Five Things Your Bank Can Learn from Norway’s Success Migrating to EVs
To succeed with digital transformation, your bank must learn from Norway: measure, acknowledge & pivot with the changes that transformation brings to your organization, staff, & customers.
Photo by CALITORE on Unsplash
Norway recently reported a milestone in its process of migrating to electric vehicles:
Last year, 80 percent of new-car sales in Norway were electric, putting the country at the vanguard of the shift to battery-powered mobility. It has also turned Norway into an observatory for figuring out what the electric vehicle revolution might mean for the environment, workers and life in general. The country will end the sales of internal combustion engine cars in 2025. Source: In Norway, the Electric Vehicle Future Has Already Arrived
Regardless of what you think about electronic vehicles and internal combustion engines, this accomplishment is impressive. And, it is one that financial institutions who are chasing digital transformation should pay attention to. There are 5 lessons that FIs learn from Norway’s recent achievement:
Change can start anywhere; transformation requires leadership to embrace it.
Measure and document changes and transformation.
Acknowledge that jobs are going to change.
Incent customers and employees to change their habits and behaviors.
Prepare to pivot as part of staying in business.
1. Change can start anywhere; transformation requires leadership to embrace it
I was surprised to learn that EVs have a long history – even in the US where the love affair with combustion engine cars is well known.
Detroit Electric started in 1907 and did well in competition against Baker and Milburn electric cars, even though those two companies were more innovative. Even as internal-combustion cars began to win the technology race, electric cars maintained a market particularly in the cities where their silent operation and ease of use appealed to many. Often, the drivers were women who didn’t want to hand-crank an engine to start it, so city shopping districts had charging stations to attract these affluent customers.
The Ford Model T, though, was far more affordable and kept getting cheaper. The first Model T cost $850 in 1908. At the time, most electric cars were at least twice that expensive. The Model T price was under $300 by 1923 and many electric cars were 10 times as costly.
In the mid-1910s, a Detroit Electric upgrade battery pack (with Edison’s nickel-iron cells) cost $600 all by itself. This didn’t matter much to wealthy folks such as Clara Ford, wife of Henry, who found her husband’s product dirty and noisy and instead drove a succession of Detroit source: Car and Driver
Norway’s road to their EV milestone got started in the 1980s, with 2 citizen environmentalists who refused to pay road tolls:
Long before the country became the world leader in battery vehicles, environmentalist Frederic Hauge had a chance encounter with Morten Harket – the lead singer for A-ha, the Norwegian pop group behind the 1985 hit Take On Me. The pair hit it off and took to the road in a converted Fiat Panda, hurtling through toll stations without paying. Source: Sydney Morning Herald
The Norwegian government support for EVs didn’t come along until the 1990s and early 2000s with reduced taxes and exclusion from road tolls. Then, the Norwegian Parliament threw its support to EVs:
The Norwegian Parliament has decided on a national goal that all new cars sold by 2025 should be zero-emission (electric or hydrogen). Source Norwegian EV Policy
Of course, you know that ideas and change can come from anywhere. But disruptive, transformational change is harder to identify. Electric vehicles appeared right along with other types of vehicles. For many reasons, including economic and technological, those inventions did not become mainstream. Once a new idea, product or services starts to take hold, it can’t deliver transformation until senior executive leadership supports it.
Takeaway for FIs:
Assume that transformational change can emerge from anywhere or anyone - your employees or customers or a TikTok influencer.
Track which ideas resonate in your geography or market and with whom - not just inside your institution.
Nurture an idea or concept or service that emerges from your team or elsewhere. This support is crucial to take an idea to the next stage of development.
Move that support up the organizational hierachy as the idea matures.
Resist the temptation to let planning get in the way of execution. Don’t wait for a complete 10 year strategy for accomplishing transformation. Norway’s plan to encourage more people and companies to buy EVs by eliminating toll fees was not necessarily tied to world emissions goals and Norway’s ultimate plan to eliminate internal combustion car sales by 2025.
2. Measure and document changes and transformation
One of the challenges of “doing innovation or digital banking transformation” is demonstrating the value of that innovation or transformation initiative.
Even with the relatively small market for EVs at the turn of the 20th century, people noticed their value:
Even as internal-combustion cars began to win the technology race, electric cars maintained a market particularly in the cities where their silent operation and ease of use appealed to many. Often, the drivers were women who didn’t want to hand-crank an engine to start it, so city shopping districts had charging stations to attract these affluent customers. Source: Car and Driver
Oslo, the capital of Norway, measured the changes that are important to the governmental goals for EVs to show the value of supporting EVs over combustion engine vehicles.
But the air in Oslo, Norway’s capital, is measurably cleaner. The city is also quieter as noisier gasoline and diesel vehicles are scrapped. Oslo’s greenhouse gas emissions have fallen 30 percent since 2009, yet there has not been mass unemployment among gas station workers and the electrical grid has not collapsed.
Levels of nitrogen oxides, byproducts of burning gasoline and diesel that cause smog, asthma and other ailments, have fallen sharply as electric vehicle ownership has risen. “We are on the verge of solving the NOx problem,” said Tobias Wolf, Oslo’s chief engineer for air quality, referring to nitrogen oxides. Source In Norway, the Electric Vehicle Future Has Already Arrived
What’s interesting is that noise reduction is one of the values that people experienced in the early 20th century - and Norway has identified it as value to measure. These measurements are critical to drive and continue support of a digital banking transformation project both internally and externally.
Many banks have already measured change when they implement initiatives such as reducing the friction of account opening processes. As the digital banking transformation challenges and projects become more complex, financial institutions must clearly demonstrate the value of the complex changes that are part of those projects.
Takeaways for FIs:
Identify the processes that your initiative is transforming. What are the current benchmark metrics you use?
Figure out what currently defines success for that process or app or solution that you measure.
Question whether you are measuring the right things. Do our customers view this process as successful? How many questions or complaints do we receive about this process? Does this process as it is now continue to make in a digital world?
Target tasks that you may not already measure. For example: How steps (device and channels) does a customer have to take to change his or her legal name on his account?
Include customer service (digital and human) inquiries as part of your measurements.
Identify new measurements of progress towards transformation and success.
3. Acknowledge that jobs are going to change
The process of transforming existing tasks, creating new products and services, and targeting new markets will likely have one result: Many internal bank staff will think that these changes threaten their jobs. They aren’t wrong.
This has long been the understanding and fear around the debate whether manufacturers should move to EVs and whether governments should support that move.
The key is whether or not organizations and governments acknowledge this reality - and what they do about it. In Norway’s case:
Nor has there been a rise in unemployment among auto mechanics. Electric vehicles don't need oil changes and require less maintenance than gasoline cars, but they still break down. And there are plenty of gasoline cars that will need maintenance for years.... Electric vehicles are creating jobs in other industries. Source In Norway, the Electric Vehicle Future Has Already Arrived
Takeaways for FIs
Admit that jobs are going to change - maybe radically.
Be explicit about how jobs will change.
Create a plan that shows the path for everyone after the transformation initiative is completed.
Prepare, don’t punish, those employees or customers who don’t or can’t make the change.
Communicate your FIs plans in clear and simple language that isn’t overburdened with passive voice.
Use technology to support these efforts, not to drive them.
4. Incent customers and employees to change their habits and behaviors.
People need incentives to change their habits.
Clearly one of the reasons that early EVs did not gain traction over combustion engines is that there was no “carrot” for large numbers of consumers or manufacturers to choose them. The appeal was limited to those who could afford them. In fact, there were plenty of incentives for consumers to buy Ford Model Ts.
The Ford Model T, though, was far more affordable and kept getting cheaper. The first Model T cost $850 in 1908. At the time, most electric cars were at least twice that expensive. The Model T price was under $300 by 1923 and many electric cars were 10 times as costly.
Naturally, Ford and other car companies were motivated by the “carrot” of consumer adoption of the Model T.
Both consumers and organizations may need both “carrot and stick” motivations to spur large scale adoption of new, transformative products and services. Here is where high level support is necessary.
The Norwegian government incentives started in the 1990s and pushed mass adoption of EVs:
Toll charges were removed for electric vehicles in 1997, parking made free in 1999 and access to bus lanes granted in 2003. Source: Sydney Morning Herald
These incentives directly addressed the typical challenges or complaints that both consumers and car manufacturers have about EVs: cost and distance. EVs cost more than combustion engine cars and have a limited range because they have to be charged. With few charging stations, ), the Norwegian government further incentivized people and organizations to buy EVs and build charging stations with higher costs for vehicles with combustion engines than for EVs:
Norway imposes hefty vehicle import duties and car registration taxes, making cars significantly more expensive than in most other countries. By waiving these duties for electric vehicles, Norway is effectively subsidizing EV purchases at a level that other countries couldn’t afford. Add free parking to the mix and going electric suddenly looks like a tempting proposition. Source World Economic Forum
Once you give away a toaster, you have to supply the bread
The Norwegian government not only incentivizes purchasing EVs, but also owning one.
The government also subsidized the construction of fast charging stations, crucial in a country nearly as big as California with just 5.5 million people. The combination of incentives and ubiquitous charging “took away all the friction factors,” said Jim Rowan, the chief executive of Volvo Cars, based in neighboring Sweden. Source: In Norway, the Electric Vehicle Future Has Already Arrived
FIs cannot stop incentives once they acquire a customer. Is anything more annoying than seeing an online ad for new customers to the bank where you have an account for higher savings rate than you get? Acquisition incentives attract new customers, but what keeps them? More toasters? Or something more substantial?
Takeaway for FIs:
To grow transformation, FIs must incent everyone – from internal staff to customers and non-customers. Once you giveaway the toaster to attract customers, you have to supply the bread!
Plan for incentives to both acquire and maintain customers. You cannot motivate long-term profitable customers (or prospective customers) with one-off, one-time incentives.
Understand the difference between “carrot” and “stick” incentives. Depending on the type of behavior you want to motivate, you may need to use both types.
Use existing loyalty and rewards programs
Add new features or services to existing products and services to incent customers.
Prepare to identify & use new incentives for customers and employees. This preparation will be part of your bank’s ability to pivot towards change.
5. Prepare to pivot as part of staying in business.
Pivot is a skill your organization must have to survive. You must be able to pivot. Whether you are a financial institution or vendor you must be prepared to pivot – whether it is with new products or services or changing your business model entirely. Your current business model is not guaranteed. The old ways of making money – like float, NSF fees – are going away.
Part of the driver for a digital banking transformation strategy is the FI’s desire to be able to create business models, new ways of generating revenue. Those FIs that thrive will be able to pivot away from legacy products and sources of revenue that no longer serve them — and create new sources of revenue.
Again, Norway’s migration to EVs provides an example:
Circle K, which bought gas stations that had belonged to a Norwegian government-owned oil company, is using the country to learn how to serve electric car owners in the United States and Europe. The chain, now owned by Alimentation Couche-Tard, a company based near Montreal, has more than 9,000 stores in North America. Source: In Norway, the Electric Vehicle Future Has Already Arrived
This example is important for financial institutions: Your bank’s primary source of revenue may not come from 50 or 250 or 500 or 1000 physical branches as you did in the 1980s, but you will still be delivering banking and payments services through your apps or another company’s app.
Takeaway for FIs:
Identify and raise innovation ideas throughout the organization. Enable the organization to promote ideas not only from business and IT corporate organizations but also from operations organizations. To do this, provide incentives to internal staff in all organizations to suggest changes to processes, products and services that reduce customer friction, process redundancy.
Fight the urge to create innovation silos. Incent teams to share ideas and collaborate to create new ideas.
Identify potential adjacent verticals for new business models.
Tie your business & IT strategies – M&A goals, BaaS, embedded finance, neobanks, fintech investments, partnerships & acquisitions – to your pivot. All of these technologies and business strategies take you forward – the same direction as your pivot.
Takeaways for digital bank vendors
It’s all well and good for FIs to embrace change and pursue transformation. But what do these lessons mean for digital banking vendors?
What capabilities can your digital banking platform deliver for your FI customers?
Show how your solution can help your customers tie small innovations to their overall digital banking transformation initiative.
Demonstrate that your solution can – and better yet does - allows financial institutions to bring in new eyes – whether other vendors, fintechs or consultants – to drive more small innovations. This means proving your solution’s architecture is truly open and that the institution’s partnerships are not restricted to your partners but also includes their partners. (Stop Failing at Transformation)
How does your digital banking platform support not just one but multiple pivots?
Does your platform support new business models with customer, existing and new partners, fintechs, other financial institutions?
How do you measure success of transactional capabilities and processes?
How does your organization embrace new technologies?
Can your organization pivot?
Note: Financial institutions: If you’re evaluating upgrading or replacing your digital banking solution, include these questions as part of your evaluation process.
Me, Elsewhere
I moderated a great panel of folks for a conversation on innovation. We cut through the hype and share practical advice for making your digital transformation efforts pay off. We definitely talked about the importance of small innovations.
How can banks be truly low friction? They must address friction everywhere. Otherwise innovation & digital transformation will elude them. In this report I identified the characteristic of a low friction bank and why legacy core banking and architectures don’t support it.
What can the Kardashians teach your financial institution about partnerships and innovation? How can working with empathic fintechs help you identify niche groups (aka hidden tribes) and innovate. All this and more in this this ebook that you can download at Praxent or Nymbus.
Adopt an Agile Digital Banking Platform: How bankers must have an agile digital banking platform to support both global and local trends and requirements to help them identify new niche markets that will drive innovation, create new value and increase profitability. In this report I identified a set of capabilities that a digital banking platform must have that will help take banks into a competitive future and urges banks to select a digital banking partner who shares their innovation, vision and support for new value creation.
How Your Financial Institution Can Leverage Niche Markets for Next-Level Growth: The old rules that influenced how mid-sized financial institutions acquired technology and the tradeoffs they had to make no longer apply. Why? Because new thinking on old models brings new ways for banks and credit unions to deliver new products and services to new niche customer markets. I moderated a vibrant discussion about this & more with Jeffery Kendall, Chairman and CEO, Nymbus and Tim Hamilton, CEO of Praxent.
Think like a Challenger: How banks and credit unions can compete and win - I recently moderated this conversation on challenger banks with Bryan Clagett of Moven and Ted Brown of Digital Onboarding.
Digital banking transformation’s surprising secret for success in Entersekt’s ebook New Directions in Authentication
Does It Fit Me? Tailored Banking - The Next Step in Digital Transformation.
Yes, I worked with clients on these ebooks and webinars. They may ask you for information before you can download or watch them.
How can I help you?
To collaborate with me on a similar project or something else completely different, please contact me at stessa@pivotassets.co or via LinkedIn.
I’m also available for inquiry and strategy sessions via Third Eye Advisory.
Who writes PivotAssets?
I’m an independent analyst, strategic advisor & consultant (& a former Gartner analyst). I’ve worked in and covered the banking industry for over 2 decades. I write about digital banking in this newsletter - not to confirm what you know (and you are plenty smart!) but to give you a fresh perspective & analysis on the transformation that is —and isn’t happening - in the industry.