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HomeThemesDemocratization of FinanceNordic Fintechs: A Different Breed?

Nordic Fintechs: A Different Breed?

The Nordic region has the highest number of unicorns per capita in Europe, and the last two years have seen Nordic fintechs raising record-high investment rounds. So, what is their secret sauce?

With a combined population of more than 27 million people, the Nordic countries only account for four per cent of the European population. And let’s be honest. Most of the world doesn’t distinguish between the Nordic countries. Instead, they might see a group of countries speaking a similar language, sharing values and common ideas – and being the happiest people on the planet. But the commitment to digital services and the digital economy is also common in the Nordic countries. It has enabled the region to move fast towards cashless payments.

The top rankings in international indexes, including digital integration and infrastructure, competitiveness, and entrepreneurship, are a testament to this. For example, Denmark, Finland, and Sweden are among the top four in the Digital Economy and Society Index (DESI). Also, Denmark tops the global competitiveness index, with the rest of the Nordic countries ranking in the top 10.

With the strong fundamentals in place, Nordic fintech companies have the conditions to scale beyond the magical 1-billion-dollar mark to achieve unicorn status.

“We have Nordic values integrated as the cornerstone of the culture in Pleo and the product we build and design today. We want to empower employees through efficiency, transparency, and trust. To make these values thrive you must run a flat organizational structure. To me, that’s also the most important value to why the Nordic ecosystem is a great place to scale a business,”

Jeppe Rindom, Co-founder and CEO, Pleo

“Building a company in a technically advanced country is obviously an advantage. We have a great technical infrastructure and an open culture that enables collaboration between fintechs and financial institutions. We are also catering solutions to a digitally savvy population so they will have high standards for the customer experience,” says Jeppe Rindom, co-founder and CEO at the Danish business expense solution Pleo.

Over six years, Pleo has raised more than 420 million euros headquartered in Copenhagen. In an online video, Jeppe Rindom announced the 150 million euro raise that earned the company unicorn status. While standing on top of a big rock – an evident contrary to a fast-moving agile scale-up company – he simply declared that he and the Pleo branding team like to think big and then announced the biggest C-round in a Danish startup. All with a dry and sarcastic touch. Just like the Danes prefer their it.

And Jeppe Rindom does tribute a significant amount of the company’s success to the Nordic values: “We have never seen ourselves as a Danish company, and I was the only Dane employed in the company up until we were more than 15 people. But we have Nordic values integrated as the cornerstone of the culture in Pleo and the product we build and design today. We want to empower employees through efficiency, transparency, and trust. To make these values thrive you must run a flat organizational structure. To me, that’s also the most important value to why the Nordic ecosystem is a great place to scale a business.”

“The governments in the Nordic countries are also supporting technical development by investing in universities and financially supporting Research and Development, which jointly contributes to highly educated and skilled entrepreneurs and a lot of talent.”

David Sandström, CMO, Klarna

An Internationalized population

On April 10, 2005, the first transaction at Klarna took place. Known for the buy now, pay later model, the Swedish fintech has a mission to make e-commerce as smooth as possible for both consumers and retailers. The company already earned unicorn status in 2011 and raised an impressive mega-round in 2020, doubling the validation from 5,5 billion dollars to 10,6 billion dollars.

The company’s CMO, David Sandström, has been with Klarna since 2017 and has seen it transform into a global fintech power brand. According to him, the key to the Nordic fintechs’ success is the Nordic welfare model, with free education, social security, and healthcare. This provides a solid ground for startups and breed entrepreneurs with international scope:

“A large percentage of the population is multilingual, where the majority are also fluent in English, which facilitates interaction with the outside world. Furthermore, the governments in the Nordic countries are also supporting technical development by investing in universities and financially supporting Research and Development, which jointly contributes to highly educated and skilled entrepreneurs and a lot of talent.”

While Klarna is now a global company, we don’t want to risk losing the spirit that brought them this far. The colleagues should feel the benefits of working in a large, successful, well-resourced company without struggling with a slow, dull corporate environment.

“Everyone at Klarna is part of a team of four to eight people. That’s big enough to make things happen and keep the company moving forward but small enough to keep the startup magic alive. Each Klarna team operates like a mini business with its vision, targets and goals, and its members acting like startup founders. As a result, teams are fully accountable for creating and delivering value to their customers – internal or external – and at Klarna,” says David Sandström.

And just like they do in Pleo, Klarna is also putting great pride in running a flat hierarchical organizational structure with few or no levels of middle management that will slow the decision process down.

Customer obsession

Adding to the Nordic welfare model, David Sandström sees a couple of other common factors for successful Nordic startups. First, fintechs need to focus on quality and high results. There is a need to focus on quality in customer offerings, recruiting talent, and building teams.

Klarna has formulated a series of business principles which permeate their way of working.
“We need to understand their customers with absolute dedication and ensure that serving the customer comes first. We don’t make excuses, we don’t hesitate, and we have no barriers to the customers’ input. We also want to challenge the status quo and never miss an opportunity to disrupt to find simple solutions to customers’ problems, and we are not afraid of failing. We choose courage over comfort and dare to engage in difficult conversations and decisions,” David Sandström says.

He sees a positive trend among startups in the Nordic region that will give them a significant advantage in international competition. In a time where there is a considerable focus on applying new technologies, Nordic companies tend to focus on something different and more critical: The customer.

“The impact of growing up in Estonia in the nineties had a massive impact on the founders of Wise. The economy was starting from scratch, meaning everyone had to be entrepreneurial. Perhaps living through this has also impacted some of Estonia’s other entrepreneurs,”

Clara Nobre, Head of Business Product at Wise.

Forced to be entrepreneurs

In Tallin, Kristo Käärmann and Taavet Hinrikus set out to fix international money transfers in 2011. They founded TransferWise – today Wise – and are more than 4.000 employees building an entirely new cross-border payments network which they hope will one-day power money without borders for everyone, everywhere.

Estonia ranks equally at the top with the rest of the Nordic countries regarding digitization of the public sector. In 2014, the government launched their e-Residency, allowing non-Estonians access to Estonian services such as company formation, banking, payment processing, and taxation. However, the country was in a completely different situation in 1991 after the dissolution of the Soviet Union.

“The impact of growing up in Estonia in the nineties had a massive impact on the founders of Wise. The economy was starting from scratch, meaning everyone had to be entrepreneurial. Perhaps living through this has also impacted some of Estonia’s other entrepreneurs,” explains Clara Nobre, Head of Business Product at Wise.

For Wise, it’s always been essential to nurture the entrepreneurial mindset. The founders strongly believe in autonomy. Wise was founded with a mission to enable money to move freely, transparently, conveniently, and eventually, one day, for free. Each of those four parts gained its team full autonomy. For example, the speed team could build what it wanted, hire who it wanted, and do what it wanted if it made the product quicker.

“Today, we have 4,000 staff, but that autonomy remains. Employees are given a clear goal and then the freedom to reach it. This helps us avoid bureaucracy and allows our staff freedom. It is an approach crucial for our rapid growth,” says Clara Nobre.

Why do unicorns matter?

Stories of successful fintech unicorns are rare, but stories about the few are often told. Maybe it is simply about the incredible journeys these companies have made in relatively short time. But what goes beyond the stories and the narrative of the Nordic as a leading unicorn factory?

“The ability to pay for our future welfare system the Nordic model lies in the success of the companies of the future. Unicorn companies are just that. We create many jobs, preferably in Denmark, if the strict regulations and taxations allow us to. We drive innovation and spin out new companies. Some employees feel inspired to leave because they want to build a new fintech company and embark on their entrepreneurial endeavours,” says Jeppe Rindom.

He does point out the absurdity that Danish legislation can hurt international competitiveness in Danish fintech: “We are committed to proving that you can build and scale a company in Denmark that can be the biggest international player in its field. However, it requires good regulatory conditions and they do not exist in Denmark. The fintech ecosystem here is a great incubator for fintech companies. Still, to get to the next level and keep unicorns in Denmark, we need to eliminate tax legislation that puts us in a weak spot if we choose to keep our main activities here.”

Jeppe Rindom refers to the fact that financial institutions pay a higher corporation tax than other industries and to a direct tax on salary expense. The latter was introduced in 1990 before labour and production became mobile and financial services became internationally competitive. Today, it might force fintech scale-ups to move their main activities out of Denmark.

While the public sector holds a responsibility to create the best scaling conditions, unicorn companies have the responsibility to build something meaningful. According to David Sandström: “Unicorn companies offer disruptive and market-changing products or services that make an impression on the masses and lead industries in different and new directions.

A lot is happening within tech fast, and if you have a unicorn company, you have a lot of power to change. With the leading position, you have the opportunity to influence many different stakeholders globally and thus have enormous influence. This makes it so exciting and interesting that it’s essential to continue supporting and focusing on these businesses. The unicorn companies will shape our future.”

Jakob Lindmark Frier
Jakob Lindmark Frier
Jakob is the founder of and partner @ TechSavvy Media and currently works at Digital Hub Denmark. As an editor he has covered tech and startups in Denmark over a decade, and he has previously had the pleasure of spearheading the Copenhagen Fintech Magazine as editor in chief.