Management of digital modernisation in Nordic insurance and financial services

The Nordic Financial Sector

The sector consists of Insurers, Banks, Investment Banks, Pension Funds and Financial Infrastructure. Further, you have retailers who provide bank-like services.

The financial infrastructure has been consolidated over decades. You also have market entrants using modern technologies apps and phones to simplify the process, but the infrastructure is the most regulated and stable.

It is appropriate to separate customer experience from internal process efficiency. Core processes are usually outsourced, and innovation happen through strategic acquisitions. Smaller banks consolidate either through mergers or through networks. Usually, we think it’s appropriate to separate the customer experience from the internal process efficiency, since the back-offices of banks are well-tuned machines that is really the engine of cost-compression. Often, you have legacy systems that is almost impossible to replace because they work so well, and innovation such as APIs are wrappers put on top of these systems. The customer experience is strategic and more marketing oriented, and not directly financial operations, albeit customer representatives are authorised to make changes in a customer service sense.

Insurers deliver peace of mind. Their systems are very similar to banks, and many are even owned by banks. Insurance is strategized by mathematics and statistics, that is really the product. The customer journey is competitive, and packaged products are usually important for success in these markets. You also have the B2B insurance market, casualties, life and auto-insurance. The bank-office machinery is very similar to how systems work in banks.

Pension corporations are often split between a pension administration function and an asset or fund management function. The operational systems resemble those in banking and insurance, and their funds management systems are specialised.

Nordic Finance is distinct compared with the European insurers and banks

The Nordic economy is large, but the markets are fragmented, and the same applies to their system landscapes. European banks and insurers often operate across dozens of countries and maintain large headquarters that centralise operations.

In the Nordics the practice is to run systems in each country, and the internals even on bank account practicalities are very different and not harmonised, despite initiatives like IBAN and SWIFT. You have dominant banks and insurers that operates in all markets but rather have first position in their home market.

Digitisation Projects in Finance

The financial service actors are usually very digital today. Regulations from EU and SWIFT are gradually implemented one source of projects. You also have Solvency requirements, risk management, Know Your Customer and the like. Renewal of legacy systems are usually part of the project portfolio. Central to digitisation projects is streamlining systems and integrations. Outsourcing and shared service departments are important to the cost differentiations.

Another part is the market with segmentation and marketing channels which is core to customer lifecycle analysis. Market activities are handled with CRM and sales tools often in collaboration with external alliances and channels.

Each project often has different thematics, products, improvement of financial data, better marketing agility and so forth.

How to run digitisation projects in finance

In finance, the teams are very large and international. Special for the Nordics is that projects are run from Oslo, Bergen, Stockholm or Copenhagen. What’s unique with finance is that the data is massive. The key is to simplify to business cases and variants and do financial modelling that are the foundation for all system and process change.

Inhouse and external consulting

It is common to run consulting grade services to have continuity in the modernisation efforts. Industrial lean frameworks and agile adaptions are common. However the waterfall is a source to success, so the pragmatic approach is a mix.

Projects are rather large, a little slower pace than what more retail-oriented businesses are accustomed to. Key is testing, verification and control. The data itself is of sensitive nature and regulated, so some innovative and modern analytical approaches are discouraged.

Implementation and delivery

This phase is usually very structured and professional. Large teams are coordinated and deliveries are systematically tested against the requirements your management sets. Financial institutions operate large change portfolios, and not all initiatives reach production, even after successful project delivery. There is a limit to the amount of changes that can be absorbed in the organisations.

Data quality

In finance, data quality is usually the case. One problem is that you might have too much data and on projects you rather park some of it. For a well-functioning bank, it is paramount to have correct data and that they can be controlled and verified along the customer lifecycle and according to legal requirements. Because of this, there is systematic cleanup and improvement of data records.

Core Finance

Central for finance are accounts, contracts, and processes like payments, invoicing, payment plans, interest-rates and premiums. The pricing domain is of course important and is usually performed by specialised teams.

Both workflows and systems are characterised by sophisticated checks, balances, and control mechanisms. Document flows and record making is essential and there are a lot more going on than what the personnel observe by their roles only. Governance with approval chains, roles and security have top attention.

Projects and Programs

Finance runs project portfolios. Essentially, these are multiple projects clubbed together in portfolios. Programme managers are more attentive to the strategic levels and are managing according to larger initiatives. The program manager manages project managers and ensures they are aligned. Given the scale and complexity, project teams are large, but some of it is not directly visible since there are usually multiple vendors and advisors involved as subject matter experts. It is very common with outsourced processes and service providers with many services being commoditised by international vendors.

Financial Controlling in Financial Services

The finance department is key to ensure financial implementation of regulations and production of financial reporting and control. Separate teams are running operations of payments and invoicing, but it’s the controller’s responsibility to verify and analyse general ledgers, transaction data and more. The technologies are usually modern but not cutting edge. Focus is of course on having the right records rather than the fanciest presentation.

Efficiency and workflows

Banks, insurers and pension funds are like industrial corporations with the assembly line being digital and numeric. Real efficiency is normally accelerated through workflows because it can be measured. You can always tweak systems and buy more computing power, but ultimately, it’s the process design that enables velocity, and engineering of these processes can provide the precision. It is always a balancing act to decide the right blend of manual work and automation, and it should be optimised for the customer experience together with the financial health of the bank.

Selecting projects

Banks and insurers do not invent projects. They prioritise initiatives that emerge as high priority given their backlog of structural and regulatory issues.

The normal way is also to have business cases that are discussed and analysed, because initiating projects are costly and they have long-term impact on the organisation, market and systems.

Prosjektsentrum and the financial industry

We have experience with the full project cycle, starting with the strategic discussions. We manage complex projects with regional or global teams and are very literate with working with global outsourcing vendors. We believe technical architecture and financial professionalism are the keys for modernising banks, insurers, financial infrastructure and pension corporations We are adept with agile and waterfall, however our mindset is always strategic and focused on team delivery in a Nordic context.