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Competition distortion hampers international growth for the Danish Fintech environment

Fundamentally, the Danish Fintech environment is thriving. Innovation and creativity are giving rise to many new and exciting companies, but outdated legislation is hampering growth opportunities and further job creation.

“Fintech companies aren’t competing with nor carrying the same risks as banks. They’re mostly competing with other Fintech companies abroad. Therefore, it’s not reasonable that they are subjected to the strictest regulation in any sector and parts of the world as the well-established banks. Regulation and legislative framework should be nuanced so that a start-up in the Fintech environment doesn’t have to struggle with the heavy legal burden and special taxation like the payroll taxes from day one as Fintech companies abroad are not.” says Steen Lund Olsen, Deputy Chairman of Finansforbundet.

In other words, he believes that despite the government designating the Fintech environment as a Danish strength, the need for further improving the conditions for Danish Fintech start-ups is urgent. One way to address this, in his view, would be to increase competitiveness. He thinks that being a start-up in Denmark is too complicated, and he would like to see more lenient political winds blowing over the Danish Fintech environment. He suggests, for example, sandbox environments as a way for budding companies to experiment and practice while testing their solutions and growing their business.

“Danish fintech and finance is already known for high ethics and responsibility.  It’s a brand we can use to market ourselves in an international setting, and Danish standards in the field are world class and a strong competitive advantage, that we need to utilize.”

Steen Lund Olsen, Deputy Chairman of Finansforbundet.

The need for an ambitious national strategy

“In the middle of August, the Minister for Industry, Business and Financial Affairs, Morten Bødskov, visited Copenhagen Fintech, where we discussed that Denmark is much more than wind, pigs, and insulin. If we’re going to be able to create strong, large, well-operated companies within Fintech, and if the political standpoint is indeed that we’re good at it, then I honestly think there could be more action behind the words, when it comes to support the companies as they grow” Steen Lund Olsen continues.

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Although Denmark has several success stories in the Fintech environment, such as Pleo and Lunar, he looks somewhat enviously at what’s happening beyond the country’s borders in terms of growth companies. Moreover, if a start-up does succeed in bringing a solution to market, the challenge is also to find the right skills for continued operation and development. Therefore, Steen Lund Olsen also calls for a more targeted effort and higher ambitions into improving the possibility of recruiting international talents and higher ambitions when it comes to a national strategy for competence development, both in terms of retaining Danish talent and attracting foreign talent.

Made with ethics: A Danish competitive advantage

“Danish fintech and finance is already known for high ethics and responsibility.  It’s a brand we can use to market ourselves in an international setting, and Danish standards in the field are world class and a strong competitive advantage, that we need to utilize. “Made in Denmark” could become synonymous with Danish digital solutions that are “Made with Ethics”, but it takes a serious commitment from all sides to really create and benefit from this rather unique position. So, there’s a significant task in developing and strengthening the Danish Fintech environment in a way that gives companies the best possible conditions to grow strong in Denmark, backing them sufficiently to participate in global competition, export their solutions and retain their headquarters on Danish soil,” Steen Lund Olsen elaborates.

Denmark is, of course, not the only country in the world where Fintech has been designated as a strength. It’s the case in places like Singapore as well, but Steen Lund Olsen points out that they’ve approached things in a completely different way. There, they strategically work on utilizing competencies in the best possible way and strategize how to use technology for the benefit of society. Considering that Denmark can boast being one of the most digitized societies in the world, he believes that as a society, we have access to low-hanging fruits that we just need to grasp, including the possibilities in public-private collaborations.

A completely new interface changes the financial sector

When Fintech began to emerge as a serious concept, some viewed the innovative start-ups as a threat to the established financial sector. However, that hasn’t proven to be the case. On the contrary, these companies are strengthening the financial sector and increasing competitiveness. They also offer the opportunity to provide customers – consumers – with new, personalized services. The significant revelation in this context is a new interface between innovation, IT, digitization, and finance. That’s what truly defines the new possibilities.

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“We, in Finansforbundet, need to be attentive to and address the skills our members need moving forward, and we are also profoundly committed to help developing the Fintech community, attract skilled labor and creating new, sustainable jobs in a constantly evolving financial sector and growth for our society. This is one of the reasons we initiated Copenhagen Fintech and why we in Finansforbundet entered into a framework agreement with the Employers’ Association for Fintech in Denmark two years ago. It was the first of its kind in the world at that time and led to UNI Global Union, an international federation of trade unions, awarding Finansforbundet the Breaking Through Award of the year,” explains Steen Lund Olsen.

Strengthening the intersection between tech and finance

The initiatives are, of course, intended to support efforts to create an eco-system that create innovation, jobs, and economic growth for the benefit of society. It has also led to Copenhagen Fintech becoming a member of the Employers’ Association for Fintech and, here in September, renewal of the initial collective framework agreement between Finansforbundet and the Employers’ Association for Fintech. Since the inception of Copenhagen Fintech in 2016, the ecosystem in Denmark has grown explosively, with over 4,000 employees in Fintech start-ups. This is in addition to more established financial technology companies.

“So, we need to contribute to nursing the intersection between tech and finance, but as the political and legislative situation stands now, we’re losing companies to foreign countries as they grow larger, and it’s simply due to a distorted competitive situation. In Finansforbundet, we have a pronounced wish for a more nuanced understanding of the financial sector and Fintech. As it stands now, all companies related to finance are subjected to the same requirements, and that can be particularly challenging for small companies that operate digitally on a global market to meet,” Steen Lund Olsen concludes.

New entrepreneurship strategy is on the way

When Minister for Industry, Business and Financial Affairs, Morten Bødskov, visited Copenhagen Fintech in August, he mentioned that the government plans to present a new entrepreneurship strategy during the second half of 2023. 300 million DKK have been allocated for this purpose, but according to the minister, there will be a tough prioritization in efforts to accommodate the many different recommendations and advice from the industry. However, it’s clear that finance and Fintech have been designated as a Danish strength, which means an area that has special importance for the Danish economy.

“I’ve followed Copenhagen Fintech for several years. In many ways, it’s an archetype of how, around significant activities in Danish society, you can build ecosystems that can help us retain jobs in Denmark and ensure that we innovate and develop Danish strengths,” the minister said during the event. However, praising words alone aren’t enough. Good framework conditions are needed if the growth story is to continue on Danish soil. Additionally, efforts should be made to ensure fair competition and employment conditions as much as possible. This benefits both companies and employees, as well as society as a whole.

NFM Publishing Team
NFM Publishing Team
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