Lars Millberg, head of transaction banking at SEB's merchant banking division, discusses the importance of innovation, and describes the bank's unique approach to encouraging out-of-the-box thinking among its employees.

For nearly a century and a half, Sweden’s SEB was focused on serving corporates in its domestic market. In the past two decades, however, the bank's focus has spread outside of Sweden, into the Nordics and Germany. It now has branches in 17 countries, including Hong Kong, the UK, Singapore and the US, and, increasingly, the merchant banking division's total income is generated outside of the bank's home market.

To keep abreast with competition and the changing regulatory landscape, SEB has taken innovation to heart and set up an innovation lab. Lars Millberg, head of transaction banking at SEB's merchant banking division, says that the bank wants to encourage staff to devote time to brainstorming new ideas for products.

“The innovation lab initiative is about finding products that we are not aware that we need,” he says. “We want to tap into our staff’s brains. We created the innovation lab to allow our staff to take the time to sit down, think and brainstorm. We also encourage people to work with colleagues from other parts of the bank and describe their idea or problem, so that other people without expert knowledge in that part of the business can contribute with ideas and solutions."

People can publish their ideas on an internal web-based community. All staff have access to the community and they can read up on and even ‘like’ each of the ideas published on it. This builds momentum and creates discussions among colleagues.  

“We are trying to encourage staff to present out-of-the-box ideas to an innovation committee. In the committee, we have people from markets, client coverage, business support and other business areas within the bank who listen to the ideas. The presenters have five minutes to present and convince the committee to invest in their idea. With the committee, we spiced up the approach to out-of-the-box innovation,” says Mr Millberg.

Where ideas meet

The innovation committee meetings, where the ideas are presented, take place four times a year. In the last meeting in June, eight ideas were presented. Since the launch of the innovation lab in early 2012, the bank has had 103 ideas presented in the committee, all of which have been published on its internal web community.

“The number of ideas that have been put through to development [is not large] because we are really looking for new products, not an idea to enhance a product we have,” says Mr Millberg. But he adds that some innovative ideas have already been approved by the committee and will soon be launched to the market.

With this focus on innovation, SEB is reacting to the wider evolution in the market. Instead of trying to be all things to all men, the bank serves clientele from and in the Nordics and Germany only.

“The market has changed dramatically, so we need to change our approach [to transaction banking] as well,” says Mr Millberg. “Transaction banking is too dependant on the macro-environment. In the traditional business model, income is to a large extent generated from net interest income and products and services have been subsidised. But with near-zero interest levels, that business model is challenged. We are trying to redefine the business model totally.”

Clear cut

One way that SEB is looking to change its business model is by improving its transparency, so that customers understand what they are being charged for. 

“For instance, a cash pool is a cash pool. However, it can be more or less complex depending on the customer’s needs and we price it in the same way for all customers – not the same price, but the same price model. That has to change. Many industries, such as telecom operators and airlines, have changed their business model in order to create sustainable profitability and we believe that it is time for us to apply a value-based business model,” says Mr Millberg.

“Unbundling the services and products we offer is a good description of the change. If customers do not have in-house competence and need our expertise they should pay more for the additional service and expertise we provide compared to customers that have invested in staff and in-house competence. In the new, more transparent business model, the customers will be able to make their own choices and the service level and price will be connected to the choice they make.”


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