Q&A: How SEBx aims to “reinvent banking inside the bank”

Banking-as-a-service (BaaS) has been making waves in the financial services industry in recent years, and it’s only expected to keep growing over the next decade. With fintech start-ups disrupting the space and making legacy banks rethink their strategies, one such bank in Sweden decided to launch its very own start-up to compete.

In 2018, SEB Group launched SEBx to explore new technologies from scratch and build new products and offerings in a bid to join the growing BaaS industry.

Since its launch, SEBx has built financial products catering to the self-employed in Sweden, as well as struck a partnership with retail giant Axel Johnson and its fintech start-up Humla.

In a chat with FinTech Futures, Christoffer Malmer, head of SEBx, discusses the Nordic bank’s rationale behind launching SEBx, what sets it apart from the competition and what it aims to build going forward.

FinTech Futures: What was the idea behind launching SEBx?

Christoffer Malmer: Prior to launching SEBx, the conversations had been coming from two perspectives – one being technology driven. We were thinking of ways to explore new technology, considering the current legacy infrastructure that we have, and the opportunities that new technologies could bring and how we could break into that.

Chris Malmer, head of SEBx

The second perspective is our ability to try and increase pace in new product exploration and bring concepts and products to market.

By setting up SEBx on the side, we thought we could give ourselves the opportunity to start from scratch, outside of existing legacy technology, outside of committee structures and processes, giving ourselves the opportunity to reinvent banking inside the bank if we had a chance to do it again.

So that’s how it started and very early on, we zoomed in on what we refer to as a dual strategic purpose. We want to build new products and we want to explore new technology, but with a business-driven initiative.

For example, building new technologies like cloud infrastructure and artificial intelligence (AI) credit scoring gives us the opportunity to build those two pieces together.

There are a lot of start-ups out there and we don’t necessarily think that we have an edge just being a “start-up”.

We want to bring together the strength of being an incumbent bank and what we have in terms of data, capital, liquidity, products, licenses and network customers with some of the traits that we see in fast growing start-ups and fintechs.

What does SEBx offer in terms of products and the platform itself?

For the first product, we decided to go for a value proposition for the self-employed.

Looking at the opportunity in the market, we thought that this was a customer segment that was struggling a little bit with its personal and business finances. There were not that many products and services that were specifically targeting this audience, and it’s a fast-growing form of employment.

Even last year, the number of new companies started in Sweden was at record levels. We see this across the Nordics, across Europe and beyond, that self-employment is a growing form of employment.

Keeping that in mind, we started building the cloud infrastructure and thinking about the different pieces we should have in this platform to really bring it to life.

We launched a version of the product, called UNQUO, initially targeting the Swedish self-employed.

The process of building that product, bringing it to market and launching it has been a tremendous learning experience.

The next step for us was thinking how we should leverage this platform, because it was built for a lot of use cases. The infrastructure, the heavy lifting, the technology is very much scalable and leverageable.

Via APIs, SEB wanted to see if there are ways of leveraging this platform to establish new products and services. So, we set up a team inside SEB that is building on this platform a new generation of mobile apps for a younger customer segment. So again, a specific user experience but a very standardised and scalable infrastructure.

And as of the first quarter of this year when we announced our quarterly results for the group, we also announced our first external BaaS customer.

With our BaaS platform, we’re now trying to open up to external customers to build on it.

The first customer we have signed up is a Swedish retail conglomerate called Axel Johnson, who started a fintech company called Humla. This company is now building products and services on top of the very same infrastructure that powers UNQUO.

Could you elaborate about your association with Humla?  

Here’s somebody who comes from the retail perspective, centred around user journeys, the retail interaction and consumer purchase, and we’re coming from the banking, infrastructure and regulatory compliance risk management perspective. And I think this really gives us an opportunity to build on our relative strengths.

What our BaaS platform then enables, is it allows Humla to build on top of our infrastructure, which will ensure that they comply with all the EU regulations, and if there’s any banking assets or banking capabilities that are needed, we can deliver it to them as a service.

We think there’s an opportunity for companies to engage further to access more customer data and get closer to customers by bringing them financial services, but they don’t want to become a bank.

So for Humla, this is an opportunity to leverage all those aspects of offering financial services without crossing the line of actually becoming a bank.

What do you think sets SEBx apart from your competitors?

When it comes to the concept of innovation in incumbent companies, through something like SEBx, you put something outside the conventional organisation that allows you to operate differently.

SEBx was launched in 2018

I think that’s a methodology we have seen across banking, but certainly across other industries as well. When we started SEBx, we talked to a lot of other companies and even banks that have done similar types of initiatives, learning from their experience how to manoeuvre in this way.

We’ve never done this before.

It’s a novel way of innovation for ourselves. In that regard, I think there are other initiatives that are of this similar nature.

When it comes to UNQUO, we really think there is an opportunity to serve the self-employed – that there’s still a gap in that market.

At the same time, when it comes to the broader BaaS platform offering, as an incumbent bank, we think there is a great opportunity to combine the banking assets of being part of the group of having access to liquidity, capital, licenses and products, and put a technology piece on top that allows us to embed those products in whatever user journeys we find in our B2B customers.

I think it’s important to mention as well: this is for us. That’s not to say that we will now distribute our products via third parties. It’s to say that we’re going to continue to distribute products in our own distribution channels. But we also think there’s an opportunity to empower other brands and embedding financial services in their user journeys.

What’s next for SEBx?

BaaS is still in the early stage of its development for us. We’ve just onboarded our first external customer. Our most imminent priority is to see how this works and how it can grow and scale from here on. So for now, it’s really about execution.

In the longer term, broadening the suite of products delivered as a service in combination with broadening the partner pool of distributors that build and embed financial services on top of our platform is an opportunity.

When it comes to SEBx, our ambition – together with the group – is to share our experiences, technology insights, ways of working and product development and try to play to our strengths. It’s a learning journey every day, but we’re really excited about the progress so far.