SkandiaBanken: Key factors of success

Abstract

In April 2001 SkandiaBanken, a fully owned subsidiary of Skandia Insurance Company Ltd., bought Din Bank in Denmark and started what today is the largest pure Internet bank in the country. All though Internet banking never got the revolutionary impact on the banking industry that had been predicted SkandiaBanken did, with their 107.000 customers and their first positive result in 2004, justify their existence on the market. But in this record breaking good period for the Danish banking sector, SkandiaBanken’s modest result of approximately DKK 1 million seems to be too low. The thesis is structured around three phases: a descriptive phase containing the problem identification, an analytical phase containing environmental scan and a concluding section where the strategic implications are outlined. The purpose of the thesis is to determine the strategic implications SkandiaBanken in Denmark will encounter in the near future. The environmental analysis combined with an analysis of SkandiaBanken’s specific resources and capabilities is investigated in the third phase which recommends strategic and practical recommendations on how to improve their competitive situation. The most important findings in the external environment are the impact that the Internet has had on the banking sector, primarily diminishing barriers of entry. Furthermore, the customer’s mobility and their bargaining power have been increased significantly. The market for pure Internet banks is growing and with increased focus on price and transparency, SkandiaBanken seem to have a justification for their existence on the Danish market. Internally SkandiaBanken have been able to cut costs significantly in its first years of existence leaving it to be one of the most cost efficient banks in the country, when measured in cost per customer or per employee. But just as efficient as SkandiaBanken have been in lowering their costs equally poor have they been in generating a sufficient income. To generate a larger income SkandiaBanken has to shift focus from growth to customer relationships and loyalty. Training and empowering the front-line office will encourage this shift of focus. The management of the bank does not seem to recognize that the front-line office is the only connection they have with customers and the importance of this connection. Presently the bank does not segmentate their customers resulting in the bank not knowing the needs of their customers. In order to increase customer loyalty, customer satisfaction, share of customers’ wallet and thereby increasing the income-per-customer the bank will need to implement a CRM system in the bank.