The Nordic challenger bank obtained a full European banking licence in August 2019 and started offering a stock trading service soon after, giving its customers access to 300 European and US companies in which to invest.

“We’ve broadened our selection of stocks, both international - so you can buy Amazon, Tesla, Square and the like - and you can buy a large number of Nordic stocks,” founder and CEO, Ken Villum says.

The rails of Lunar’s stock trading platform is provided by fellow Danish bank Saxo, who clearly regard the partnership as an opportunity to reach a wider market.

“Saxo shares our vision of a future of partnering up between financial services businesses,” Villum says. “We are targeting a segment that maybe they weren’t targeting in the past.”

Saxo Bank are often touted as leaders in making the investment experience digital, though Villum believes that it would still prove a challenge for them to make their platform resonate with the mass market.

Experts in the field, he believes, will inevitably try to include a lot of features with a complex dashboard and market data from different sources and so on.

“It can be difficult to build an investment platform making it as simple as possible if you have some expertise in the area, as you need to cut out 90% of the features that you would think you need to include,” he says.

“Our job is to slice out the features that would make a solution too complex for first-time investors. Building that simple experience caters to a segment that maybe Saxo didn’t in the past.”

Testing times

Lunar is looking to expand its investment offering, including seeking a partner with whom to provide a robo-advisory service.

“We can offer funds and fractional shares using the Saxo rails, but for a robo-adviser we would probably need to work with somebody else,” he tells Finextra Research.

Despite how commonplace digital investment platforms are now, there remain significant barriers to their becoming more widely used in the mass market, not least lack of confidence to know what to invest in and a fear of losing money.

The current climate then would suggest now is the not the opportune time for the beginner to cut their investing teeth, given the prolonged period of volatility looming ahead, but Villum disagrees.

“I actually think it’s a great time,” Villum says, “mainly because it’s a time when you need to pay a lot of attention given the number of dips and spikes we will probably see.

“We are seeing this on our platform both with the trading volume and the number of new signups we’re getting.”

With the platform still in its infancy, Lunar’s stock trading service is seeing healthy growth, more than doubling its number of users month-on-month since its creation.

Villum states that the aim was for 10% of Lunar’s 150,000 customers to be using the service by the end of the year, a target which was in their sights by the end of Q1.

Range of services

Features such as stock trading are vital for any company wishing to appeal to large numbers of Nordic customers who are accustomed to having all their financial needs serviced by one provider.

This is the case with some 80% of consumers in Norway, for example. Being able to rely on this customer adhesiveness makes Nordic banks incredibly profitable when compared to their equivalents elsewhere.

“The Nordics are a bit schizophrenic to be honest,” Villum says.

“On the one hand, it’s the most profitable banking landscape in the world but it’s also the territory with the most dissatisfied customers.”

Dissatisfied they may be, but their tendency to use only one company for all their banking, savings, lending and investments demonstrates how loyal Nordic customers can be, which may be to the detriment of competition or innovation.

“All the banks look alike, there’s a monopoly of the infrastructure and banks are almost forcing their customers to stay with one bank and get all their products from it,” Villum says.

Lunar will be aware then of the need to expand its range of products quite rapidly to meet the expectations of the Nordic client base.

“We’re looking into lending, subscription-based credit lines, deposits for renting an apartment and, by the end of the year, mortgages,” Villum states.

“You need to have an array of products to challenge the incumbents. It’s not enough to just provide a card and an account.”

Unlike in the UK where many customers use a digital bank as their secondary or tertiary account, people in the Nordics are less likely to dip their toe into different providers.

Villum says: “If you look at the banking landscape in the Nordics, it’s unheard of ‘try’ an account. That doesn’t exist.

“So, we’re going to consumers and telling them it’s okay to try a new bank without switching bank. So, they would use us as a second account, and then over time we’ll use predictive algorithms to suggest other specific products, moving to a point where they move to us for all their financial needs.”