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Technology that replaces the authorities

Banks, finance, estate agents and a whole range of businesses must think again. BlockChain enables the new “trust room” that replaces the authorities. This technology has the potential to change the ways we engender trust, thereby influencing our relationships with agreements, trade and ownership.

Players within banking and finance are now being threatened by small companies with disruptive blockchain technology. Blockchain is best known as the technology behind the digital currency bitcoin, which has already led to innovation among central banks all over the world. Recently, JP Morgan, Goldman Sachs and 40 other international finance heavyweights have established a collaboration to investigate the opportunities and threats posed by blockchain technology.

The new “third-party”

Imagine that you are intending to buy a house from a stranger. You have drawn up a purchase agreement and consulted a third party who stamps and stores a separate copy of the agreement. If at some subsequent point a forged agreement appears in which the salesperson continues to make a claim on the property, the third party can produce their copy from the archive and resolve the conflict. Of course, this will require the third party to be of a sufficient standing to enjoy the trust of both parties. In the example of a house purchase, this third party is directly authorised by the state, but will in other cases have earned their trust through seriousness and financial weight.

Now consider that this third party is not an individual player but a committee comprising volunteers who, in return for a fee, sign documents and store them in a large collective archive. If there is subsequent disagreement on the purchase agreement, you can compare your respective copies with those stored in the collective archive. If your copy is identical to the one that 962 volunteers have signed, it will be difficult for the salesperson to assert that your document is a forgery. The outcome is that you have reasonably good security, even without a guarantor like the state, a bank or a notary.

A “trust room” that replaces a trusted third party,

i.e. the guarantor who enables a secure transaction is no longer a heavyweight individual player. The guarantor is now a group of players. On their own they would lack sufficient weight, but together they create the necessary level of trust. The outcome is that you can create a “trust room” without the respective parties agreeing on a single trusted third party. We have seen this outcome with digital currencies like bitcoin. These are not issued by any central bank but by a “committee” of volunteers in blockchain. Nonetheless, many people trust the currency.

Blockchain gives third-party players equal status

Trust is key in most industries, not just in finance. For example, record companies would not survive if artists didn’t depend on receiving their rightful percentage of sales revenues. This has given heavyweight players with concessions, authorisations and other structure capital a competitive edge ahead of recently established small companies.

What happens when new technology evens out the competitive edge and gives smaller players access to the market? In the case of Uber and Airbnb there has, over an extended period, been major latent benefits in the form of unused capacity. Companies that have succeeded have played on strong drivers that increased globalisation, social media and the use of cloud services. And the changes have happened quickly. Players who were secure in their position three years ago now feel significantly threatened.

Bank cryptonite:

The finance industry is particularly exposed to disruption as a consequence of new technology

If, for example, you transfer money between the USA and Norway, you would expect that these days it would be a digital transaction that took place in seconds, and with minimal fees. But because of manual processes, old systems and varying degrees of technical maturity, it is both slow and costly. This is an example of a market failure with a huge upside for those who identify a solution.

The new players, however, have met with much resistance. Capital requirements, statutory regulations and industry norms provide trust, but at a great cost. What happens if you cannot achieve trust through technology at a fraction of the cost?

The Norwegian finance industry collaborates on technology and is technologically far advanced. We are therefore less vulnerable to disruption than the USA, for example. But money is an homogeneous commodity, and international players that rectify market failure will also be able to gain momentum in Norway.

Platform technology makes it easier to participate globally

“Platformisation” is another driver that influences. In our digitalised workplace, many service providers are moving from offering independent services to offering the same services as platforms on top of which others can build services. This is being done in the hope that the platforms will form the basis for an ecosystem of new innovative services. For example, developers from all over the world use Apple’s interface to create apps on top of Apple’s platforms. This creates significant added value for Apple in the form of increased demand for tablets and mobile phones, and it also provides platform rental income from the entire app economy. The same mindset exists when businesses like Telenor offer technical interfaces that permit other players to send SMS messages without having to think about the complexity of the GSM network. This is something we will see more of in completely new markets such as the finance market.

New secure authentication technology makes this possible in Norway

In recent years we have seen several new banks in the Norwegian market. What if the next bank is a "light-footed" bank with no employees whatsoever and which leaves other new small companies to develop the best services for online banking/mobile banking? With an abundance of different banking apps at the top of its platform, they earn money on volume. The spread of BankID and other forms of secure authentication technology already makes this possible in Norway.

In a survey recently conducted by the analysis company, 330 international top finance executives were divided into the following groups: “market leaders” and “mainstream”. When asked, 40% of the market leaders said that they feared competition from small, agile players. Only 16% of the “mainstream leaders” saw the same picture.

Technological advances are changing society at a steadily increasing rate. Less than 10 years ago, few of us had even heard about Facebook and iPhone. What is common to most of these changes is that we tend to overestimate the effect in the short term and underestimate it in the long term. Blockchains are not going to turn the world on its head in the coming years, but from a 5–10 year perspective, blockchains will have a great impact. Players who quickly understand and adapt themselves to the new picture will have an advantage.

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As a manager you can pose the following questions:

To what extent is the business’ existence based on a level of trust that it has been difficult for others to achieve?

  • Many businesses will experience a significantly changed competitive situation insofar as new technology increases what Porter calls the “threat of new entrants” (P5F).
  • For example, banks depend on a significant level of trust to manage their customers’ money, and it is a relatively onerous process for new players to achieve this level of trust. For this reason, banks have had a shielded existence. In the future, blockchains and encryption technology could make it very easy for new players to gain trust, and thereby access to the market.


If all players in the market completely trusted each other and we were able to re-establish all internal logic in our business (or the entire industry), to what extent would we end up with the same processes that we have now?

  • It can take three weeks and cost thousands of kroner in fees to transfer $10k from the USA to Europe. If this system had been built today, the transfer would have occurred instantly and free of charge.


If all players in the market completely trusted each other, would it be possible for the manufacturer and consumer to trade directly – without going via my business?

  • New players are offering platforms on which the provider and consumer can trade directly. There are grounds to believe that will see similar disruption in other sectors.
  • For example, brokerage firms (of every variety) are vulnerable to new business models in which the middleman is no longer required. This is particularly relevant if a major part of the brokering is “rule-governed” and/or has high margins.


To what extent is my sector isolated from the rest of the world?

  • Particular circumstances exclusive to Norway can protect against outside competition, but if significant enough changes occur internationally, there are grounds to believe that this will also impact us.
  • For example, Norwegian banks are more technologically mature than the majority of banks in the USA and Europe, and the benefits for new, disruptive players are therefore lower. But if global needs are otherwise significant enough, new players will be able to gain sufficient momentum to also impact the Norwegian market.


To what extent does my business share an interface with the operations of the three major players in Silicon Valley?

  • Google, Facebook and Apple are very good at using new technology. They will probably expand their service spectres with completely new services – including in Norway. Just look at Apple’s investment in the Smart House market.
  • For example, DNB’s Vipps service is a relatively simple function that lets you charge your credit card and send money to your list of contacts. This is a service that both Facebook and Apple are well positioned to recreate on a global scale.  


If your position is not secure enough for growth to happen automatically, we recommend the following:

  • Transform the business so that it offers platforms. Feel free to let others build surrounding ecosystems. Earn money on volumes.
  • Take ownership of the customer relationship by offering the best user experience – then you will always win.
  • Build on top of other players’ platforms.
  • Choose best-in-class platforms that can easily be replaced. Achieve volume. Drive down costs based on a high volume of customers.

Create hypotheses on what your customers actually want. Have a major/gigantic/absurd focus on hypothesis testing through user tests, AB testing, focus groups, etc.

Have a chat with one of our experts and challenge us on how your critical business processes can be improved.

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