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Fintech at The Crossroads: Realizing the Full Potential

Financial technology or “Fintech” – using technology to deliver better financial services to the masses – has undergone explosive growth in recent years. The number of startups has grown from 71 to 280, and today they employ more than 2.300 people.

Danish companies and founders are punching well above their weight. One way to measure the success is the number of unicorns created by Danish founders. And back in 2016, no one would have guessed that we could celebrate the unicorn status of both Tradeshift, Pleo, Lunar and Chainalysis just five years down the road. You can also add the US-based investment platform Public with Danish co-founder Jannick Malling at the helm, who recently announced that they are hiring hundreds of people in Denmark.

But it’s not only about investments and valuations. It’s also about creating jobs and economic growth for society at large. 100 new jobs in financial services and IT creates an additional 175 jobs in other sectors. Which makes the fintech sector’s impact on GDP an impressive amount between 200-300 million DKK (if created from foreign investments you can add an additional 100-200 million DKK, one of our recent studies show).

Fintech is just good business for all! Financial technology reduces transaction and intermediation costs through increased transparency, new business models and digital distribution for the benefit of private households and small businesses. Fintech democratizes access to financial products and services and seeks to include segments previously not served.

Fintech also plays a major role in accelerating the Sustainable Development Goals (SDGs). Despite a tremendous increase in the number of initiatives dedicated to sustainable development since the adoption of the 2030 Agenda in 2015, a persistent $2.5 trillion annual financing gap stands in the way of achieving the SDGs.

In the 2020 report “People’s Money: Harnessing Digitalization to Finance a Sustainable Future” published by the UN task force on digital financing, Kristalina Georgieva, Managing Director, International Monetary Fund stated that: “[there is an urgent need to] return the financial services industry to what it is supposed to be – an industry that serves people.”

Fintech can help citizens and businesses in directing the use of their money more effectively to realize their goals, by delivering the right information, improved access, greater accountability, and smarter financial services.
I am certainly not suggesting that fintech holds the answer to everything, but I am claiming that the potential of fintech is even bigger than what we see right now, and that Denmark (and the Nordics) are uniquely positioned to take the lead.

This historic opportunity combined with an unprecedented global health crisis provides a unique moment and imperative to act on and we need to begin with the end in mind. Much of the work on this has already been done. The SDGs set up clear goals for us to reach for and if that is not enough, please read the latest Intergovernmental Panel on Climate Change (IPCC) report:

“Climate change is already affecting every inhabited region across the globe with human influence contributing to many observed changes in weather and climate extremes” That should do it! Collective action and a sense of urgency from every stakeholder, is what we need. Now!

Earlier this year Copenhagen Fintech Policy published a set of recommendations for improving the access to talent for fintech companies in Denmark. This is a major barrier for continuing the international scaling of Danish and Nordic fintech solutions. Addressing the talent issues and the other major challenges and opportunities related to the scaling of Nordic fintech solutions will definitely be some of the main focus areas for Copenhagen Fintech going forward.

As an ecosystem operator (for lack of better description), we have the responsibility to ensure that innovation is facilitated towards sustainable solutions. That new products and services serve people and planet before profit and that the ethical dilemmas in the use of technology are discussed and addressed before hitting the market and scaling. Investors (and the founders they invest in) should always be able to answer the most basic of all questions: will this investment and this product/solution make the world a better place and how?

This year’s edition of the Copenhagen Fintech Magazine will give you, the reader, an update on the progress of fintech in Denmark and the Nordics. It is also my hope that you will be inspired to – based on the many stories in the magazine – think about how you and your company can build a more sustainable future.

Get your copy of Copenhagen Fintech 2021 Magazine here

9 recommendations from Copenhagen Fintech Policy

Copenhagen Fintech Policy consists of Copenhagen Fintech, Danish Industry, Finansforbundet, Finans Danmark and Forsikring & Pension. The proposals have been developed in collaboration with Zenegy, Jamii.one, Public, November First, NewBanking, DreamPlan, Subaio and The Many.

  1. Talent exchange programs between established financial companies and fintech startups: where employees from larger companies spend time with startups for a limited period, giving startups access to more experienced talent and established companies access to new knowledge.
  2. More people educated with specialised fintech competencies: at least 10,000 more students with STEM degrees by 2030, including specialised degrees relevant to the fintech sector.
  3. Higher provision of digital competences in further education: whereby institutions of higher education must match the needs of fintech companies.
  4. Education of fintech talents from developing countries and more diversity: each university must provide 10 free places for fintech talents from developing countries, such as African countries with strong fintech sectors.
  5. Establishment of a dedicated group under the Ministry of Trade and Industry (Erhvervsministeriet): in order to analyse how the economic incentive structures and tax framework can be improved, for startups wishing to attract foreign talent.
  6. Review of existing schemes: adjustment of the salary requirements, positive list (a limited list of jobs that enable foreigners to seek residency in Denmark) and fast-track scheme for attracting international talent. Additionally, adjustment of the rules concerning employee shares and bonuses.
  7. “Try Denmark for 90 days”: a trial scheme which makes it easy for fintech employees from selected countries and their families to move to Denmark for 90 days, where all the necessary paperwork is sorted on their behalf.
  8. It must be attractive for startups to do research and development activities: the government should make it easier for research-heavy companies to invest in R&D activities by, for example, making the 130% deduction for R&D activities permanent
  9. Increased efforts to retain international students after their studies: where it is crucial that students develop a relationship with the labour market via, for example, work experience, whilst studying in Denmark.

Sebastian Kjaer
Sebastian Kjaer
Sebastian is editor in chief of the Copenhagen Fintech Magazine. As partner and editor at TechSavvy Media he covers the Danish startup ecosystem on a daily basis

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