Frankfurt. London. Stockholm attract financial institutions like magnets. If Copenhagen leverages its competitive advantages, it could also attain a similar status. A new public-private partnership is working hard to turn that potential into reality.
Last September, the most prominent figures of the Danish financial ecosystem gathered in London to meet with the representatives of some British financial institutions. Fintech organisations, asset managers, pension funds, and even the Danish Minister of Industry, Business and Financial affairs came together to promote the future of international finance in Denmark.
Gathering all these people in the same room was no small feat, but Christian Frigast, executive chairman of equity fund Axcel and the main organiser of the event feels that it was worth his time.The meeting was the culmination of an idea he had conceived of the year before: making Copenhagen the next financial hub.
That was why Frigast and Axcelfuture took the initiative in 2016 to set up a new public-private partnership called “Copenhagen Financial Hub”. The goal of the endeavour is no less than to create a financial ecosystem in Copenhagen that is able to attract international financial companies. Allan Polack, CEO of PFA, leads the consortium of public and private players and was a driving force behind establishing the project.
“Denmark already has a number of core strengths in the financial area that gives us a number of competitive advantages: We have very large pension funds, Copenhagen is the asset management capital of the Nordics, and our fintech ecosystem has achieved international recognition over the last couple of years,” says Frigast.
Unfortunately, most international companies remain unaware of these facts when they choose new locations for their companies. Instead, they play it safe and head to London, Frankfurt, Dublin, or Stockholm. That is exactly why the financial stakeholders gathered in London: to start bridging the gap between potential and reality.
The world’s largest pension sector and a booming fintech sector
ATP. PFA. Nordea Asset Management. Danske Bank Asset Management. The asset management industry in Copenhagen has a large number of significant players and employs more than 2,000 professional portfolio managers—a much larger share of the labour force than the OECD average. Denmark has the world’s largest pension sector in the world relative to its GDP.
Denmark’s claim to fame is not only on the basis of relativity: the country is home to no fewer than ten of Europe’s top 100 pension funds. Source: IPE and CABA.
Hans-Ole Jochumsen, who has served as CEO for NASDAQ OMX Nordic, president for NASDAQ in New York and Vice Chairman for NASDAQ Europe, is now the chairman of the Copenhagen Financial Hub project. He is convinced that the strong pension sector presents a lot of opportunities for asset managers, investment banks, fintechs and other financial companies located in Denmark.
“What our large pension sector indicates is that there is significant capital in Denmark that needs to be invested in order to generate returns for future pensioners. Danish pension funds are highly sophisticated investors and that makes them promising customers for asset managers and investment banks,” Jochumsen says and continues:
“Pension funds as well as banks and insurance companies represent potential partnerships that can help fintech and other startups develop and scale their services. At the same time, the established part of the financial sector is dependent on the innovation that is flowing from the small and more agile companies. Access to these partnerships is an important selling point for the Danish fintech scene.”
A map of the Danish fintech community, which consists of more than 100 startups that range from insurtech to digital banking. Reference: Copenhagen Fintech
Fintech ecosystem initiatives such as Copenhagen Fintech have boosted innovation tremendously over the last couple of years. A number of scale-ups have grown out of that effort, attracting international acclaim.
Foreign companies are unaware of the Danes’ strengths
The World Economic Forum has deemed the Danes some of the best users of IT when it comes to boosting competitiveness and well-being. MobilePay came close to turning Denmark into a cashless society in four short years. In addition, the country has been crowned as Europe’s most advanced digital economy by the European Commission.
The Danish flexicurity labour market allows companies to hire and fire with more flexibility and, at the same time, provides employees with a safety net to soften their landing. That same workforce is also the source of a vast talent pool: one in four young Danes pursue higher education.
To top it all, both Forbes and the World Bank named Denmark as the best place to do business in Europe in 2016. Why is it then that, despite all these achievements and benefits, Copenhagen is often overlooked when larger financial companies search for a new location for their operations? Anders Klinkby, project manager for Copenhagen Financial Hub, thinks the answer is a lack of awareness.
“When we speak to international financial companies and tell them about what Denmark and Copenhagen have to offer, their reaction is a mix of surprise and appreciation. The problem is that they simply don’t think of Copenhagen because they know very little about it,” he says.
The ecosystem is greater than the sum of its parts
Up until a few years ago, cooperation between traditional financial institutions and fintechs was practically unimaginable, and the fear that the role of fintechs was to put established financial companies out of business was acute.
“Fintech startups, banks, insurance companies and pension funds depend on each other because they are part of the same ecosystem. When financial companies pursue innovation, they source some of it from fintechs. Fintech startups, on the other hand, provide innovation and competition that is needed for the industry to evolve,” explains Klinkby.
The Copenhagen Financial Hub project is currently working on a benchmark analysis with Deloitte. The report will survey what kind of factors financial institutions and fintechs consider when they relocate.
“We will use the report to qualify and brand Denmark’s benefits as a financial hub. We are new contenders in the competition to attract financial companies, but we have a value proposition that is well-received—especially among fintechs, corporate banks and asset managers. We want to use that to our advantage as much as possible,” concludes Klinkby.