The future of fintech is centred around making life simpler for consumers and businesses. The ubiquitous accessibility of smart devices and technology is transforming the financial industry and because of fast-paced development, present and future clients will expect more from an industry that has struggled to become truly customer-centric.
Customers demand new, innovative products and many startups have jumped on this opportunity. Competition forces the Danish incumbents to change their approach and to try to keep up with new innovations.The future holds great challenges for the Danish incumbent financial institutions as they get pressured from customers and startups alike.
“Many companies have realised that their competitiveness is being threatened. They consider their options and recognise the need to create innovative solutions and business models. This is the case in finance and many other industries,” says Michael Busk-Jepsen, director of digitalisation at Finans Danmark.
Since last year, the influence of the fintech sector has expanded to cover areas such as insurance, regulatory affairs, logistics, distribution, and retail. Development strategies need to become as innovative as the technology solutions they are trying to promote.
Investing heavily in technology
Meanwhile, established financial players, such as Danske Bank and Nordea, are revising their agenda and looking to create new joint ventures with startups.
“What we see now is that companies partner up. The Danish financial sector has always been good at adopting new technology. This is probably one reason why their leaders are willing to form new collaborations, and I think we will see more of this in the future,” says Anja Skadkær Grue, consultant at Confederation of Danish Industry.
According to Statistics Denmark, the financial industry invested around 250,000 Danish kroner in IT expenses per employee, and more than 23 billion Danish kroner in total in 2016.
The incumbents recognise their inability to foster the necessary innovation internally. Therefore, they open up towards fintech companies and initiate or accept collaboration with them. New partnerships between Danske Bank and Spiir, Saxobank and Grandhood, Nykredit and Lunarway, and Nordea and Tink demonstrate that more and more banks realise the importance of working together.
Fostering the future
Another tendency shaping the financial sector is open banking. The term refers to a system through which companies make their IT solutions available for others to be integrated into their infrastructure. This trend stems from the realisation that companies need to collaborate to stay in the game—something Busk-Jepsen believes has a strong historical background in Denmark.
“It is interesting because it builds upon a Danish tradition of doing things together. Cooperating despite being competitors is part of our social DNA, so to speak. We have a long history of developing solutions across the sector, exemplified by Dankort, Betalingsservice and NemID,” the director says.
While some partnerships exist between incumbents and fintech startups which have established themselves, another type of partnership is taking root as well.
“Another form of collaboration takes place at the earlier stages of launching a new company, where established players help budding startups develop. This can happen through an ecosystem such as Copenhagen Fintech, which runs the Copenhagen Fintech Lab, or through incubation processes such as the one managed by Nordea,” explains Busk-Jepsen.
Copenhagen Fintech is living proof that collaborative efforts between the Danish fintech industry and the incumbents with sponsors such as Danske Bank and Nordea and partners like Spar Nord and Sparekassen Sjælland can work effectively.
“Today, we have a blossoming ecosystem with roughly 70 startups at Copenhagen Fintech Lab alone. Additionally, there are several companies that have outgrown the Lab and moved into new spaces: we see fintech startups reaching into sectors far beyond finance,” says Skadkær Grue.
In the end, it all boils down to the goal of creating greater innovation within companies new and old, so they can offer the best possible solutions for their customers.
“The Danish fintech ecosystem should be an inspiration to participants of other sectors, because they could also benefit from the same type of collaboration regardless of whether they are startups or long-established institutions,” concludes Skadkær Grue.