October, 2000

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Bo Harald, Executive Vice President, Internet Banking Services, Merita

Going Solo
The Nordea group has interests in Denmark (Unibank), Finland, Norway, Sweden (Nordbanken), Estonia, Latvia, Lithuania and Poland. The group also has offices in New York and Singapore. Nordea's Finnish operation, Merita, is a world leader in Internet banking, on the basis not only of its technical sophistication, but also the percentage of customers using its online services.

By early 2000, the bank could already claim that 14 per cent of credit applications were handled online together with 11 per cent of mutual funds management and 74 per cent of stock trading. By October 2000, Merita was receiving a staggering 4.8 million logins and 5.6 million online bill payments per month.

Overall, the Internet has rapidly become the most important channel for the bank's business. In comparison with other major European banks, which generally average between 100,000 and 200,000 online customers, Nordea's combined online customer base by October 2000 amounted to nearly 1.8 million. In Finland alone, Merita had 960,000 customers using network services such as Solo, the Internet bank - meaning that over 60 per cent of its active customers were Internet-based.

"The Solo concept is one of the main reasons for the popularity of our Internet banking services," says Bo Harald. "Solo customers, private and corporate alike, can check their accounts and perform transactions at any time and from any web-enabled computer anywhere in the world. This is a major step forward from traditional Internet or dial-up solutions that require customers to have specific software installed on the PCs they are using."

Customers are also offered real flexibility - and complete mobility - in how they use the system. One password and service agreement gives each customer a choice of channels ranging from land and mobile telephones and computer terminals to the Internet (including TV-based access) and WAP telephony.

Full range of services
Solo offers a full range of services including account status, payments and transfers, foreign exchange transfers, stock market transactions, a news service, email dialogue with the bank, and much more.

"This is a major leap forward since the start of our home banking service back in 1982, which was based on interactive voice response. Since then, we have proceeded via GSM bill payment in 1992 to web-enabled services in 1996 together with a direct paying-in system for businesses. Our latest products include full banking services with e-billing and foreign exchange transactions, and our customers need nothing more than the browser they are already familiar with," Bo Harald continues.

Quality of service is vital
It is important to provide an accessible, customer-friendly service. To inspire customer confidence and ensure success, however, the system must also be 100 per cent stable and completely secure. Merita achieved the scalability, security and Quality of Service it needed for worldwide access by deploying a Cisco-based communications infrastructure linking branch offices over a wide area network.

Bo Harald comments: "We rely on Cisco for support to maintain and expand the robust network infrastructure and services that enable us to build on our leadership position in the fast-moving, real-time Internet banking world."

Regular dialogue
Cisco maintains a regular dialogue with Merita's IT staff to discuss new business opportunities. "We aim to stay ahead by adopting new technology before our competitors, and also by preserving as high a degree of flexibility and independence as possible," says Bo Harald. He adds that Cisco has helped Merita to implement a CRM solution which meets the needs of banking and financial institutions in the new economy.

Completely secure
The inability to conduct completely secure transactions has often been cited as the Achilles heel of ubiquitous Internet banking. Solo, however, benefits from SSL encryption using constantly changing security keys that protect data transmission against abuse or intrusion by outsiders. In addition, the technology ensures that users are connected to a genuine Merita server. "Solo customers log on by entering their personal user ID and a password that is different for each session," Bo Harald explains. "They then have online access to the various services and can perform transactions, browse news bulletins or read email from the bank at their leisure. All communication between the user and the bank is encrypted and all transactions are confirmed with a different password to that used to log on." The extent of customers' confidence in Solo can be seen by the fact that, four months after the start of the Internet foreign exchange payments service, 25 per cent of all small value foreign exchange payments were being made via the Internet.

Reaching operational excellence
Financial institutions are among the earliest adopters of e-commerce and Internet-based access. The potential is immense, particularly in the business-to-consumer sector.

Web-enabled customer relationship management is set to become one of the major competition drivers as banks and other providers seek to win loyalty in a highly volatile consumer market. "In addition to significant savings in transaction costs, one of the major advantages of our Internet banking solution is that it frees up staff at our branch offices to focus on customer relations," Bo Harald relates.

"With e-banking, customers can conduct business where and when they want. And when they need personal advice, there is always someone available at the local branch, on the phone or by email to provide individual assistance and guidance. In other words, e-banking is our way of automating routine tasks, enhancing customer loyalty, and doing more business at lower cost."

En route to create new revenues
One of Merita's additional services seeks to provide a completely new touch point between the bank and its customers. Solo Market is an e-marketplace where some 1,500 Finnish and Swedish businesses offer a wide selection of products and services ranging from food and fashion to cars and computers. Solo Market owes its accelerating success to the 4.8 million monthly bank logins (October 2000) supported by its convenience, the wide choice it offers, and a secure and real-time payment system that gives security to both the purchaser and the vendor. Orders are placed directly with the supplier, either by WAP phone or at the website, after which the customer reverts to the normal Solo service in order to pay. Once payment has been made, the customer can return to the vendor's site to see confirmation of receipt.

Foundation for the future
Unibank in Denmark is another Nordea institution running a Cisco end-to-end solution. A Network Supported Account contract enables Unibank to operate its Cisco network at high levels of availability and ensure business objectives are met. "There is no doubt in my mind that Internet banking not only attracts customers and makes a significant contribution to retaining them, but that it also reduces transaction costs dramatically," Bo Harald says. "None of this would be possible, however, without the range of services that Cisco is able to provide. And the fact that other Nordea acquisitions in the past year already have Cisco solutions in place will make it that much easier to expand our Internet banking solutions across the Group and throughout the Nordic region."

A rock-solid infrastructure
Merita's Cisco-based infrastructure consists of a core network based on 5000 Series switches enabling the delivery of high-performance backbone access to accommodate browser-based traffic across the intranet. Added to this are 2600 Series routers that serve branch offices with web and e-commerce applications in order to enhance productivity and support converged voice and data.