Why AI could finally get CIOs a seat at the table

Nordic banks are turning more eagerly to artificial intelligence (AI) and innovation-led tech partnerships that can help them compete more cost-efficiently with niche digital banking rivals that are increasingly populating the financial services space in the region.

Leading Nordic financial groups such as Danske Bank, Nordea and SEB have identified strategic partnerships with fintechs as the fastest and most effective means of building digital capacities. Banks are driving forward with capital-intensive investment projects to integrate and utilise advanced AI technologies that they hope will give them a competitive edge over the current wave of digital bank disrupters. 

For their part, Nordic digital banks are looking to gain added leverage from the cost advantages of lower overheads to lure customers away from traditional high street lenders. The significance of having a lower cost base has enabled digital banks to offer competitive rates of interest and low to zero monthly account and transaction service fees at levels below the rates and fees available from traditional finance houses.

AI delivers productivity boost

The wider utilisation of AI in Bankdata’s work methods and processes, according to the company’s CEO, Esben Kolind Laustrup, significantly boosted its productivity in 2023. Bankdata is one of the largest IT providers in
Denmark ’s financial sector.

“The AI solutions we introduced reduced costs for the company by up to 25% in 2023. Our owners are benefiting from these savings. The degree of potential savings from AI use means more organisations in the financial services sector are putting AI very high on their agendas in 2024,” said Laustrup.

The degree of potential savings from AI use means more organisations in the financial services sector are putting AI very high on their agendas in 2024
Esben Kolind Laustrup, Bankdata

Bankdata provides core banking systems, card platforms, and digital and AI banking solutions to its eight owner banks in
. These comprise Jyske Bank, Djursland Bank, Kreditbanken, Nordfyns Bank, Ringkjøbing Landbobank, Skjern Bank, Sparekassen Sjælland-Fyn and Sydbank. Together, the eight banks serve one in every four Danish bank customers.

Nordic banks are increasingly shifting their primary focus from digital-theme partnerships to strategic collaborations that offer advanced AI expertise and solutions to reduce costs and improve efficiencies within the domain of administrative operations and customer services provision.

Despite the more rapid transition to AI, digital-based partnerships like Danske Bank’s multiyear deal with Amazon Web Services (AWS) in March 2024, can be expected to remain a key area for Nordic banks engaged in group-wide digitisation projects.

Danske’s collaboration with AWS forms an integral part of the Danish bank’s “better banking” Forward 28 (F-28) strategy that aims to offer new digital solutions and a more expansive menu of self-service options to its customers. The F-28 strategy is backed by a capital investment plan front-ended by additional spending on digitisation and cloud technology.

Under the agreement with AWS, Danske Bank will migrate selected infrastructure, applications and data, which includes systems for personal, business and institutional customers to AWS.

Moreover, Danske Bank will leverage AWS’s full range of cloud technologies, along with its AI, machine learning and generative AI (GenAI) services to reinforce internal developer productivity, said Frans Woelders, Danske Bank’s chief operating officer.

“Our goal is to grow our position as a leading Nordic bank in a digital and AI age where our customers are becoming increasingly digital. By investing more in digitisation and AI technology, we are able to deliver a better banking experience and drive operational efficiency,” said Woelders.

Danske Bank has identified GenAI as a prime area for investment. An increasing number of the bank’s employees are starting to use new AI tools, including DanskeGPT, to conduct internal tasks. The bank is also exploring Microsoft 365 Copilot as a proof of concept, while GitHub Copilot is also running as a proof of concept. Testing is ongoing on DanskeGPT, which is intended to serve as the bank’s exclusive internal smart assistant.

“Our vision is to provide different generative AI solutions that can be utilised across different business units securely and with compliance,” said Woelders.

Motivated by a greater need to achieve cost efficiencies, Nordic banks have deepened their engagement with AI to explore the benefits of expanding the use of GenAI, especially at the customer service end of their operations. Banks are showing a particular interest in exploiting the potential cost-efficiency advantages in large language models, an area of AI that has rapidly developed since the release of ChatGPT in November 2022.

Taking out costs with AI

The pursuit of cost efficiencies by Nordic banks is evidenced in Swedbank’s AI tech partnership with Akur8. The Stockholm-headquartered finance house penned a partnership deal with the French company in March. Swedbank aims to use the collaboration to bolster its insurance pricing process. The deal will enable Swedbank to use Akur8’s advanced solutions powered by Transparent AI.

The partnership will not alone revolutionise Swedbank’s insurance pricing processes, but it will also leverage Akur8’s advanced AI technology to improve accuracy, transparency and efficiency while expanding the overall customer experience, said Juris Kipluks, head of underwriting at Swedbank.

There will be individuals and corporates who adopt the new technology and others who will not. The ones who adopt AI will most likely stay relevant and replace the ones that don’t
Philip Widegren, Nordea Bank

“We recognised the substantial potential in the range of functionalities in the Akur8 suite during the onboarding stage. The platform is a perfect fit with our own development plan. It will help Swedbank bolster efficiency in our modelling process,” said Kipluks.

Nordic pension fund groups are also starting to embrace AI to drive cost efficiency. ATP, one of
Denmark ’s three largest pension fund managers, has rolled out a project that uses AI tools to streamline manual processes.

ATP estimates that it has already booked savings of €85m since 2014 through a continuous process of partnering with external IT companies to run operational efficiency projects to reduce administrative costs. ATP manages Denmark’s mammoth €87bn Statutory Pension Scheme. “Adopting AI in a deeper way is a calculated risk, but we are ready to make the journey as we can see huge potential in the technology,” said Haktan Bulet, ATP’s CIO.

Adapting to AI in the workplace

The broader adoption of AI by Nordic financial services organisations is taking place against the backdrop of a lively dialogue between labour unions, employers and finance sector employees. The main general concern about AI – that the technology could result in the mass replacement of employees in certain fields of business and industrial activity – is somewhat overstated, according to Philip Widegren, the data science lead at Nordea Bank’s AI Hub.

“New technologies have always impacted our way of working. In the case of AI, the first batch of changes will be similar to what we have faced before – there will be individuals and corporates who adopt the new technology and others who will not. The ones who adopt AI will most likely stay relevant and replace the ones that don’t,” said Widegren.

Some jobs, as AI advances and assumes a more dynamic presence in workplaces, will become redundant and lead to the emergence of new work roles, said Widegren. “The latest AI technology is here to help individuals and employees. I don’t see AI technology as replacing human beings in any short view, but people with AI might replace people without it,” he added.