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Change of Pace in Norwegian Fintech as it Reaches a “Critical Mass”

The rise in fintech innovation and investments across the Nordics has risen sharply in the past 4 years. A new report shows a corresponding increase in fintech innovation comming out of Norway, albeit with few cases leading the Norwegian market on the financial innovation front.

Marius Nordkvelde has led the team in Ontogeny Group, which has prepared the report ” Fintech 2022 – status and trends for the Norwegian fintech sector ” on behalf of Finansforbundet. This is the second year in a row that they are taking the temperature on the Norwegian fintech market .

In the first survey, which was based on accounting figures for 2019, it became clear that the Norwegian fintech industry has so far not been able to create the major growth successes or money machines. Vipps, Signicat and Buypass were the only ones to have exceeded NOK 100 million in turnover and Fiken was the only company that could show stable profits over several years.

When it is now the 2020 figures that form the basis for the survey, the picture is not completely turned upside down. There is still a long way to go before one can talk about Norwegian fintech as a profitable industry, but in principle all key figures in the survey point in a more positive direction.

► The Norwegian fintech ecosystem grew strongly. 70 analyzed companies last year had become 128 years old. There is a 45 percent increase in the number of companies between 2019 and 2020.

In fact, Ontogeny identified 171 companies, but 24 were filtered out due to missing numbers, acquisitions or bankruptcy. Just like the first year, the digital banks were also taken out of the figures. They are dominated by consumer loan banks, have a value proposition similar to the traditional banks and account for almost three quarters of the total turnover, or just over NOK 9 billion out of a total of just over NOK 13 billion in total operating revenues.

– An increase of 58 companies is still so significant that it can be said that the fintech ecosystem has reached a critical mass of companies, says Nordkvelde to Shifter.

► Strong growth in operating revenues. The companies’ total operating revenues increased from NOK 2.7 billion in 2019 to NOK 4.1 billion in 2020. The 58 new companies in the figures contributed approximately NOK 500 million.

Vipps is still in a class of its own and alone in being able to count operating revenues in billions. At the level below, the number of companies with revenues of NOK 50-500 million has gone from six to 11, and in the range thereafter, 5-30 million, the number of companies increased from 10 to 28.

– If we remove the largest companies, we can see that there are starting to be a good number of companies that are equipped for growth. These are also not the most well-known or talked about companies, says Nordkvelde.

Strex, Logiq, Promon and Stacc are all examples of companies that have exceeded 50 million in turnover and can show a profit on the bottom line.

► Strong performance improvement. The accounting team in Fiken are still the ones who excel in Ontogeny’s figures when it comes to positive operating results. The improvement in operating profit from NOK 35 million to NOK 53 million meant that Fiken was the company that increased its profit the most, according to the survey. But the company is not alone in being over on the plus anymore.

– The really big difference, however, is that the companies that make losses, reduced the deficits sharply, says Nordkvelde.

The three payment companies Vipps, Zwipe and MeaWallet excelled as the ones that reduced the deficits the most from 2019 to 2020.

Ontogeny has been collecting figures all the way back to 2011, and until 2019, the losses of the fintech companies’ accumulated annual result have only become larger and larger. 2020 was the first time the arrow pointed upwards. The accumulated annual result for all the 128 companies nevertheless ended with a deficit of approximately NOK 500 million.

– The change of pace from 2019 to 2020 shows that more companies can now be on their way out of the valley of death, he says.

► Increased value creation. The change of pace is also evident when Ontogeny has looked at the value creation that Norwegian fintech has contributed. This has been achieved by combining total payroll costs and total EBITDA.

– It is the best measurement criterion for direct value creation, says Nordkvelde.

From 2019 to 2020, Norwegian fintech’s contribution to Norwegian value creation more than doubled, from approximately NOK 300 million to approximately NOK 700 million.

Even with a doubling, it is a contribution that still makes up a vanishingly small share. In 2015, Nordkvelde was involved in calculating value creation for the entire bank and the financial industry . Then he, Torger Reve and Ole Jakob Ramsøy came to the conclusion that the banks accounted for a value creation of NOK 74.8 billion and that the entire financial industry ‘s value creation was approximately NOK 173 billion.

These are the latest known figures for the banking and finance industry , but show that there is still some way to go before the companies in the survey will really make a big financial impression compared to the more traditional players in today’s financial industry , according to Nordkvelde.

Chris Crespo
Chris Crespo
Chris is a Founding Partner and Chief Editor at Nordic Fintech Magazine, where he simplifies complex financial ideas into easy-to-understand content. With a over 15 years of experience in Management Consulting and financial services, including collaborations with some of Europe's largest banks, he offers profound industry insights. Previously serving as the Chief Futurist at the largest bank in the Nordics, Chris is at the forefront of the Future of Financial Services, Money, Disruption, and Ethical AI in Finance. He is also a guest lecturer at Stanford University, Singularity University and Copenhagen Business School, where he frequently discusses the future of Money, Finance, and Entrepreneurship in Financial Services. As a Behavioral Economist, Chris is passionate about studying how human behavior and decision-making relate to risk. He also delves into the connections between psychology, leadership, and technology within financial services.