The shackles of the COVID-19 pandemic managed to take almost the entire world by storm, crumbling entire nations, and segments. Despite the widespread impact of the virus on global economic operations, the Nordic FinTech community managed to emerge as an epitome of resilience and strength. Led by ambitious investors and innovators, and supported by an enterprising government, the FinTech landscape in the Nordic region is all set to define finance in the years to come.
Scaling and Sailing
The Nordic region is home to every one in ten of the FinTechs listed on the Global Fintech Index by Findexable. From Klarna to iZettle, Tink to Wise, several big names in the world of financial technology has their roots in Northern Europe.
Why? The Nordic region continues to be a global leader when it comes to digital maturity, being home to around 1000 FinTechs despite housing only around 2% of the total population of Europe. The region was one of the first in the world to start drifting away from cash in its practices and policies. At the same time, both the government and the private players of the Nordic countries display a shared commitment towards digital services and the digital economy.
The Nordic countries have also, in the past years, embraced innovative collaborative models based on the growth and distribution of financial services. Having put such models in place even before “FinTech” became dear to banks, the region had created the perfect ground for a booming FinTech ecosystem much before other countries in the world.
As reports by leading analysts associate Nordic FinTech with the dynamics of the future of financial services, it is important to consider what parameters the current growth in the Fintech sector is based on.
Financial Services Institutions
When it comes to product management for larger customer pools, financial services institutions have always been market leaders. They are almost single-handedly responsible for the wide and diverse global financial network today, in conjunction with stock exchanges and payment service providers.
The financial institutions of the Nordic region have shown great resilience during the severe financial crisis of the pandemic. The numbers say it all: the seven biggest Nordic banks have a combined balance sheet of over 2000 billion euros.
As the trend in financial services continues to shift with unprecedented speed towards digital solutions, it is the Nordic region that seems best prepared for the change. A range of economic, commercial and cultural factors are at play. Several analysts forecast that the region could become the world’s first officially cashless society by 2023.
The development of regulatory oversight and cost structure over the years have been consistently aligned to the operations and actions of various stakeholders – government officials, policy-makers, and more.
With time, even regulators have come under the powerful grasp of digitization. They are increasingly opting for greater financial stability despite more disruptive innovations – two aspects that conventionally have not gone hand-in-hand for the FinTech industry.
For the Nordic region, fortunately, this conjunction of regulation and innovation has been exemplary so far. Nordic FinTech firms have kept up the momentum of innovation despite the regulations and drawbacks that came showering with the onset of the pandemic. Quick to embrace digitization, the region is hopeful of faster economic recovery compared to leading global competitors due to the penetration of industry-wide digitization, thanks to governments and firms alike.
New FinTech Players
Just like any other industry facing the powerful onset of digitization, the financial services segment is witnessing stiff competition between traditional giants and new players. Why? The traditional financial players have not been able to stay neck-to-neck with the latest insights and knowledge of digitization in finance. They are thus facing the brunt, with a worldwide sweep in terms of customer base to the millennial generation.
The Nordic region, however, attributes the successful support to both traditional and new players by the local infrastructure due to its early commitment to digital services. The region has now become a testbed for the future of financial services, which is digital. The Nordic countries are a testimonial to the world of how a steady and transparent collaboration between governments, policymakers, corporations, and entrepreneurs can both handle and shape a thriving futuristic economy.
Startups and Investors
Globally, the number of startups and their investors has seen a steep rise – 41% since 2014 in the EMEA region alone. The more the number of startups and investors in an economy, the greater the possibility of innovation and disruption in every segment, including finance.
Talking about the Nordic region, its FinTech market boasts of a highly sustainable domestic startup ecosystem already. The share of Nordic capital in the region’s FinTech market is at a staggering 80% today, which is why the region was able to withstand the pandemic crisis so well – despite a shortage of foreign capital, the self-sustaining FinTech market of the Nordic recorded continuous growth.
Besides, as more and more investments are taking place in the early stages, the FinTech hub in the region is expanding at an unprecedented rate. FinTech startups and companies are an important link. Some of these influential companies are leading the wave of change in the region, bringing transparency, cost-efficiency, and sustainability to the table.
Axo Finans is a leading FinTech company working as a digital broker for personal lending in the Nordic region. Aimed at helping customers fill out and send loan applications to multiple banks with ease, the company is currently represented in Norway, Sweden, Finland, and Denmark. The services of Axo Finans are not just adding value to customers but also helping them save more time, money, and the complexity of handling multiple applications.
Vipps is the largest FinTech in Norway, which provides access to Norwegian mobile gaming sites that are otherwise banned in the country. Created in 2015, the one-of-its-kind platform also provides a secure portal for the Nordics to handle instant and secure digital payments. The company’s ever-growing popularity is a testimony to the wide acceptance of mobile payments and online banking in the region’s day-to-day operations.
When it comes to FinTech innovations, Sweden and its online banking solution Klarna can easily be termed as world leaders. The company was started 15 years ago in Stockholm and has grown into a banking giant handling over 40% of the total financial transactions that take place in Sweden today. Going by numbers, Klarna happens to be Europe’s largest FinTech unicorn of 2020.
Tradeshift is a Danish FinTech startup that has registered significant growth in the last few years, thanks to the constant support of the government. The FinTech unicorn provides a cloud-based platform for connecting applications, marketplaces, and supply chain payment systems globally with the help of local entrepreneurs in the field.
Shaping Global Finance: Nordic FinTech
From automated infrastructure to personal finance management, virtual currencies, and online banking transactions, the FinTechs of the Nordic cater to a wide range of operations. As per a special review by Deloitte, FinTechs are the fastest growing branch of startups in the Nordics, accounting for over 11% of the total capital invested in the region.
As the numbers continue to impress and the FinTech hub of the region continues to snowball, the future of global finance also seems tied with the Nordic. More and more startups are collaborating with FinTechs, if not set up their business in the segment itself. Although there remain multiple complexities to the regulation, management, and growth of both FinTechs and incumbents, the bigger picture delineates a magnanimous growth for the segment, led by the Nordic.