cost savings.

The future is bright for electronic signatures.

They’re becoming cheaper, faster, and more secure. Efforts like eIDAS 2.0 will soon make electronic signatures the norm” Roni Oescher CEO at Skribble

nation ensures both the authenticity

In finance, where speed and accu-

overall customer experience but also

and integrity of signed documents.

racy are essential, digital signatures

helps fintech companies and financial

In contrast, Advanced Electron-

enable individuals and businesses to

institutions accelerate onboarding, loan

ic Signatures (AES) offer a more

sign contracts, agreements, and trans-

approvals, and other financial transac-

streamlined approach to identifica-

actions remotely, reducing the need for

tions, ultimately boosting their compet-

tion. For instance, Skribble in col-

in-person interactions and paper doc-

itiveness and ensuring compliance with

laboration with GlobalSign provides

umentation. This not only improves the

regulatory requirements.

Roni Oeschger CEO and co-founder, Skribble

52

Game Changing Utility The utility of digital signatures lies in their ability to solve several critical problems in the digital age. Firstly, they significantly streamline the process of signing and validating documents,

eIDAS 2.0 marks the evolution of the Electronic Identification, Authentication, and Trust Services (eIDAS) framework in the UK and EU countries. Launched in 2016 to enhance the efficiency of electronic transactions, the initial phase faced implementation variations. The updated eIDAS 2.0 addresses these concerns with detailed requirements and guidelines for a seamless implementation.

eliminating the need for physical presence and paper-based processes. This shift not only accelerates the pace of transactions but also cuts down on costs and administrative burdens associated with paper documentation.

For users, digital signatures open new levels of convenience and efficiency. They can now execute legally binding agreements remotely, ensuring continuity in business operations regardless of geographical barriers. This technological advancement empowers users to conduct secure, efficient, and legally compliant transactions in a fully digital environment, something that was not feasible with traditional signing methods.

AATL and EUTL in the Trust Model The trust model underpins the entire digital signature ecosystem, establishing the credibility and legal validity of digital signatures through identity verification, secure certificate storage, and trusted certificate authorities. In essence, it instills confidence in the legality and trustworthiness of digitally signed documents.

Two components in the Trust Model play an integral role. The AATL (Adobe Approved Trust List) and EUTL (European Union Trust List) each serve a distinct purpose in the realm of digital signatures and electronic documents.

AATL, curated by Adobe, features trusted digital certificates from approved CAs, creating a standardized trust framework for confident use of electronic documents and digital signatures in Adobe products.

EUTL, tailored to the EU, catalogs trusted CAs and certificates compliant with EU regulations, such as eIDAS. Its goal: standardized, secure digital signatures and trust services, promoting cross-border interoperability and legal

Vermote adds, “EUTL, on the other

predominant way of signing in Europe.

recognition across EU states.

hand, is an eIDAS-centric list, playing a

“The slow adoption is astonishing,

pivotal role in the EU and EEA, setting a

since electronic signatures bring

model for other countries.”

many advantages like being cheaper,

Understanding AATL and EUTL is crucial in establishing trust in digital signatures. Oeschger explains, “AATL

faster and even more secure,” says

helps verify the trustworthiness of elec-

Tremendous Opportunity for Growth

Oeschger. He continues “With efforts

tronically signed documents. However,

Despite its many benefits, the tech-

like eIDAS 2.0, electronic signatures

it doesn’t reflect the eIDAS standards.”

nology has not yet become the

will soon become predominant.”

53

Advanced Electronic Signatures (AES) and Qualified Electronic Signatures (QES) are digital signatures, which are backed with cryptography and provide security assurance of varying levels” Arvid Vermote CISO at GlobalSign

national commerce.” The involvement of a Qualified Trust Service Provider like GlobalSign is crucial for issuing the qualified digital certificates required for QES, indicating compliance with legal standards and regulations.

The ongoing trajectory for electronic signatures and digital identities is set for expansion observes Vermote. “There’s a growing need for systems that transcend geographical and regulatory boundaries, offering interoperable solutions.” For global enterprises, navigating the complex web of international regulations poses a significant challenge. “Different countries have varying regulations and quality standards. It requires intricate knowledge to understand which signature type to use and ensure its legal validity across regions,” Vermote points out.

“The future is bright for electronic signatures. They’re becoming cheaper, faster, and more secure. Efforts like eIDAS 2.0 will soon make electronic signatures the norm, echoing the successes seen in countries like Estonia which has seen electronic signature savings to be about 2% of their GDP! That is Vermote elaborates, “eIDAS 2.0

citizen will have access to an eID that

introduces the European Digital Iden-

can be used to sign QES. Once this

tity Wallet and expands the scope

happens, electronic signatures will

of qualified services requiring QES.

become the norm. Oeschger contin-

There’s also a stronger emphasis on

ues: “eIDAS is laying the foundation

privacy, aligning with GDPR.”

for legal electronic signatures across

With efforts like eIDAS 2.0 it is only

Europe, facilitating cross-border digital

a matter of time until every European

contracting, a game changer for inter-

huge!” Oeschger concludes.

Building Trust with eIDAS 2.0 and Digital Signatures, a webinar by GlobalSign

54

AI Act: High Stakes for Credit and Beyond The EU’s new AI Act introduces strict rules for AI, especially for systems that check how likely someone is to repay a loan, requiring careful monitoring. Fintech companies worldwide will have to carefully follow these AI rules to avoid large fines and protect their reputations from the scrutiny of EU regulators.

By Jakob Lindmark Frier

T

In 2021, the EU Commission introduced a proposal for the AI Act, targeting the regulation of AI systems by imposing specific responsibilities on the providers, operators, and users of these systems.

he once-celebrated tech

maintaining records of AI system oper-

also employed to optimise profits by

industry motto to “move fast

ations; ensuring transparency; provid-

tailoring financial offers based on the

and break things,” echoed

ing human oversight; and maintaining

customer’s likelihood to accept higher

from Silicon Valley in Cali-

accuracy and cybersecurity.

borrowing or repayment terms.

fornia to the Nordic fintech industry,

“The AI Act distinguishes the high-

“Use of credit scores, especially by

is nearing its departure. EU regulators

risk AI systems, which due to their

smaller financial institutions, discour-

appear to be taking up the mantle as

operation may cause significant impact

age them from checking the data with

the courteous yet firm gatekeepers.

on the safety of individuals or may have

the registers, reducing the costs, but

In 2021, the EU Commission in-

an impact on their rights and freedoms.

degrading the level of credit analysis.

troduced a proposal for the AI Act,

High-risk AI system providers and users

Transparency was also identified as an

targeting the regulation of AI systems

must additionally implement quality

issue, where the reasons for scoring are

by imposing specific responsibilities on

management systems, draw up tech-

not disclosed, as the scoring process

the providers, operators, and users of

nical documentation, and comply with

is usually protected as a trade secret,”

these systems. This regulation follows a

registration obligations,” says Stasys

Drazdauskas says.

risk-based approach, meaning that the

Drazdauskas, Counsel at the interna-

greater the risk the system poses, the

tional business law firm Sorainen.

more stringent the compliance require-

When preparing the AI Act propos-

AI Act debate heats up The Commission’s proposal identifies

al, research on the financial sector

systems used for assessing the credit-

revealed several concerns regarding

worthiness of individuals or determining

ious aspects such as risk management,

using automated systems to offer credit

their credit scores as high-risk.

which involves identifying, estimating,

and financial services.

ments become.

These responsibilities encompass var-

In contrast, in its June 2023 negotiating

and adopting measures to manage risks;

It was discovered that credit scoring

stance, the European Parliament sug-

ensuring data quality to prevent biases,

serves a dual purpose: not only does it

gested broadening this high-risk catego-

data gaps, and other shortcomings;

help avert borrower defaults, but it is

ry to include AI systems for determining

55

Urging proactive AI compliance

Stasys Drazdauskas Counsel, Sorainen

collaboration According to Drazdauskas, entities in the fintech sector utilising creditworthiness assessment systems should initiate dialogues with their AI system providers to formulate a plan for implementing compliance measures.

“The system providers expect to manage the bulk of compliance-related tasks, including quality assurance, technical documentation, and record-keeping. However, it remains essential for financial entities to inquire about the providers’ methods for ensuring the quality of their training datasets and the steps they take to mitigate biases,” he says.

However, risk management systems will have to be redesigned by the credit institutions to include AI issues, and risk management systems will have to be created from scratch for non-credit institutions.

“It remains to be seen whether ethical guidelines become part of the final wording of the Act,” Drazdauskas says.

Hefty fines signal compliance clampdown The AI Act is set to impose substantial penalties – up to 30 million EUR or 6 per cent of annual global turnover – thereby adding another significant area of compliance alongside financial regulations, competition law, consum-

or significantly influencing individuals’

er protection, data protection, and

health and life insurance eligibility.

cybersecurity.

“The Council seems not to agree with such proposed expansions, but the final decision remains to be seen. On the other hand, the Parliament proposed to exclude fraud prevention systems from the high-risk list, which the Council did not accept. However, safety-related systems should qualify as high-risk by definition,” Drazdauskas says and adds: “Under this classification, operators of creditworthiness assessment systems will be subject to all enhanced obligations about such high-risk systems.”

The AI Act says that banks covered by Directive 2013/36/EU need to ensure their current risk and quality control

“As experience with GDPR shows, this

The AI Act distinguishes the highrisk AI systems, which due to their operation may cause significant impact on the safety of individuals or may have an impact on their rights and freedoms.”

Stasys Drazdauskas Counsel, Sorainen

processes also cover AI. They don’t have

scape in the financial markets. However, those who find ways to ensure compliance more efficiently will benefit from reputation-damaging publicity of non-compliance and financial cost in terms of fines,” Drazdauskas says.

Historically, international market participants have adapted to meet European standards without necessarily overhauling their global operations.

Nevertheless, according to Drazdauskas, some non-European jurisdictions may adopt similar regulatory frameworks, leading to increased compliance challenges for global market players.

to build new systems for this; they need to update what they already have.

will not reshape the competitive land-

“As local regulatory replicas tend to Examples include systems for identi-

appear with certain variations and

“Beyond creditworthiness, the AI

fying customers using biometric data

differences or “enhancements” making

Act could also affect various systems

and employee management systems,”

the compliance management more

not exclusive to the financial sector.

Drazdauskas says.

complicated,” he says.

56

Rising Stars: The MustWatch Fintech Innovators in 2024 a clear vision, strategic leadership,

Chris Crespo Head of Content at Nordic Fintech Magazine

effective execution, relentless resolve and luck, plenty of it. It’s the founders’ and their team’s grit and determination that often dictate the fate of their

T

startups. Travelling through the Nordics

different kind of landscape – one shin-

of these extraordinary fintechs who

ing brightly with technological innova-

dare to dream big and work tirelessly

tion and entrepreneurial spirit. Much

to turn their visions into reality. These

of this explosion entrepreneurship is

companies are but a handful that have

evident in the fintech sector, where

captured our attention for their bold

a wave of startups taking financial

innovations and solutions that are as

services back to the drawing board. In

disruptive as they are necessary.

the blood, sweat, and tears that many

with their serene landscapes

of these young organizations pour into

and rich cultural heritage, are

their ventures.

In this issue, we feature a select few

this section, we give centerstage to fin-

This section is a salute to their vision,

techs, which stand out not just for their

resilience, and potential – a showcase

innovative solutions but also for their

of the fintechs we believe are on the

potential to leave an indelible mark in

brink of sparking something extraordi-

the future of the industry.

nary in the world of finance and that are

Starting a successful venture goes far beyond a great idea. It demands

Being regulatory insiders and understanding the pain points of market participants from the inside has enabled the creation of cutting-edge technology solutions that streamline AML/CFT and compliance processes to unprecedented levels of efficiency.

and Baltics, we’ve witnessed firsthand

he Nordic and Baltic regions,

now gaining recognition for a

AMLYZE is a Software-as-a-Service (SaaS) RegTech offering a suite of anti-financial crime solutions for all types of financial services providers.

Comprehensive modules include real-time and retrospective transaction monitoring, customer risk assessment, AML/CFT investigations, PEP, sanctions, and adverse media screening.The company’s products have been developed by a team of AML experts and former regulators leveraging an extensive experience in supervising financial institutions while working with central banks and law enforcement agencies.

shaping the future of the industry in the Nordics and Baltics.

Invesdor, founded in Helsinki in 2012, has grown to be one of Europe’s largest investment and crowdfunding platforms. It empowers individuals to shape a sustainable economy by enabling investments in companies they believe in. With a strong focus on fairness, cooperation, and agility, Invesdor connects investors to diverse projects starting from €250, cultivating a community of over 184,000 investors. The platform’s expansion, including its merger into the Invesdor Group and the integration of the Dutch platform Oneplanetcrowd, highlights its commitment to sustainable and accessible investment opportunities across Europe.

57

Kvikk is building a completely new insurance product that can be a game changer in the industry. By using location data Kvikk automatically updates and activates the customers’ insurance coverage tailored to their exact destination and trip. Kvikk wants to make insurance simple, accessible anywhere and everywhere, and personalised.

Focalpay, a Swedish startup, is reshaping retail and payment sectors with its innovative platform that merges payment and retail functionalities. Born from a desire for more innovation in these sectors, the Stockholm-based company provides a unified solution for payment, checkout, and backoffice processes, streamlining operations and reducing costs. With its recent 15 million SEK funding from Icelandic investor SKEL, Focalpay is enhancing its platform and expanding into the European market, already serving notable clients in Scandinavia.

The whole customer journey takes place in the Kvikk app- where customers can activate and purchase insurance instantly, file a claim in minutes and actually understand their policies.

Subaio, a pioneering fintech firm, redefines personal finance with its innovative engine. Subaio’s engine excels in analyzing, sorting, and translating all transaction data into actionable recurring payment insights. It leverages a powerful ecosystem for unparalleled accuracy and expansive merchant connections. The platform excels in subscription management, credit checks, and digital sales solutions, setting a new standard in personal finance management.

Established in 2018 by ex-Wise and Skype talents, Estonian fintech Salv is revolutionizing anti-money laundering efforts. Their flagship product, Salv Bridge, empowers financial institutions to tackle fraud effectively by processing large data volumes swiftly and enabling secure, compliant info exchange. Garnering significant seed funding and showcasing a rapid growth trajectory, Salv has already attracted a diverse client base, including major banks. With its innovative solutions and commitment to transforming financial crime prevention, Salv is revolutionizing the safety in finance by actively combating fraudulent activities. Its innovative approach in filtering out financial crimes positions it as a significant fintech to watch closely.

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Empowering the Future of Payments: Shift4’s Commitment to Nordic and European Partners As a licensed bank and acquirer in Europe, Shift4 offers growth opportunities to payment service providers (PSPs) in the Nordics. By combining forces with us, Nordic PSPs can excel in delivering comprehensive solutions for online payments across various technical platforms, covering both physical and online transactions, including card and alternative payments. Our mission is to empower our partners to go cross-border via our brilliantly simple payment solutions.

Written by

T

he Nordic payment eco-

flexible mindset to PSPs. We support

system is undergoing rapid

them and provide tailored guidance as

transformation, characterized

they navigate the complex cross-bor-

by dynamic changes that

reflect the region’s commitment to in-

novation and scalability. As technology advances and consumer preferences

Ruben Nielsen Vice President Sales & Business Development Nordics at Shift4

evolve, there is a growing demand for payment solutions that are not only efficient but also adaptable to the evolving digital landscape.

Challenges for PSPs PSPs in the region face challenges in navigating this landscape. The rapid evolution, strict regulations, and the necessity for seamless integration create hurdles, leading partners to deal with interoperability issues and security concerns.

Additionally, meeting consumer expectations for local payment methods adds another layer of complexity. As consumers increasingly seek conve-

By combining Shift4’s smart acquiring services and robust gateway platform with Ginger’s SaaS proposition, and its parent company’s Ximedes software development capabilities, the partnership is wellequipped to expand further across Europe and offer powerful and flexible PSP solutions to a growing client base.”

Joord Koot CRO Ginger

der payment ecosystem.

We bring a wealth of expertise to streamline processes, enhance security measures, and ensure seamless integration, enabling PSPs to deliver exceptional value to merchants across the Nordic region.

Our Approach and Partner Ecosystem We stand as a flexible acquirer and that is our unique proposition in the market. Nordic businesses, known for their adaptability, see us as a partner ready to handle the complexities of the modern financial world, thanks to our fresh perspective and strong global payment infrastructure.

For partners envisioning growth and cross-border ventures, our adaptability is the key to seamless expansion.

By working with us, currency hurdles dissolve, language barriers fade, and

nience, payment providers must stay attuned to the demand for locally

How We Empower Our Partners

diverse regulatory landscapes be-

preferred payment options, ensuring

As a trusted partner, Shift4 extends

come a non-issue. We simplify global

their solutions align with evolving

beyond the traditional roles of acquir-

transactions and enable a focused

consumer expectations.

ers and provides an international and

approach to core services.

59

Digital Onboarding: Our commitment

personalized support, including com-

Local Adaptation: In the Nordics, we pri-

to a streamlined onboarding flow

prehensive analysis and consultancy

oritize local nuances, exemplified by our

reflects our dedication to addressing

services, tailored to their unique needs.

focus on Denmark’s payment landscape.

partner concerns. We offer our part-

Recognizing MobilePay as a local wallet,

ners a fast and flexible onboarding

we engaged in a strategic partnership

process through our digital onboarding

with them, addressing the rising de-

tools, so they can onboard their mer-

mand for localized wallet support.

chants efficiently.

Empowering Partners for Success

This shows our commitment to

Our digital onboarding tools are de-

market responsiveness, positioning

signed to help our merchants navigate

Shift4 not just as a technical enabler

the onboarding process as efficiently

but also as the acquirer behind the

as possible. When it comes to on-

service. Collaborating with us pro-

boarding, we understand that one size

vides partners with the advantage of

does not fit all. Our digital onboarding

international expertise and a distinctive

is designed to be flexible, meeting the

mindset to navigate the Nordic pay-

diverse needs of our partners. This en-

ment ecosystem.

sures that our merchants can efficiently onboard their customers, tailoring the experience to specific requirements.

Through our partnership with Shift4, we are able to help merchants of every size across the Nordics and drive growth by enabling quick and seamless transactions, no matter how their customers choose to pay.”

David Maisey CEO, MultiPay

Morten O. Wagner Founder Freepay

execute a partner enablement strategy, tapping into top-notch expertise across different segments or products. By forming knowledge-sharing partnerships with local entities deeply ingrained in the market, we blend international perspectives with local insights. Our international mindset with local adaptation, distinguishes us from the competitors.

Empower Your Payments Journey with Shift4 Are you ready to elevate your FinTech

beyond Nordic borders, tapping into a

game? Join Shift4, where innovation

global landscape with ease.

meets adaptability in the dynamic Nordic payment landscape. Unlock the

Value-Added Services: Our offerings

Once we began working together, it became immediately apparent that our strategic partnership was a unique one. This was largely due to our innate adaptability to emerging technologies and its natural alignment with Shift4’s vision.

Together, we are a force to be reckoned with!”

Partner Enablement Strategy: We

extend beyond security products, en-

Benefits for Our Valued Partners

potential for seamless transactions,

compassing reporting, settlement, and

Unified Commerce Approach: Shift4

localized support, and a unified

optimization solutions for merchants and

provides unified commerce to our

commerce approach that sets you

partners. By delving into the analytics of

Nordic partners, both online and

apart in the competitive market.

partner transactions, we provide insights

card-present payments. Our offerings

into approval rates and benchmarking

include optimizing approval rates,

against the market.

integrating local payment methods,

Our commitment to deep analysis

implementing token services, and 3D

and offering relevant solutions differ-

Secure — all crucial components of a

entiates us in the Nordic market. We

one-stop-shop payment provider.

address gaps, whether in payment or technology, ensuring that our partners

Local Adaptability and Consultancy:

receive comprehensive solutions.

Our dedication to local adaptability is

In contrast to domestic competitors,

embedded in our resource allocation

our international capabilities, enable

strategy. Our partners enjoy the advan-

Nordic companies to go cross-border

tage of a dedicated local contact person

effortlessly, transcending currency and

who is well-informed about the cultural

country constraints. With Shift4, part-

nuances of the payment industry. This

ners can confidently expand their reach

guarantees that our partners receive

About Shift4 Shift4 (NYSE: FOUR) is boldly redefining commerce by simplifying complex payments ecosystems across the world. As the leader in commerce-enabling technology, Shift4 powers billions of transactions annually for hundreds of thousands of businesses in virtually every industry.

For more information, visit www.shift4.com

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