Dual-Track’s Strategy for Incumbent’s Transformation: The Case of Danske Bank Adopting a Platform Business Model
- 5.4k Downloads
Situation faced: The traditionally stable and conservative financial service industry is undergoing a process of transformation where contenders utilizing new technologies and relying on novel business models challenge the role of incumbent financial organizations. The changing preferences of customers, who demand customized services at convenient for them time, and the shifting regulatory environment, which encourages the entry of fintech start-ups, threaten the dominant position of these traditional actors.
Action taken: Instead of observing passively this ongoing trend, Danske Bank, one of the leading banks in Northern Europe, took a proactive approach to digitalization by launching pre-emptively a number of disruptive digital initiatives in order to protect itself from disruption. Danske Bank correctly read the market dynamics in Denmark in connection to consumer readiness, technology maturity and competitors’ actions and decided to venture into the mobile payment area in order to position itself as first mover. By launching its solution MobilePay, which functions as digital payment platform, Danske Bank also adopted a platform business model, which differs from the traditional banking products.
Results achieved: Leveraging its first mover advantage, MobilePay gained momentum and has successfully defended its dominant position in the Danish market, which other local and international mobile payment solutions tried to threaten. Four years after its launch, MobilePay is currently being used by more than 90% of the Danes, has established a growing ecosystem of partners, and has expanded to other Nordic markets. MobilePay’s success has helped Danske Bank improve its brand image and reduce customer churn. It has also demonstrated Danske Bank’s ability to be at the forefront of digital innovation by proving the bank’s capability to address the changing preferences of its private customers and to deliver on the digitalization agenda of its corporate customers.
Lessons learned: This case demonstrates how an incumbent financial organization can successfully protect its core services by venturing into disruptive digital initiatives, such as the launch of platform business model, which requires the adoption of different business thinking. The success of such initiative depends upon the timely launch of a customer-centric solution with focus on simplicity, ease of use and strong value proposition. Despite the short-term gains, the long-term sustainability and profitability of such a solution operating in constantly changing environment requires its continuous development. Its success also depends on achieving a certain level of organizational autonomy from the traditional business, while at the same time establishing synergy to it in order to gain access to the incumbents’ core resources.
KeywordsDanske Bank Platform Business Model Incumbent Financial Institutions Danish Market Strong Value Proposition
- Børsen (2017) Danske Bank: “De sidste kunder skal være digitale”. Can be found here: https://www.pressreader.com/denmark/dagbladet-b%C3%B8rsen/20170803/281956017867315
- Danske Bank Group (2012) Annual report. Can be found here: https://www.danskebank.com/en-uk/ir/Documents/2012/Q4/Annualreport-2012.pdf
- Danske Bank Group (2013) Annual report. Can be found here: https://danskebank.com/en-uk/ir/Documents/2013/Q4/Annualreport-2013-parent-company.pdf
- Danske Bank (2014a) First Danish mobile payment solution for businesses. Press release. Can be found at: https://danskebank.com/en-uk/press/News/news-archives/Pages/mobile-payment-solution-for-businesses.aspx
- Danske Bank (2014b) Mobiltelefonen er fremtidens betalingsløsning. Can be found at: https://danskebank.dk/da-dk/erhverv/nyheder/pages/danske-business-december-2014.aspx
- Danske Bank (2016) Three million people in Denmark are now using MobilePay. Can be found at: https://danskebank.com/en-uk/press/News/news-archives/Pages/3-million-use-mobilepay-in-denmark.aspx
- European Commission (2013) Proposal for a Directive of the European Parliament and the Council on payment services in the internal market and amending Directives 2002/65/EC, 2013/36/EU and 2009/110/EC and repealing Directive 2007/64/E, COMGoogle Scholar
- Evans DS, Schmalensee R (2016) Matchmakers: the new economics of multisided platforms. Harvard Business Review Press, Watertown, MAGoogle Scholar
- Finans (2016) Danskerne valgte MobilePay frem for Swipp. Can be found at: https://finans.dk/live/erhverv/ECE9149552/danskerne-valgte-mobilepay-frem-for-swipp/?ctxref=ext
- Hagiu A, Wright J (2011) Multi-sided platforms. Harvard Business School Working Paper 12-024Google Scholar
- MobilePay (2015) MobilePay 2015 – året i tal. Can be found at: https://www.mobilepay.dk/da-dk/Nyheder/artikler/Pages/MobilePay-2015-aaret-i-tal.aspx
- MobilePay (2016) Nordea tilslutter sig MobilePay. Press release. Can be found at: https://www.mobilepay.dk/da-dk/PDF/Pressemeddelelser2016/20161013-pressemeddelelse-nordea-tilslutter-sig-mobilePay.pdf
- MobilePay (2017) MobilePay is heading towards 1000 webshops in the Nordics. Press release. Can be found at: https://www.mobilepay.dk/da-dk/PDF/Pressemeddelelser/Checkout-MobilePay-PressRelease-20170419.pdf
- OP-Pohjola (2015) OP brings easy contactless payment to the Pivo mobile wallet. Can be found at: https://www.pohjola.fi/pohjola?cid=-1691
- Parker G, van Alstyne M, Choudary SP (2016) Platform revolution: how networked markets are transforming the economy and how to make them work for you. WW Norton, New YorkGoogle Scholar
- Shapiro C, Varian H (1999) Information rules. Harvard Business School Press, BostonGoogle Scholar
- Skjærlund S (2016) Swipp og MobilePay dukker op i flere og flere lokale butikker. Can be found at: https://frdb.dk/erhverv/Swipp-og-MobilePay-dukker-op-i-flere-og-flere-lokale-butikker/artikel/89864
- Statista (2016) Percentage of people who use a smartphone in Denmark from 2012 to 2016. Can be found at: https://www.statista.com/statistics/488341/smartphone-penetration-denmark/
- Vipps (2016) Over 100 norske banker satser sammen på Vipps. Press release. Can be found at: https://www.vipps.no/pressemelding.html