Dual-Track’s Strategy for Incumbent’s Transformation: The Case of Danske Bank Adopting a Platform Business Model

(a) 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. (b) 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. (c) 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. (d) 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.