Open banking in Norway : the potential for third party providers and the impact on the banking industry

The purpose of this thesis is to investigate the impact of Open Banking on the Norwegian commercial banking industry and the potential for third parties in Norway. We proceed by defining the various concepts involved in Open Banking. This includes a discussion of PSD2, third parties, APIs and the risks involved with increased digitization and data-sharing. We define and discuss the drivers behind Open Banking development, which are divided into demand and supply side considerations. We then proceed to analyze the Norwegian market for Open Banking. First, we perform a competitive analysis of the Norwegian banking industry, where we find the market to be moderately concentrated and characterized by strong inequality between the players. We then examine the current state of Open Banking in Norway which is characterized by some degree of investments and startups into the sector. DNB, Nordea, Danske Bank and Sbanken have created developer portals who return dummy or personal data to enable individuals to create banking services based on their infrastructure. Further, there are some startups positioning themselves as third parties to provide payment or account information services. The estimation of the third parties’ markets show moderate penetration and a strong potential for growth in Norway. However, there is uncertainty relating to the specifications of their business models and how they can monetize their services. This is further problematized due to the already low margins in the payment service industry and the ability to scale such services. There are potentially strong effects on the incumbent banks’ profitability, where the indirect effects dominate. These effects entail the loss from increased focus on product attributions, and hereby a weakened connection to the customers. Finally, we analyze the drivers with regards to Norway. We conclude that the most favorable drivers are regulations, consumer preferences and the population’s digital capabilities. However, there are concerns regarding the capital accessibility and the availability of governmental support. We conclude the thesis by discussing our findings and their implications for the outlook of the Norwegian banking industry