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Without doubt, big data, cloud computing, the internet of things (IoT) and worker mobility have all paved the way for more disruptive business models, in markets all over the world.
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Previously, when IT changed industries it was often done covertly, with new systems purring away in the background, unseen and often unknown to the user.
However, digital systems are now out in the open, transforming industries in front of participants and their customers, and affecting almost everything we do on a daily basis.
The Uber disruption
The obvious starting point is Uber, a name synonymous with disruption. The ride-hailing service (or app) has caused heated discussion in whichever city it has launched, and the Nordic region is no exception.
In fact, taxi drivers in Denmark recently demonstrated against Uber, claiming its services are illegal and distort competition.
“I don’t mind that Uber is a new, innovative [service], and we actually used apps long before Uber came along. The issue is the use of private cars,” Søren H. Nicolaisen, chairman of the association of taxi drivers in Denmark (TiD), told Computer Weekly.
“Using an app to dispatch cars and hail rides is fine by us, but all taxis must be licensed,” he added.
For Nicolaisen the problem with the rise of this new on-demand economy is not the technology, but simply that many of the services operate on the outskirts of existing regulation.
Changing the business model
Uber has said it is not a taxi service. Instead, it enables anyone with a car and smartphone to connect with people who need a ride. This is in stark contrast to strictly regulated local taxi companies.
There’s little doubt that companies such as Uber are also pushing established taxi companies to think deeper about their customers’ increasingly digital needs.
“There are now plans to build an app for all taxi companies in Europe,” said Nicolaisen. “I don’t know how it will be developed, but I wouldn’t be surprised in a year or so to see an app for many of the taxi firms operating in Europe.”
Such moves could open the floodgates in a region where Uber alternatives are already flexing their muscles. Dutch car-sharing platform Snappcar has raided the Nordics twice, snapping up two rival startups in 2015, with a combined 30,000 registered users between them, renting cars to and from each other in a model similar to AirBnB.
The fintech boom in the Nordics
Another hot topic is the disruptive power of new financial technology (fintech), a movement being felt strongly in the Nordics, with the region already having the second largest fintech investment levels in Europe, fuelled by widespread mobile banking and some of the world’s most cashless societies.
Take the example of Norwegian bank DNB. During the first half of 2016 it plans to cut 59 of its 116 its high street branches and lay off 600 employees, citing the growth of digital self-service channels. The bank said 85% of its customers no longer use a branch for daily banking.
Accenture backs up these figures. In a recent report it estimated nearly one-third of Nordic retail banking revenue is threatened as digital challengers gain market share.
Many of these challengers stem from the Nordic region itself, particularly Sweden, which is home to several successful fintech startups, including iZettle, Klarna and Trustly.
In fact, in 2015 iZettle expanded its offering from mobile payment systems to small business loans, which are traditionally associated with banks. The idea came from the use of big data. In processing card payments for its customers iZettle already had enough data to understand viable lending limits without separate application processes.
Even more direct competition to incumbent banks can be witnessed in Finland. Helsinki-based fintech startup Holvi targeted small businesses and freelancers in a mission to shake up business banking, and incorporated book-keeping, invoicing, currents accounts and online shop tools into a single platform.
Tap into startup innovation
The online bank is also launching a business debit card to complete its offerings. Such has been Holvi’s success it was recently acquired by Spanish banking group BBVA.
Jan Sirich, head of experimentation and learning at Nordea, one of the largest banks in the region, acknowledged the threat of innovative startups. However, he also sees opportunities. “You can play the ostrich game and hope the whole thing goes away, but that is not a wise strategy. We need to change, we need to embrace it,” he said.
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Nordea’s answer has been to launch its own accelerator programme to tap into the innovation of new fintech startups. The bank has also embarked on a project to build new core banking and payment platforms.
“We have changed our value proposition, we are investing in analytics, data processing and digitalisation,” Sirich added. “Over the next four to five years we expect to increase our overall total IT investments by up to 35%.”
Meanwhile, big data and the arrays of information on people, vehicle and regions is being put to use by insurers. For example, Finnish insurer LähiTapiola is one of the Nordic companies now experimenting with data-driven insurance.
It has launched a smart life insurance system, where customers get a fitness tracker, mobile app to analyse their activity and access to a digital health check. In addition, its car insurance customers can use a mobile app which tracks their driving style and provides advice on safer driving.
Unlike some US insurers offering similar products, LähiTapiola said this data gathering is not intended to bring down premiums. Instead the aim, at least for now, is to motivate its customers to lead healthier lifestyles or have fewer accidents while driving. Mikko Vastela, CIO at LähiTapiola, stressed the company doesn’t have access to individual data, but only to aggregated results.
Again, similarities to other disruptive industries can be found. Nordea, like LähiTapiola, embraced such innovation through collaboration and, as with taxi drivers in Denmark, it also welcomes the notion of building more universal ecosystems.
“This is the core of the third wave of [digital change]. Companies look for partnerships and how they can combine different things, such as fitness data and physiotherapy. Everybody is thinking how to best make this happen,” said Vastela. It’s these partnerships which will provide the foundation for real disruption across the industry, he added.
“Disruption hasn’t happened yet, but it will come. There will be completely new digital processes and services,” said Vastela.
“A lot will happen at the end of the decade and these changes will stem from the customer. So far, the insurance industry has focused mostly on products, but it will be all about the customer and finding solutions for their needs,” he concluded.