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Top Three Nordic Fintech Trends

Much buzz in recent press considers the Nordics as a region that could redefine the global future of financial services. In this episode Futurist Chris Crespo reveals the top three fin-tech trends across the Nordics for 2021. The second one probably will surprise you.

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The following is a transcript of the video above

There has been a ton of buzz lately about how Nordic Innovation could spell the future of financial services globally, so today we will look at the top three Fintech Trends across the Nordics, and who knows, maybe more than one will surprise you.

Dear wonderful people of the internet welcome to The Future of Here at Nordic Fintech Magazine. Many of you have written to us asking for a video on top Nordic Fintech Trends, and this is it!

My name is Chris, I am a Futurist at Nordic Fintech Magazine, and we are delighted to have you with us in this channel where we try to remove all the jargon from financial services and make all the changes and transformation the industry is going through, easy -to-understand.

As you probably know the Nordics are well known globally for being a highly innovative and highly digitized region where entrepreneurs take a passionate approach to disruption with a distinct twist for minimalism and impact.

It is therefore no surprise to see that Nordic entrepreneurs have been taking the market to task with solutions that leverage the exponential power of technology to absorb complexity and bring solutions to market, that are both simple and functional.

Today we are going to be looking at the three hottest trends that are picking momentum amongst the fintech communities in all five Nordic markets of Iceland, Norway, Denmark, Sweden and Finland, so let’s get into it.

In third place, the trend we are seeing across Nordic markets is:  fintech solutions for SMEs

Let’s go back to 2009, the year that marked the beginning of the current inflection point in financial services. 

Technologists, innovators and visionaries, disgruntled by the oversights that led to the credit crunch of 2008, started to envision new ways of doing things, and the emergence of a new breed of technology companies with financial expertise picked up momentum.

Following in the steps of early fintech pioneers like Paypal, these new companies went after the low hanging fruits of payments and foreign exchange which were two of the areas that were most ripe for disruption within financial services.

 As these players nibbled at the edges of these markets, they gained popularity with customers and started to see their revenues rise, as well as their ability to attract private investment.

Following a traditional “land and expand” strategy they ventured into other areas of the financial services industry like current accounts, loans and investments, but for many years the disruption was mostly restricted to the mass market. But, that is no longer the case. Fintech founders across the Nordics are now finally addressing the previously untapped and underserved market of Small and Medium Enterprises.

SME is a very broad term that can go from the freelance designer working from home, all the way to the architecture firm with a few hundred employees. As such the financial needs of this segment can vary significantly in volume, but not in substance. Most SMEs, regardless-of-size, have needs for Accounting, Payroll, Cost optimization, financial analysis and data security, but, at a much lower scale.

One of the biggest deterrents for servicing this market from a fintech perspective has always been that SMEs have typically been slower in the uptake of digitalization. 

However, across the Nordics we are now seeing the launch of solutions that help SMEs jumpstart their digitalization journeys through “Cloud” or “As a Service” models, making them affordable, easy and fast to implement.

In this space we are seeing companies building solutions for things like, invoicing, point of sale systems, self-service, cashflow management, payroll services, expense management, and loans & financing solutions that are using technology to make credit available to SMEs with little friction and high convenience. 

What is perhaps more interesting about these solutions is that they are not only helping SMEs address their fast-changing needs to operate in highly digitized environments, they are also helping banks develop a closer relationship with SME customers, which can lead to further business opportunities for cross-selling and upselling.  

The second trend that we have been observing over the past 12 months is that of embedded finance. 

The origin of embedded finance started with Open Banking which refers to the concept of making personal data, a shareable asset. The principle behind this is that as an individual you own your data, and you should therefore be able to decide who gets to access that data and for what purpose. 

Open banking initial proposition was simple, allow customers to determine who can access their data stored in a bank’s database. This idea further evolved to allow third parties to also access some Banks’s capabilities “as a service”. Think for example things like payments or KYC. 

The whole concept of openness was a significant departure from a culture of confidentiality, self-sufficiency and tight regulation that has always permeated financial services.  

Fast Forward to today and open banking has become a reality on which several companies are building new services, new business models and better and more convenient ways of serving customers. 

And this is when embedded finance comes in. We could think about embedded finance as the ability of a customer to access financial services whenever and wherever they are, both in physical and in virtual spaces.

Now this idea of being able to embed all manners of financial services in unlikely places like apps on your smartphone, cars and even electro domestic appliances has been a reality for several years. 

Most notably the trend has totally taken off in Asian markets where embedded finance has become a lifestyle.

Asian customers in markets like China, South Korea, Singapore, Malaysia and Indonesia access financial services like payments and loans on a daily basis; but not through their banks, in fact they do this through Super apps that concentrate all manner of activities from food delivery, mobility, ride sharing, investment, communication and entertainment into single interface mobile phone applications from companies like WeChat, Grab, Kakao Talk and Gojek.

Momentum for this trend across the Nordics is perhaps best evidenced by two significant transactions that took place recently across the region.

Earlier this summer, Visa acquired Swedish open banking company Tink for a staggering 1.8 billion Euros signaling the onset of a fierce battle for the open and embedded finance market. 

A couple of months later, MasterCard made its competitive move by acquiring Danish open banking company Aiia for an amount yet to be disclosed.

These two high profile transactions not only signal a strong investment ahead of the trend in western markets, but also a strong capability and vision brewing amongst Nordic players committed to the transformation of this space.

And Finally our top trend for Nordic fintech: Sustainability and Green finance

Sustainability is everywhere, with the worlds governments and corporations vowing to cut down carbon emissions and to promote sustainable business practices that will benefit not just stakeholders, but -all -shareholders- involved in the ecosystems that produce, distribute and consume products and services. 

The Nordics have traditionally held a strong belief that sustainability is simply good business practice. 

Being able to ensure the long-term repeatability of the process of production that helps companies bring their ideas to life is a primary Nordic principle that Nordic companies that want to build long lasting and profitable businesses adhere to.

This ethos lies at the core of many innovative solutions we see coming out of the Nordics, not just as the object of their business, but also as the purpose for why many Nordic Entrepreneurs go into business in the first place. 

What is very interesting about the Nordic development is that companies addressing sustainability challenges, are ahead of the curve, and they are already developing solutions that will help meet consumer demand for a better understanding of how their purchasing decisions, and investment habits impact the things Nordic consumers find important. 

So, there you have it, three trends that continue to reshape the evolution of financial services and that will no doubt leave their mark in the future of finance as the industry shift carries on. 

Chris Crespo
Chris Crespo
Chris is the Co-founder of Nordic Fintech Magazine and Fast Forward Banking; Financial Media companies that seeks to bust the jargon out of banking. As a behavioural economist he enjoys exploring questions that challenge conventional thinking. He is fascinated with innovation and technology and its intersection with financial services, society, and culture. Chris is also a guest lecturer at Stanford University and Singularity University where he teaches regularly on the Future of Financial Services, the Future of Money and the Disruption of our current Banking and Monetary Systems.

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