Adapting for 2024 Banking Success

Jim Marous (00:12):

Welcome to Banking Transformed, the top podcast in retail banking. I'm your host, Jim Marous. I'm excited to welcome Pal Krogdahl, director of technology strategy and advisory services at Samlink to the Banking Transformed podcast.

Jim Marous (00:26):

Pal recently co-authored an insightful report titled Banking Outlook: Navigating the Transformative Trends in Banking, which provides an in-depth look at the key forces currently reshaping our industry.

Jim Marous (00:41):

From economic conditions to emerging technologies, competitive dynamics to consumer behaviors, this report explores the most pivotal trends on the horizon for 2024.

Jim Marous (00:52):

With over 20 years of experience advising banks on digital transformation technology strategy, Pal shares his expert perspectives on the defining challenges and opportunities ahead for financial institutions and how technology factors into strategies for remaining relevant amid digital transformation.

Jim Marous (01:11):

Emerging technologies are pivoting competitive dynamics while advancing personalization, efficiencies, and security capabilities.

Jim Marous (01:22):

More than ever, there's an increasing necessity for banks to embrace partnerships and specialization rather than relying on legacy processes, legacy thinking, and trying to be all things to all people.

Jim Marous (01:37):

So, Pal, I think several months ago, we met in Amsterdam in Money 2020, and it was interesting because we had some discussions there around what was going on in financial services, but things have changed, especially for you.

Jim Marous (01:52):

Can you discuss a little bit about your journey over the last 20 years of working with financial institutions and what got you to where you are today? And tell us a little bit about Samlink.

Pal Krogdahl (02:05):

Absolutely, Jim, and you're right, I think it was Money 2020 last time we physically saw each other, although we’ve spoken a little bit since then. I mean, you helped to create the foreword to the report we published, was it last week?

Pal Krogdahl (02:19):

So, but yes, last time we met in Amsterdam, I was working for IBM as part of IBM's Global Center of Excellence. And I believe at that point we did a joint podcast episode with SEB Embedded talking around embedded finance and the growth of banking as a service.

Pal Krogdahl (02:38):

But for me, 26 years in IBM up until about a month ago, focused most of that time with inside of the banking industry. So, worked in and around with banks for most of that time. And an opportunity landed on my lap that I just couldn't refuse.

Pal Krogdahl (03:01):

I got the chance to join Samlink, Samlink being a banking as a platform provider. Quite a substantial large FinTech in the Nordic region. It operates the platform for a number of banks and financial institutions in Finland.

Pal Krogdahl (03:23):

A number of years ago, Samlink was acquired by Kyndryl. So, that gives Samlink a global platform to expand its capabilities as not only just a platform as a service or platform as a banking, as a platform provider, but also, bring our experience and deep knowledge in operating platforms in regulated industry and operating platforms for banks.

Pal Krogdahl (03:51):

But also helping banks in that continued transformation as the industry is progressing as an advisory capability to new clients and new banks.

Pal Krogdahl (04:05):

So, my role now, is to run what we're calling advisory services with the inside of Samlink, which is taking our expertise out to our current and future banks at a global scale to help them to continue to drive relevance in the marketplace going forwards.

Jim Marous (04:24):

See, it's interesting, Pal, when I went to Money 2020 in Amsterdam, I was just amazed. I mean, it's a huge event. It's multiple warehouse size areas filled with all types of FinTech companies, payment companies, integration companies, and financial institutions.

Jim Marous (04:41):

And one thing that really took me aback, because I'm in the United States and somewhat in a sheltered environment, was how many firms I really wasn't aware of.

Jim Marous (04:52):

I mean, there were names out there, Samlink being an example, where they're doing great things in their regions, but maybe they don't get the amount of press, the amount of awareness from the overall marketplace and what they're doing.

Jim Marous (05:06):

And one thing we have found within the FinTech marketplace is geographic boundaries many times do not limit opportunities for organizations to be partnering with other organizations to build bigger and better solutions.

Jim Marous (05:21):

So, when we look at Samlink, for example, what is the reason why, from your perspective, there are so many organizations such as yours and others that are regional, but really have the potential to work globally with traditional financial institutions?

Pal Krogdahl (05:43):

I think that it comes down to historically, banking has been very regional. So, banks have their own entire IT departments, they've been very self-contained.

Pal Krogdahl (06:00):

And when you look at Samlink, Samlink was created as the combination of number of banks IT departments. So, as an example, Samlink was very focused on the Finnish market.

Pal Krogdahl (06:15):

As things have become more and more digital, as boundaries between countries have started to a certain degree, erode as we look at banking, I think we have started to see FinTech companies and also other banking providing organizations being able to transcend country borders to be able, to deliver their capabilities and services to a wider audience.

Pal Krogdahl (06:48):

Because digital is digital. And it really doesn't matter whether you're talking digital in the Nordics, or you're talking digital in the US, or you're talking digital in Asia Pacific.

Pal Krogdahl (07:00):

There are variations that are driven by some elements of geographical changes, there is cultural changes. But very often you find that leadership of digital capabilities in one region can be brought to bear to drive advances in other regions.

Pal Krogdahl (07:19):

And when we look at the Nordics in particular, the Nordics have been leaders in digital banking for a substantially long period of time.

Jim Marous (07:30):

So, Pal, as we get deeper into the overall marketplace, which is changing so fast, your report called Banking Outlook: Navigating the Transformative Trends in Banking, really puts a great sandbox, for lack of a better word, around what's going on in the industry.

Jim Marous (07:48):

And as you mentioned, you've been in the industry for quite some time, over two decades. What do you see as the biggest challenge in financial services today as we're entering 2024? And more importantly, what has changed with regards to those challenges in the last few years?

Pal Krogdahl (08:08):

I think, Jim, first of all, like we said a minute ago, there are some regional differences. We see difference in how banking has evolved in emerging markets versus markets like Europe and North America.

Pal Krogdahl (08:26):

But all in all, when we look at banking for 2024, we see first of all, there's a, I'm not quite sure if I'd call it a schizophrenic situation for banks, but the rising interest rates has the potential of making the banks cash rich.

Pal Krogdahl (08:54):

But at the same time, you've got this slowing economy. You've got this cost of living crisis, which means that it could potentially make the banks very quickly lose their cash in default of loans, the reduction of loans and mortgages and those sort of things.

Pal Krogdahl (09:15):

But whilst the banks have got a rise in free cash flow, they need to really focus on how can they take advantage of that based upon the other trends that are happening around them. And that's the continued digital transformation and innovation is a key of that.

Pal Krogdahl (09:37):

AI is coming along, and I don't think we're any more talking about when will AI become relevant. AI is relevant now, but at the same time, you could sort of say that it doesn't mean that the banks need to jump on it and completely rewrite the rule book based on AI.

Pal Krogdahl (09:52):

But if you don't start the journey, at least now, by the time you realize that AI has become ingrained in banking, if you haven't been part of the train, it's too late. You're not going to keep up and you're definitely not going to be able to catch up.

Pal Krogdahl (10:09):

So, there is this whole digital transformation element, the AI, the banks need to think about, "Well, we've got better cash flow now, we've got some money, let's focus in on that."

Pal Krogdahl (10:20):

I also think that nothing has revolutionized overnight. It's a slow progression that we've gone through. It got accelerated when COVID hit, we started looking more at digital transformations, both from a customer perspective and also from an employee perspective.

Pal Krogdahl (10:38):

And what that did was it opened up this chasm between banks have spent a lot of time and focus on improving their digital channels on an ongoing basis, and thinking, "Well, we'll leave the legacy, the core, the manual processes, we'll leave them there. It's not causing us a pain at the moment."

Pal Krogdahl (10:57):

That chasm is at breaking point now, because so much focus is on the digital transformation. The use of advanced technologies like AI, the move to hybrid multi-cloud, the ability to leave the legacy is no longer an option.

Pal Krogdahl (11:18):

And again, if you've got increase in free cash flow, doesn't mean that you have to rip everything out and start again. But now, really is the time that you say, "Let's take a little bit more of that cash and put it as investments towards reducing what's going to be our overall cost in the future of the backend systems."

Pal Krogdahl (11:38):

Because today, most banks are putting most of their profits or most of their investment in keeping the lights on. And it's not going to last anymore.

Jim Marous (11:50):

It's interesting, Pal, COVID simply when you look back, it did a lot more things than this. But basically, it changed the way we worked. That's a major impact.

Jim Marous (12:01):

The economy situation, the uncertainty economy, the change in interest rates really made it so financial institutions had to look and dig into their archives into how they did banking over a decade ago when there were rising and falling interest rates. We had virtually no change in interest rate for a decade.

Jim Marous (12:22):

So, it gave the wakeup call that said, legacy thinking, while you may have to go back a decade, maybe a good foundation, but it's not going to solve the problem of the future. As you mentioned, change is happening so fast right now.

Jim Marous (12:36):

When we look at that, it also is an amazing opportunity because it gives an opportunity for people to think, okay, with uncertainty on the table, you have to actually make your organization future ready under various scenarios.

Jim Marous (12:52):

And it's going to make financial institutions think about how are they going to put a stake in the ground to become future ready and to position themselves as a leader no matter what the scenario ends up in the future.

Jim Marous (13:04):

So, your report that was sponsored by Samlink actually provides insights into the major trends around banking and technology. What do you see as the key technology trends that you referenced in the report?

Pal Krogdahl (13:19):

Well, I mean, obviously, like we already said, generative AI, AI is a fundamental trend technology wise that we're seeing.

Pal Krogdahl (13:27):

Another trend that we're seeing, which I will put in the technology space, is the explosive growth of embedded finance. Now, some people would say that that's also a change in business model. But it's driven by the open API paradigm shift. It's been driven by historically open banking.

Pal Krogdahl (13:50):

And we've taken that transition now, into embedded finance and that continues into banking as a service. Now, we're seeing a lot of discussions about who takes risks, is it the financial institutions, et cetera, when it comes to banking as a service? So, I think there's a lot that still has to filter out in that domain.

Pal Krogdahl (14:10):

But when you look at embedded finance, I think that's, to me, I would say one of the largest technology implications that we're seeing. And I think it's really driven by not just customer expectations but also, the way that customers deal with their financial lives.

Pal Krogdahl (14:33):

I think a lot of banks are still attached to this notion that they are going to create a unique relationship with a customer, which is all encompassing. There used to be a time when the bank you got your mortgage with was the bank that you did all your banking with, and everything was there in-house.

Pal Krogdahl (14:54):

I mean, most people, even of my age, of our age, has a banking relationship with at least three different institutions.

Pal Krogdahl (15:03):

Then we've got digital wallets, and then we've got ... our financial life is split across so many different channels and so many different institutions that it's getting eroded and therefore the banks need to think about, “Well, what does this mean then, from an embedded finance perspective?”

Pal Krogdahl (15:23):

“What does this mean from me being able to externalize capabilities that could be embedded into customer journeys to deliver my capabilities still with relevance as part of those agile customer journeys?”

Pal Krogdahl (15:36):

Because customers are no longer interested in banking products. They're interested in outcomes, they're interested in having their life journeys satisfied. And I don't want to think about the banking.

Jim Marous (15:49):

It is interesting because embedded finance is a question or a change that impacts how you're ranked in the consumer's mindset as a needed entity. With embedded finance, you could very easily be put into the background as a financial institution, you can become invisible.

Jim Marous (16:13):

And the reality is, from a seamless transaction perspective, that's good. On the other hand, if your brand becomes invisible, you are invisible and your value transfer is not as great.

Jim Marous (16:27):

So, as you referenced, we've really moved from trying to create great experiences to how do we build ongoing engagement that brings value to the embedded finance model?

Jim Marous (16:40):

Because we may not control the infrastructure and what gets embedded and how it gets embedded, but we need to try to control our role in that. And how do we stay in the forefront of the consumer's mind?

Jim Marous (16:54):

As you mentioned, every consumer … I do this at major events, I ask people to raise their hand if they changed a major financial institution relationship in the last five years and nobody raised their hand.

Jim Marous (17:05):

Because getting out of financial relationships, even in the UK, is not the easiest process. People just don't do it that much. They kind of stay with where they are.

Jim Marous (17:13):

I then ask, “How many of you have opened a brand new non-traditional financial relationship with some organization last two years?” And everybody raised their hand.

Jim Marous (17:25):

So, what happens is, while we may not change the starting point, we're changing everything around it. Almost building our own open banking architecture where we say we're going to connect our major financial institution relationship with this, this, this, this, this, thereby weakening the primary financial institution.

Jim Marous (17:45):

And in fact, even the definition of what a primary financial institution is changing. My son in the US has a traditional financial institution relationship. But if you really dug into what is this primary financial relationship, it's with Venmo, it's with this payment app. Other people may see it as their loan institution.

Jim Marous (18:07):

So, when we look at this, we really have to look at new ways of adapting to brand new business models on a personalized basis. So, for some consumers, nothing's going to change. For other consumers, everything's going to change.

Jim Marous (18:23):

So, when you look at, we've talked about generative AI, and we've talked about AI in general. We've talked about embedded finance. We can talk about payments.

Jim Marous (18:33):

But when you're talking to broad priorities right now, and we're going to take a broad brush here because it's hard to get very specific because every financial institution is different. But where do you think financial institutions should prioritize their investments in 2024?

Pal Krogdahl (18:52):

I think I'll go back to what I said a minute ago. I think the fundamental investment right now, for most banks to make ... and I'm focusing in on incumbent banks now at the moment, because they tend to be the largest ones. It's on fixing the backend.

Pal Krogdahl (19:10):

I think we've got to the point where leaving that cow in the field is no longer an option. You need to sort it out. And it's not just legacy systems, it's also processes, it's backend processes.

Pal Krogdahl (19:27):

And here, yes, I agree you can take generative AI to help you to deal with some of those backend processes, but really, to be able to continue this march towards customer centricity and everything else, you can't have a system where it takes you half a year to develop a new product.

Pal Krogdahl (19:46):

Because the notions of what a mortgage is, and what a current account is, and what a checking account is, it's going to change.

Pal Krogdahl (19:56):

The consumer is asking for it to change because the way that we do banking today and the way that we're going to do banking in the future is not the way that we used to do banking in the past. And the banks need to be able to support that. And you ain't going to do it with your old 60-year-old system. It needs to change.

Pal Krogdahl (20:16):

And it needs to change with partners. Don't try and develop it yourself. Don't build it yourself. I'll put my hand on my heart and say, I see red every time a bank says, “We're an IT company with a banking license.”

Pal Krogdahl (20:30):

And I'll say, "No, you're not. No, you are a bank and you're damn good at doing banking and you just happen to have some clever IT guys that work for you."

Pal Krogdahl (20:42):

"Leave the IT stuff to the IT companies because they're putting all the investment into it. They've got all the research that they're putting into it, and that's what they're focusing on. They don't want to be a bank."

Pal Krogdahl (20:50):

"You do the banking, they'll do the IT, partner with them, and you will have the best of breed. Try and do it all yourself in-house and you're doomed."

Jim Marous (20:59):

It's the most exciting time in banking for that reason alone. It's interesting because it used to be you'd make a partnership with a primary back office provider and you kind of took what they built and put it in when you to put it in or when they enabled you to put it in.

Jim Marous (21:16):

Today, you have composable solutions provided by a vast number of providers that can make you best in breed in any specific segment.

Jim Marous (21:26):

So, if you have to improve your digital account opening, if you have to improve your loan application process, if you have to improve your use of data to build personalized solutions, there are solution providers out there you can partner with in a very quick and easy way to deliver solutions at speed and scale, as you mentioned.

Jim Marous (21:47):

It's the most exciting time in the world because it doesn't matter what asset size you are, you can make these changes almost instantly, three months, let's put it at, on major changes in specific areas that you need improvement. And as you said, working from the inside out.

Jim Marous (22:08):

Because we are way beyond being able to make a nice flashy new app that shows up great on your mobile device, but have back office, it sucks. It's just not going to work.

Jim Marous (22:17):

We've seen that when organizations say, "Oh, we have a digital new account opening process," and all of a sudden you see it's 15 minutes and you go, "No, you have a digital account opening capability, but the process itself is still analog."

Jim Marous (22:34):

It's interesting because the partnership with companies like Samlink and so many others, it's not just them. We're seeing major providers like IBM where you used to work, Microsoft, Google, partnering with organizations to move them forward.

Jim Marous (22:49):

So, it's not a matter of size or scale, it's a matter of just saying, how do we let those who can do it best do it best and move us forward?

Jim Marous (23:01):

So, when you look at this, it's just so important in this whole buy versus build approach. The reality is the building has to be in how you integrate all these vast number of solutions that come from disparate companies within an overall seamless environment.

Jim Marous (23:19):

And as I said, I think it's the most exciting time ever in banking because of that. Because anybody can succeed.

Jim Marous (23:27):

And I'll go a step further and say, it's not just based on how you do the back office, but it's going to be based on your leadership. So, before we get into the whole leadership issue, let's take a short break here and recognize the sponsors of the podcast.

Jim Marous (23:39):

Welcome back to Banking Transformed. So, I'm joined today by Pal Krogdahl, director of technology strategy and advisory services for Samlink. We've been exploring the challenges, opportunities, and key initiatives facing banking in 2024.

Jim Marous (23:57):

So, Pal, before we took a break, we are talking a little bit about the power of partnerships, the power of working with specialized third-party solution providers to move traditional financial institutions forward at speed and scale in a composable way.

Jim Marous (24:17):

How do you see that really defining the success or failure of financial institutions going forward?

Pal Krogdahl (24:27):

I see it as a fundamental element for success. I talk about ecosystem enabled banking as a foundational approach for moving forwards. And I think that it's critical for banks to ...

Pal Krogdahl (24:42):

I mean, let's be honest here, Jim, 85 to 90% of what banks implement in IT is generic stuff that helps them to operate as a bank. It's 5%. If you are really, really unique and special, it's 10% of what you implement in your IT that differentiates you, that creates that unique value proposition that differentiates you from everybody else.

Pal Krogdahl (25:13):

Fine, custom developed that. That's fine because it's unique for you and no one else is going to do the same. But for everything else that you do, just take partner solutions, implement them, and get them off the ground as fast as possible.

Pal Krogdahl (25:32):

And yes, there's a need to rethink architecture more towards the notion of ecosystem enabled architecture because you break it up into sizeable chunks that enables you to be as flexible as possible.

Pal Krogdahl (25:47):

The day is gone where you say, "I've got one large core and it's a huge monolith sitting in the middle of my architecture."

Pal Krogdahl (25:53):

The future's going to be built on multiple thin cores that deliver unique specific capabilities either within inside your business units or across your bank.

Pal Krogdahl (26:04):

But you want to have the ability to say, "This core doesn't satisfy me anymore. We're going to pull it out and replace it." Rather than the days of huge monolithic solutions. It has to be based on ecosystems.

Jim Marous (26:18):

It's interesting, Pal, because when you look at it, when you look at a solution broker like Samlink, and you look at what they bring to the marketplace, they bring to the marketplace partnerships and solutions that, as you said, are kind of like thin core solutions.

Jim Marous (26:35):

But your organization's success is going to be driven by how fast you can keep up to market changes and how many case studies can you have in the marketplace that can show how you can move forward.

Jim Marous (26:46):

Traditional financial institutions can't deal with all these moving parts if they dealt with them themselves. They could not be the best at what's available.

Jim Marous (26:56):

One key element though that I put out there and I'm sure you've seen this already in your organization, is that when you make a partnership with a third-party provider that's out there to solve a specific problem you have, you must (and I underline must) get out of the way and let the solution perform.

Jim Marous (27:19):

What I see is many organizations will build a partnership with an organization that can give them best in class solutions. And then they go, "Yes, we like everything we bought. We like everything you said, we like everything you promised, but we want you to still include this, this, or this. Or we don't want to change this part of our back office."

Jim Marous (27:40):

I don't know if you've seen this already because you're still relatively new in your organization, but I'm sure you saw it at IBM in the past where organizations bought one thing and want to implement something that was like a montage of what they had in the past and what they had in the future, which means you'll never get to the optimum solution.

Jim Marous (27:59):

Is that still a challenge in the marketplace?

Pal Krogdahl (28:02):

Oh, absolutely, yeah. The issue of adapt versus adopt. How much do you adopt of the out-of-the-box product versus how much do you adapt it to your own in-house approaches and thinking. Absolutely, we still see that.

Pal Krogdahl (28:20):

And another element to this as well, Jim, is as banks or financial institutions start looking at building their future based on an ecosystem or partners, that there's also a management or governance issue because you end up with many partners that could be by themselves a single point of failure.

Pal Krogdahl (28:41):

And this is where Samlink comes in as a fantastic — we become a single throat to choke. We have the ecosystem of partners, we manage the ecosystem of partners, we create a banking platform which is built out of best and breed. We do all of that research, we make sure that it operates.

Pal Krogdahl (29:02):

I mean, one of the heritages that we have at Samlink is that we know how to operate a banking platform. We know how to operate to have it resilient, not have outages.

Pal Krogdahl (29:15):

So, we can take that, add to it, the partners that are most relevant for us to be able to deliver a best of breed solution to our banking or financial institution customers.

Pal Krogdahl (29:26):

And I think that's an interesting dynamic in a lot of these discussions going forwards when banks are looking at how do we build best of breed using a lot of partners, is you can still do that by having one partner you trust and trust them to do all the hard work. You still have that one throat to choke, which makes life a lot easier.

Jim Marous (29:51):

That's a great example because I think organizations can make life very hard if they go out there and try to build all this on individualized basis. And there are solution providers such as Samlink, that they do that legwork for you and then you can pick and choose which partnerships you want to build.

Jim Marous (30:08):

So, it is funny because I could go back 40 years in my banking career, and I can talk about this the same way I do today, but banking organizations have a vast amount of data available.

Jim Marous (30:22):

They talk about using it for improvement of efficiency and effectiveness. They talk about it improving products and solutions. They talk about it being able to provide better customer experiences.

Jim Marous (30:35):

Overall, we have a lot of data. I talk about my primary finance institution knowing everything about me, but they never show me that they know everything about me.

Jim Marous (30:48):

What are the biggest opportunities and challenges that exist in the banking world with regard to the application, coordination, and deployment of data for things that matter today?

Pal Krogdahl (31:04):

So, I think when we look at data and I'm not a data expert by any means possible. I've got data experts within inside of Samlink that I would relate to when getting into much detail.

Pal Krogdahl (31:19):

But you are absolutely right. There is an explosive growth of data and it continues to grow. There's data within inside of the organization.

Pal Krogdahl (31:26):

But if we go back to part of the discussion we had at the beginning, the days of us as individuals having our financial life with just one provider are gone.

Pal Krogdahl (31:38):

So, there is a new paradigm when it comes to data, particularly around data to satisfy customer journeys and customer expectations that you need to start looking at how do I combine my data as a financial institution with data provided by third parties to be able to enrich the ability to get a holistic point of view on my customer?

Pal Krogdahl (32:04):

Then you start getting into issues like, how can I trust the data? Do I believe the data is correct? Do I believe that the data's coming from a true source? And then how do I get my own data to be well formed and looked after?

Pal Krogdahl (32:20):

Then you add another element to that, which is this growth of generative AI and the use of data for AI. And here you start getting into a whole load of new different problems about the models, the data you're using to train the models.

Pal Krogdahl (32:34):

Where is the data coming from? Is it your data? Is it someone else's data? Data can get poisoned, data can get manipulated.

Pal Krogdahl (32:41):

So, I think there is a continued fundamental growth of data that's always going to happen, but I think we're going to see new risks associated with how you're using data as a financial organization and how do you get best advantage of that data.

Jim Marous (33:00):

So, Pal, when we look at the overall aspect of what's going on right now, and what we're trying to prepare for in 2024, and when we look at your great report, what strategic advice (and I know I'm on another one of these broad brushes here) do you have for banks aiming to thrive and at least survive among the massive amount of turbulence that's going to expect to be in front of us in 2024 and beyond?

Pal Krogdahl (33:29):

Yeah, no, absolutely. And I think here I've ended up in an awful lot of very interesting discussions, not only just with banks, but with other advisory organizations.

Pal Krogdahl (33:38):

Everybody's bringing out reports at the moment and we're all friends or frenemies and we all getting discussions with each other and that's how we all learn and get relevant points of views.

Pal Krogdahl (33:50):

But when I'm talking with the banks, the first thing that I would say is there is a fundamental opportunity at the moment for banks to look at the rebundling of banking services. And whether you want to label this as the platform modification of banking or you want to relabel this as embedded finance.

Pal Krogdahl (34:09):

If we look at the trends that have happened over the last couple of years, particularly since the start of COVID, the FinTechs and the big techs were really focused on breaking up banking.

Pal Krogdahl (34:22):

And for a short period of time that was fantastic. We as consumers ended up with fantastic apps that were giving us fantastic experiences, and we went, "Wow, this is great." And then we got the next app, and then we got the next app.

Pal Krogdahl (34:32):

And before we knew it, we had three apps for retail investments, six apps for instant payments, two apps for taking the public transport.

Pal Krogdahl (34:43):

And before you knew it, your phone had just a plethora of different non-connected apps, and you got lost of how much money have I got? Where have I got my money? Who's paid what subscriptions? The whole thing just, it becomes a nightmare.

Pal Krogdahl (34:57):

And in certain geographies, if you go to emerging markets, you can see the growth of super apps. I don't think generally at the moment, particularly in established markets like Europe and North America, I don't think we're going to see super apps being a huge explosion.

Pal Krogdahl (35:15):

But what I do think we're going to see is a continued growth of non-financial organizations taking more and more of a grasp around customer life.

Pal Krogdahl (35:26):

Here in Finland, we've got a great FinTech that's come up called Epassi, which started as a digital wallet for all intents and purposes, but it's now, grown into something much larger, which incorporates wellness for individuals.

Pal Krogdahl (35:43):

And companies will actually pay into this as part of your compensation package.

Pal Krogdahl (35:50):

So, you end up with a digital wallet with funding in there from your corporation, and you also add your own funding to that. So, you connect it to your bank, you can even connect it to your Finnair loyalty points and pay with Finnair loyalty points.

Pal Krogdahl (36:03):

So, what's happening is you're starting to create a financial situation for yourself in the Epassi digital wallets and expansion from that.

Pal Krogdahl (36:18):

I think there's a fantastic opportunity for banks to reposition them back and say, "Well, actually, we don't necessarily be able to do all of this ourselves, but we can partner (back to the ecosystem capability) to offer these capabilities."

Pal Krogdahl (36:32):

"Step out of the world of having a pipeline business that says we have to build the models and the products. We have to market the products, we have to sell the products, and we're going to get the return on those products."

Pal Krogdahl (36:41):

"We can market the combination of our products with other people's products to create that ecosystem." That's the first part that I will say focus in on that this year.

Pal Krogdahl (36:50):

The second one is don't get caught off guard. Embrace the ecosystem and embrace the ecosystem both from, as we just discussed, but also from the fact that you must modernize.

Pal Krogdahl (37:02):

The time has come, you can't sit on this anymore, you need to modernize at one level or another. Do it, use in an ecosystem of partners. Don't get caught off guard.

Pal Krogdahl (37:13):

The next one is technology trends. We are now, focused on generative AI. Quantum computing is just round the corner. If you're going to say to yourself as a bank, "Generative AI, it's interesting, something is happening. I'm going to wait another five years and then see what's happened, and maybe I'll catch up when it happens."

Pal Krogdahl (37:34):

By the time you get onto generative AI, quantum is going to be knocking you for six. So, stay on top of that.

Pal Krogdahl (37:42):

And the last one I think we all know, it's ESG. You need to focus on ESG, you need to get ESG into what you are doing. And ESG is a complex one because just like generative AI, a lot of banks are looking at ESG, they believe they know what they're doing, but there's still too many questions.

Jim Marous (38:01):

It's interesting, Pal, I'm going to go one step further and say, don't talk about it, do it.

Jim Marous (38:08):

And I say that because we did a quick poll this last week and said, what is the likelihood of certain things happening? And one of them was, what's the likelihood of branches decreasing by 25% in the next three years, in the next five years, in the next 10 years, never? Type thing. So, we did all these things.

Jim Marous (38:28):

And at the top this year, was one that didn't even exist last time we did this report, was financial institutions will have implementation of generative AI solutions to improve customer experiences at more than 50% of financial institutions. That was the number one thing that was going to happen in the next two years.

Jim Marous (38:51):

Which was interesting because I go, “Sounds good, sounds entirely sensible, but that means people are going to have to embrace something that's completely different and there will be people within every organization arguing against doing it because it's risky or there's moderated risk or whatever it is.”

Jim Marous (39:11):

And I think at the end of the day, you have to do things, you have to move forward. You should set it in your mind that we no longer look at annual plans. We're looking at quarterly movements of big amounts, (and getting back to it) and only can be done with partnerships.

Jim Marous (39:28):

So, Pal, I really appreciate talking to you. You're probably somewhat unknown in the United States to a degree. So, with that said, how do people find you? How do people listen to your tremendous podcast? And finally, how do people download the report?

Pal Krogdahl (39:48):

Yeah, absolutely. Actually, we never mentioned that, Jim. I host a podcast called FinTech Daydreaming. You've been a guest on there twice actually, I believe so, yes. Please check out FinTech Daydreaming, the podcast which I co-host with my good friend Ville Sointu.

Pal Krogdahl (40:03):

Find me, I'm on LinkedIn. I am very active on LinkedIn, so you can find me on LinkedIn pal.krogdahl. Samlink you can find at samlink.fi. We're also on LinkedIn.

Pal Krogdahl (40:19):

And you can find the report, The Samlink Equation 2024, either on samlink.fi or on LinkedIn. In actual fact, I've uploaded it as well on my LinkedIn page, so it's available. Or even more importantly, ping me, I'll send you the report and I'd love to have a discussion about it on the back of it.

Jim Marous (40:39):

Pal, great to talk to you. You have a great personality that I love to be around because you have a passion for what you do, which is exciting. And looking forward to be back in the Netherlands and in the Amsterdam to see you quickly again. Or if not, in the United States.

Jim Marous (40:54):

So, thanks for being on the show. I really appreciate it.

Pal Krogdahl (40:57):

Thank you, Jim. It's been fantastic.

Jim Marous (41:00):

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Jim Marous (41:07):

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Jim Marous (41:17):

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Jim Marous (41:25):

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Jim Marous (41:35):

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Jim Marous (41:48):

Thanks for joining us. Until next time, keep innovating and transforming.