Copenhagen fintech hub at a crossroads

Left to right: Mark Gervasini Nielsen (Danske Bank), Ken Villum (Lunar Way), Nicholas Meilstrup (CrediWire), Kent Petersen (Financial Services Union), Tanja Lind Melskens (Kammeradvokaten), Michael Busk-Jepsen (Finance Denmark), Christian Visti Larsen (NewBanking), Thomas Brenøe (Financial Services Authority), Simon Schou (Copenhagen Fintech), Anna Mee Allerslev (City of Copenhagen), Fritz Henglein (University of Copenhagen), Jan Sirich (Nordea), Mikael Nilsson (November First), Bent Dalager (KPMG), Susanne Brønnum (Nets), Louise Ferslev & daughter Elna (MyMonii), Thomas Krogh Jensen (Copenhagen Fintech). Fold sammen
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Kære læser. Artiklen her er en del af det engelske magasin Copenhagen Fintech. Indholdet er udformet på engelsk, da det også henvender sig til en udenlandsk læserskare, som deltager på eventen Money2020, hvor Berlingske Media er mediapartner. Magasinet er udformet af Berlingske Medias kommercielle redaktion i samarbejde med Copenhagen Fintech. God læselyst.

This article is part of the commercial publication 'Copenhagen Fintech'. Click here to view all articles

Representatives from the Copenhagen fintech community got together to discuss the future of the Danish fintech hub and how to keep the impressive momentum built up over the last couple of years. The conclusion: collaboration is key to moving forward.

Only a few years ago, the Danish fintech sector was close to nonexistent. Today, a thriving community around financial technology innovation is flourishing in the centre of Copenhagen with Copenhagen Fintech Lab, a busy office space, as its heart.

The people involved do not rest on their laurels, however. In order to position Copenhagen as a strong international fintech hub, key representatives from the community got together at the Fintech Lab to take stock of the situation and address some of the challenges ahead.

“We are at a crossroads,” said Anna Mee Allerslev (R), Mayor of Employment and Integration in Copenhagen, at the meeting in April and continued:

“In a short period of time we have become a huge success in both Denmark and internationally. Now the time has come for us to decide whether we want to act together and be a part of the big fintech league.”

Strong Danish fintech community
The meeting included representatives of startups, large banks and other financial institutions, as well as the University of Copenhagen, The Financial Supervisory Authority (FSA), Poul Schmith Law Firm, KPMG, Finance Denmark, Copenhagen Fintech and the Financial Services Union. Despite the diverse background of the attendees, there was a general consensus that a lot of progress has been made in building a well-functioning fintech community.

“The attitude of startups has changed from ‘banks must die’ to something more like ‘let’s work together’,” said Jan Sirich, leader of Group Digital at Nordea, which − like other Danish banks − is establishing partnerships with fintech startups and participating in accelerator programs, in order to boost financial innovation.

While applauding these initiatives, the Financial Services Union also urges the companies to think further ahead:

“We need to strengthen collaboration both across these corporate fintech hubs and in general. Otherwise, we risk getting into a situation with unproductive competition” explained the union’s chairman, Kent Petersen.

Anna Mee Allerslev (R), Mayor of Employment and Integration, City of Copenhagen

»In a short period of time we have become a huge success in both Denmark and internationally. Now the time has come for us to decide whether we want to act together and be a part of the big fintech league.«

Capital still needed
Capital remains one of the key components of a fintech hub, so startups can grow. According to both Copenhagen Municipality and the Financial Services Union, Danish fintech startups still need better access to risk capital.

“Nine out of ten startups we meet say there’s a lack of risk capital,” said Mayor Allerslev, whose viewpoint is supported by a recent study by the Danish Entrepreneurship Association, which showed particular difficulties for entrepreneurs of getting financing through bank loans.

The mayor’s opinion was contrasted by Nordea and several of the startups at the meeting, including Lunar Way and NewBanking.

“We’ve never had so much capital as today. It’s not an issue,” said Ken Villum Klausen, founder and CEO of banking startup Lunar Way. Jan Sirich from Nordea was quick to agree: “As long as you’re competent enough, capital isn’t a problem.”

When looking at the investments in Danish fintech startups, the numbers paint a picture of angel and venture capital growing in importance. Last year, fintech became the most popular of all startup sectors among investors, attracting 19 investments, according to The Nordic Web (see p. 18-20). With that said, the average funding round of about 6 million kroner still indicates that investments typically happen at the earlier stages of startup growth.

In other words, Danish fintech startups are still short of larger, late-stage investments. This is also reflected in the general view presented at the meeting, namely, that many companies choose to go public in Sweden, where capital is more abundant, instead of Denmark.

Is Denmark perhaps lacking a growth mentality? Louise Ferslev, founder and CEO of fintech startup MyMonii thinks so:

“There are very few people in Denmark who have the desire and ambition to make a big company. I don’t know how to change that mindset, but I believe we have to try.”

Christian Visti Larsen, cofounder and CEO of blockchain startup NewBanking

»We are struggling to find qualified employees − we interviewed 20 candidates for a position and none of them qualified.«

Startups & established players have to work together
One of the steps towards growth, which several participants highlighted, is corporate partnerships with startups. But while this phenomenon is receiving a lot of attention at the moment, it may still be too early to call it a trend.

“We are still in the early days of establishing corporate partnerships with startups. We have to build more of them and share our experiences of how they work,” said Michael Busk-Jepsen, Director of Digitization at Finance Denmark.

This statement received comments from both sides of the table. “Danish fintech startups need to work on being more customer oriented. A lot of those I have met just try to push new products instead of putting them in a context of how they’re improving life for the customer,” said Mark Gervasini Nielsen, Head of Concept Development and Digital Hub at Danske Bank.

On the other hand, it can be a challenge for startups to share confidential information with larger companies, according to Mikael Nilsson, founder and CEO of money transfer startup November First.

When he founded his company, he reached out to banks in hopes of establishing a partnership. It took several years of fruitless efforts to get their attention before finally negotiating a deal with a big bank. Now, that the product is out on the market, the tides have turned.

“All of a sudden, Nets and the other banks are willing to collaborate,” Nilsson said with a hint of irony in his voice before concluding his reflection upon the initial phase of his startup:

“It’s hard to find a way of collaborating at an early stage without exposing yourself too much.”

Wanted: Technical talent
Both startups and larger companies agree that there is a dire lack of technical talent in Copenhagen, especially when it comes to programmers and financial experts.

“We are struggling to find qualified employees − we interviewed 20 candidates for a position and none of them qualified,” said Christian Visti Larsen, cofounder and CEO of blockchain startup NewBanking.

In order to get the people the industry needs, education often comes up as the answer. At the moment, however, there is no specific education in the cross-section between finance and technology. Therefore, the universities need to get together to create such an education, recommended Petersen from the Financial Services Union. It is not that simple, though, according to Fritz Henglein, computer science professor at the University of Copenhagen. To get more talent is not just a question of education: it requires top tier researchers to teach the next generation of technical students.

“Researchers could and should attract talent, but the problem is that research within fintech gets practically no financing,” Henglein said at the meeting.

Regulation separates the sheep from the goats
Several Danish fintech startups have mentioned regulation as a substantial barrier for growth. The Financial Supervisory Authority acknowledged at the meeting that it had been slow and difficult to work with in the past. That, however, has changed, said Thomas Brenøe, Deputy Director General at the FSA − whose message was recognised by many of the participants of the meeting.

The FSA has recently got extra funding from the government to support fintech startup growth. According to Brenøe it will cover the expenses of regulatory guidance, creating a sandbox for quicker financial licenses, and efforts to raise awareness about technology within the financial sector.

“It will be easier for startups to get advice about regulation in the future,” he said.

Regulation, however, is important to maintain high standards within the coming wave of fintech services − an aspect far too often overlooked by entrepreneurs, warned Tanja Lind Melskens, attorney from Poul Schmith Law Firm, legal advisor to the Danish Government.

“It’s not easy to make a fintech company because you need to follow certain very strict procedures and meet capital requirements and so on. In my experience, a lot of fintech startups don’t take abiding by the regulation seriously enough,” she said.

New Nordic fintech?
Although recently ranked no. 16 on the global fintech hub index by Deloitte, Copenhagen still has a long way to go to stand anywhere near London − or even Stockholm, for that matter.

That is why the conclusion of the meeting was not only a call to action for more collaboration within Denmark but also with the rest of the Nordic countries. Larger companies, such as Nets, do business in those markets as well. If Denmark sees itself as part of the Nordics rather than an independent market, investors might just take it more seriously, said Klausen from
Lunar Way.

“We have to think bigger and start partnerships with other Nordic countries. It gives us so much more power if we focus on cooperation and not competition,” Sirich from Nordea concluded.


This article is part of the commercial publication 'Copenhagen Fintech'. Click here to view all articles