Joining an ecosystem
In a similar way if you look at it from a network expansion perspective, we don’t see that we have some kind of a competitive edge now in the Nordics because we’re the only bank in the region on we.trade. Rather, we would like to see as many banks as possible either join we.trade or have their own live network that can be integrated with we trade. That’s the way we will find more trade parties for everybody who’s using we.trade.
The analogy that I use sometimes to describe this development is the way Global System for Mobile Communications (GSM) networks were connected earlier. When I got my first mobile phone, I wasn’t able to call anybody except the people who had the same mobile operator as I did. I was not able to send an SMS to anybody except in the same network. As things developed, I was able to send an SMS or make phone calls to everyone in the same country, no matter what network they were using, although I might need to pay extra if I called somebody in another network, even in my home country.
The next stage was that we had transparent pricing and everything was the same price regardless of the phone number I call or SMS in my home country. Now you can call and send an SMS to anybody in Europe and nobody even thinks about this anymore. Anywhere in the world you’re able to turn on your phone and make a phone call or answer your phone and even use things like data.
The pricing structures are becoming increasingly harmonised. It wasn’t too long ago that I needed to turn off data if I travel to southern Europe because the roaming cost were so high. These days you can pretty much use your phone freely inside Europe and this maybe soon the case even globally. It’s a very similar kind of development in these trade networks and even payment networks ultimately further down the line. It’s all about the network.
Network growth means regulation
If there’s enough volume and business on any network, regardless of the kind of network it is, it will eventually become regulated. With the financial industry being so heavily regulated already it’s fairly easy to predict that these networks and these shared infrastructure elements will be regulated, and that there will be price pressure from the European level.
If you look at the way payments infrastructure has evolved in Europe, there’s fairly heavy price pressure, with one example being the card payment networks. You cannot charge more interchange than the regulated permitted level on the card networks. The same goes for cross border payments. Now we have things like SEPA payments, they are basically being regulated and you cannot charge extra for cross border payments inside the Eurozone.
Regulations in the Eurozone tend to come thick and fast and it’s easy to predict that once these trade networks have evolved they will be subject to similar kinds of regulation and controls in terms of pricing as well.
For more information on Emerging Technologies at Nordea, write to Ville at ville.sointu@nordea.com.
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