How Swedbank partnered with competitors to create a new payment method
The world’s most successful fintech innovation that most industry people have not even heard of, Swish, is used by 91% of all adults in Sweden.
I recently sat down with Ģirts Bērziņš, Head of Digital Strategy and Innovation at Swedbank – one of the largest banks in Sweden – to discuss innovation and how collaboration amongst competitors can ensure banks stay relevant for at least another 100 years.
Transacting with lagging methods in an accelerating world
At the dawn of the new millennium, the Swedish payments market was dominated by cards, cash, and transfers from one account to another – for example, Bankgirot and PlusGirot payments. The use of cheques had declined substantially, although cashier’s cheques were still frequently used for large payments.
For private individuals, there was only one functional alternative to cash, and that was bank transfers. These were common, but were also associated with a number of deficiencies and uncertainty factors, both for the payer and the payee. Bank transfers were, in other words, not a viable option that would enable the market to step forward into a modern, secure, future-proof solution. Something new was needed.
At the time, Swedbank had completed some proofs of concept for P2P payments and had an ongoing mobile payment project built on card infrastructure (Bart). Ongoing initiatives showed there was something missing; banks had been operating in their comfort zone and moving slowly, and that had to change immediately.
Ditching old methods to allow for innovation
Swedbank used to think that innovation was only possible if it was born and delivered within the bank. Being naturally risk averse meant innovation happened in iterative steps around the bank’s core services. To minimise risks, the bolder ideas were tested together with other market companies, even competitors.
In parallel with the EU, Swedish banks created a working group under the umbrella of the Swedish Bankers’ Association. Once the Swedish banks got together around a table, it became apparent that many had ideas about mobile payments, and they had a lot of experiences to share with one another. This led to the idea of a shared app.
Collaboration between multiple national banks is no swift process, if done traditionally. Swedbank acted as a lead bank, and realised it had to move away from waterfall to agile to deliver this on time. It set up a team with business and IT working together using agile methods, including short sprints, daily meetings, and incremental planning. The bank believes that without this commitment from management, and without this foundation in place, a collaborative effort as great as this could not have been achieved.
Collaborating with your customers
In December of 2012 the first version of Swish, for payments between private individuals, was launched. To get the fee structure right the bank had conducted customer surveys, using both unique interviews and large surveys. The outcome was clear and showed that as many as 75% were willing to pay for the service. However, after a massive backlash on launch, the price was later reduced to zero.
Swish was a resounding success, which led to the development of Swish for companies (C2B), Swish Corporate (C2B), and Swish Retail (C2B adapted for e-commerce) in the following years.
One important and fundamental factor behind the success of Swish is that the members of the Swedish Bankers’ Association, despite their different DNA, size, and domestic markets, successfully united under a single brand and cooperated across boundaries. There have of course been disagreements along the way, but in the end all banks set their individual corporate hats aside and came together under a shared umbrella. And this is an important lesson to carry forward into future projects.
Creating a shared brand was critical to get mass adoption, and to get developers interested in building on the platform, compared to each bank doing their own thing.
What’s next for Swish?
The three Swish services were launched in close cooperation between the owner banks, and the company was primarily run throughout by allocating resources from the banks to several working groups. Today, Swish operates as a stand-alone business with its own CEO and resources to continue driving the development of Swish’s infrastructure and carry both the company and the Swish products forward.
The road ahead is clear: by understanding, listening to, and learning from the market, Swish will continue to develop secure and relevant services for the future.
About the author
Christer Holloman is the author of How Banks Innovate and writes for FinTech Futures about innovation and diversity within financial services and fintech.