The Fintech World Series: Denmark

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Fintech is exploding.
It is a global industry, striving to change the future of finance.
…And the future is now. At Kurtosys, we’ve set out to cover exactly what’s happening in the financial industry the world over, one country at a time. With so many places contributing to the advancement of our digital world, each deserves their own time in the spotlight.
Starting off our look at the Nordics, here’s an exploration into fintech in Denmark. Although a small Scandinavian country, Denmark is certainly gaining serious momentum, setting up the region’s first co-working space and being its forerunner in the development of blockchain technology.

Mmm, cozy ol’ Denmark. The Danish were the originators of that cuddly state-of-being ‘hygge’ which us Brits claim to understand by buying too many candles and oversized blankets. It’s true, we haven’t adopted hygge (or the much-loved characteristically Scandinavian jumpers of Sarah Lund from noir-TV series Forbrydelsen) quite as well as we have Danish bacon (which started being imported in 1867), and the ever-amazing building tool Lego. It’s still very much the crowning glory of the toy world, having annoyingly released their Lord of the Rings series after I was too old to get it. Wait, who am I kidding? I’m definitely not too old for that. And as well as childish delights such as Lego and the beloved fairy tales of Hans Christian Andersen, the country was also home to more complex notions courtesy of ‘Father of Existentialism’ Søren Kierkegaard. We won’t get too bogged down with finding out what is indeed “this quintessence of dust” (Hamlet: Act II, Scene II – yes, that is a slightly crow-barred reference because of the Danish theme); instead, let’s delve into Denmark’s big-time Viking invasion of the fintech space.
Denmark fintech infographicAccording to Statista, Denmark’s transaction value in fintech amounts to US$11,487 million (2017). Between now and 2021, it is expected to show an annual growth rate of 16.1%, resulting in the sum of around US$20,835 million by that year, with potential users of Danish fintech being 5.4 million people. Currently, the country’s largest sector within fintech is ‘digital payments’, with that alone having a total transaction value of US$11,269 million – a very impressive figure.
It’s therefore no surprise to learn that digital payments are accepted everywhere, and in particular the country’s capital of Copenhagen (København) is looking to become the Nordic region’s go-to fintech hub, with initial speculation provided in this report from Rainmaking Innovation and Oxford Research.

København: “the world’s most liveable city”

Monocle magazine has voted the City of Spires “the world’s most liveable city”, and the World Bank have also dubbed it “the easiest place for business in Europe”. If that isn’t the most worthy of praise for a city, then I don’t know what is. It also houses leading Danish and International companies including SimCorp, IBM, Microsoft and Nets, and focuses on fintech niches such as user-friendliness, process optimisation and IT security, alongside established startups that deal with familiar fintech faces: asset management, digital credit rating, Bitcoin compliance, blockchain technology and payment solutions. Furthermore, in the Nordic region, Denmark leads the way in the development of blockchain, as epitomised by companies such as Chainalysis, Blocktech, Brainbot and WeMoveCoins.
Fintech Copenhagen Magazine outlines that the whole Danish fintech industry employs around 15,000 people, with that figure expected to rise by 36% in the next 5 years (that’s 19,410 workers by 2020). 60% of all fintech companies are confined to the Capital Region, with approximately 40% specifically in the City of Copenhagen. The city has a relatively low cost of living compared to other leading fintech cities, and ranks 5th in the European Digital City Index, perhaps due to the fact that more than 88% of the population aged between 16 and 74 are in contact with the public sector using the Internet. The Greater Copenhagen area also offers the most flexible hiring and firing legislation in Europe, and boasts the best business climate in Scandinavia, housing 12,000 researchers, 15 science parks and 14 universities and colleges. On top of this, it is one of Europe’s largest ICT clusters, employing around 100,000 IT workers across more than 12,000 companies. As Copenhagen Capacity reports, an innovative big data platform is being built by Hitachi to order for Copenhagen to become a ‘smart city’ and a world first, integrating private and public data from various sectors into a single solution. What’s more, Denmark was given a Global Creativity Index score of 0.917, which ranks it in first place. It certainly has a lot going for it.
Are there any down sides? Unfortunately, yes, as despite Denmark’s strategic location (linked with continental Europe, Scandinavia and the Baltic region to reach 100 million possible consumers), its biggest obstacle is to try and leave the shadow of leading European fintech cities, especially London, Stockholm and Amsterdam, which are currently the most revered fintech powerhouses. But luckily, it’s certainly aiming to climb the ladder through the cooperation of many different sectors. Denmark is already known for its close partnership between public authorities and businesses, which is good news for new fintech services that can be connected with larger, international financial services companies easily. The collection and usage of data is shared between public and private sectors and used for innovation and development in both.

What’s Going On?

Here’s an extensive list outlining the development of Denmark’s situation in regards to financial technology and the goals of organisations dedicated to furthering the potential of the fintech sector in the country:

  • Finance and IT makes up 5% of total Danish employment, and makes up 13% of private employment in Copenhagen.
  • Denmark’s company tax rate is 22%, below the average OECD and European level.
  • In Kromann Reumert’s report Fintech – The New Black or Genuinely a Game Changer, the country’s changing consumer behaviour is outlined. It took 8 years for 1 million Danes to start using internet banking, but only 18 months and 6 months for a million Danes to take to mobile banking and the app MobilePay respectively.
  • In 2015, 1.2 billion payments were made using the Dankort (the national debit and credit card).
  • Nordic payments services Nets, which connects banks, businesses, the public sector and consumers, reported that 6.5 billion transaction are made each year.
  • Nets is also part of a communal fintech hub joining together many other organisations to host and sponsor fintech events: the Danish Banker’s Association (Finansrådet), the Financial Services Union Denmark (Finansforbundet), the Danish Association of Lawyers and Economists (DJØF), Saxo Bank, BEC, Tryg, the Copenhagen Municipality and the CFIR, who we’ll cover in more detail later.
  • The Finansforbundet set up Copenhagen Fintech Hub in September 2015, with support from the Finansrådet.
  • Money 20/20, the world’s largest payment services conference, held its first European conference in Copenhagen in April 2016, showing the city’s recognised efforts to become the Nordic fintech hub.
  • The Danish Financial Supervisory Authority is called the Finanstilsynet, which is trying to facilitate application processes and the implementation of a new Payment Services Directive.
  • The NemID is already the official digital signature for public digital services. It is used by approximately 4.4 million citizens and 1.1 million companies, accumulating to more than 50 million transactions every month.
  • The NemID contract expires at the end of 2017 – the Danish Agency of Digitisation (Digitaliseringsstyrelsen) is working on the next national infrastructure for e-identity and public digital signature.
  • Growth potential in digitisation is of high priority for the Danish government, with its Growth Fund extending its direct investments. There is, however, no plan to introduce the British model of the famed ‘sandbox’ principle to curb regulation for fintechs, despite the recommendations of industry experts to the Danish FSA.
  • The government is also keen to improve cybersecurity, implementing a National Cyber and Information Security Strategy and aiming to make the systematic application of ISO27001 the standard whilst “reinforcing ministries’ ICT security oversight”. Many public ICT services has been outsourced from external suppliers.
  • There is a vision for Denmark to become a completely cashless society by 2030, as reported by Deloitte.
  • On January 13th 2018, the introduction of EU legislation PSD2 looks to increase competition and foster innovation in payments.


The Big Initiatives

Whilst Denmark is not a traditional financial centre such as Switzerland or Luxembourg, in 2014 Denmark’s pension scheme was ranked the world’s best for the third consecutive year by the Melbourne Mercer Global Pension Index, and the Danish share of capital under management in Europe increased from 1% in 2003 to 1.9% in 2013. It was also the first country in the world to digitise stocks, bonds and registration.
What is clear therefore is that it has a specialised fintech cluster. To further develop research and education in fintech, Copenhagen Fintech is a non-profit organisation initiated by the Finansrådet. Its Copenhagen Fintech Hub is an innovation lab set up in the offices of the Finansforbundet to offer space for Danish startups and was the first of its kind in the Nordic region.
Copenhagen Fintech has itself initiated the Innovation Network for Finance IT, supported by the Danish Agency for Science, Technology and Innovation. It aims to bring together universities, GTS institutes and research-based organisations to collaborate and create projects, events and conferences for the fintech ecosystem.
Between 2009 and 2013, Copenhagen Fintech ran a 4-year project called “The Future of Money”, centring on the envisioned cashless society. As a result, the Copenhagen Business School has built the largest research environment for payments in Northern Europe and set up an International Cashless Society Roundtable.
Similarly, an alliance with the Danish Defence Intelligence Service, IBM and the Technical University of Denmark has led to the introduction of a cybersecurity specialisation as part of the university’s master’s programme. Copenhagen Fintech has also worked in conjunction with the University of Copenhagen to develop a computer system for financial markets at research centre HIPERFIT. It’s other notable partners are Danske Bank, Nordea, Nykredit and SimCorp, as well as international research partners and the Chinese Academy of Sciences, Oxford, and UCLA.
Danish banks are also instrumental in the development of fintech. As reported by Banking Technology, the Danish banking collective Bokis was the first to offer mobile payments using the Dankort. It comprises of 62 small to mid-sized banks, a segment of Lokale Pengeinstitutter (the Association of Local Banks, Savings Banks and Co-operative Banks in Denmark) and four regional banks: Sydbank, Spar Nord Bank, Arbeidernes Landsbank and Nykredit Bank. In February 2017, Bokis’ NFC wallet solution (a digital wallet for Android) was launched, closely followed by a version for iOS, using technology provided by Nets. It can be used in Denmark’s largest retailer, Dansk Supermarked.

Fintech Investment

The Nordics are 2nd in European fintech investment, lagging behind the UK. Over $390 million has been invested in the last two years. In the last five years, around 50 Danish startups have been founded. In total, there are 368 companies in the fintech space, broken down into these sectors:
Payments & Transfers – 35%
Equity & Lending – 28%
Cybersecurity & Other Services – 21%
Personal Finance – 20%
Financial Research & Data – 18%
Retail Banking & Investment Services – 10%
Institutional Investment Services – 10%
Cryptocurrencies – 3%
In 2015, 12 deals were made with a total value of €12.2 million, compared to €5.9 million the year before. Nearly 90% of funding went to only 5 companies. The average investment of ‘Series-A deals’ (75%) is €1.2 million. Nordic bank Nordea has established its own venture arms in the region.
Nearly half of Danish fintech is led by international investors:
Scentan Ventures / Singapore: €5.5 million
Zenith Ventures / Sweden: €2 million
Nova Founders Capital / Hong Kong: €2.1 million
Native VCs however include SEED Capital and Innovationsfonden. Between the two, they have closed five deals and publicly invested almost €2 million in fintech startups, as reported here.
Vækstfonden is a growth fund offering startup loans and capital funds. It has financed more than 6,600 companies. The aforementioned Copenhagen Fintech’s innovation lab is the first co-working space in Scandinavia.
Here’s a list of successful Danish startups:
Capdesk – The world’s first shareholding tool for investors and companies, founded in 2015 by Christian Gabriel and Casper Arbøll with its HQ in Copenhagen.
Clearhaus – Founded in 2011 by Claus Methmann Christensen with its HQ in Aarhus, Clearhaus provides card payment solutions to online merchants, and is authorised by the Danish Financial Supervisory Authority.
Coinify – Coinify accepts payments in 16 digital currencies, offering its blockchain payments services to over 100,000 online business. This article explains how the company has partnered with payments company Nets to make a blockchain lab.
Hufsy – A banking service for startups and entrepreneurs, offering a financial overview tracker and invoicing tools, as well as cross-border banking using blockchain technology. It was founded in 2015 in Copenhagen by Rafal Lipinski (CEO) and Maria Flyvbjerg Bo.
Lunar Way – Digital banking, with a focus on mobile technology for millennials. Founded in 2015 by Ken Villum Klausen in Aarhus, “the city of smiles”. You’ll also see that they have a pretty nifty-looking website.
MobilePay – Started by Danske Bank, with its app released in 2013, and now Nordea and Jyske Bank are distribution partners. 3.4m Danes use this mobile payment solution.
NewBanking (‘Emerging Star’ in KPMG’s Fintech 100 2016) – Centralising KYC and AML compliance, with access to 3.8 billion payments cards wordwide. It is the first in the world to provide KYC and AML verified money, founded 2016 with its HQ in Lyngby, Hovedstaden.
Tradeshift – A B2B platform that uses cloud-based technology to improve invoicing workflow and supplier financing for companies. It is used by 800,000 companies, founded in 2009 by Gert Sylvest (CTO), Christian Lanng (CEO) and Mikkel Hippe Bru.
So, looking back at all of this, Denmark (and the Greater Area of Copenhagen in particular) has plenty to offer, with multiple organisations pulling together to make the country’s technological capability flourish within the financial services industry. Hoping to become Europe’s number one in fintech, it is very much possible that that accolade could be added to Denmark’s already prolific trophy cabinet.
If you have any thoughts about fintech in Denmark, let us know in the comments below, or you can tweet us.
Check back soon for more instalments of The Fintech World Series!

Elliot Burr

Elliot Burr

Fervently chatting about the future of funds and fintech.