Financial technology, or fintech, start-ups are looking to change and renew traditional financial service and financing operating models, and they have done astonishingly well so far. The main strengths of fintech companies are that they are open, digital, transparent and efficient. They often focus on a more narrow area of business than traditional banks and operate entirely digitally, which makes them agile and efficient.

What are the major Nordic fintech trends right now, and how does Finland measure up? We also asked our colleagues in Vinge and Gernandt & Danielsson from Sweden, Kromann Reumert in Denmark and Simonsen Vogt Wiig in Norway to provide their view on how their local fintech scenes are developing.

The Battle for Nordic Fintech Dominance Is On

According to a review by Deloitte, Sweden is leading the race for mastery of the Nordic fintech market, with Finland in second place measured by invested euros (Denmark is ahead of us at the moment in the number of investments). Like Finland, Denmark and Norway are not giving up the contest without a fight.

A variety of organisations and even state authorities in every Nordic country are investing in seeking out and making use of the opportunities provided by fintech. The Finnish Ministry of Finance has established an expert group to monitor and promote the development of finance technology, and the Financial Supervisory Authority has also established an Innovation HelpDesk to speed up the development of Finnish financial innovations. All the Nordic countries have also seen the formation of various fintech associations, such as Finland’s Fintech Finland network, Sweden’s Swedish Financial Technology Association and Denmark’s Copenhagen Fintech.

Growth Opportunities for Traditional Banks, Too

The PSD2 EU directive that enters into force at the start of 2018 will force banks to allow third-party service providers access to the accounts and payments of the banks’ customers. Worst case scenarios have been painted in bold letters in brick and mortar banks, but threats have been slowly transforming into opportunities.

One interesting example is Accenture Strategy’s estimate that Nordic banks could increase their turnover by up to 5 billion euros by 2020 if they could leverage their cooperation with fintech companies. All of Finland’s large banks are running various programs and digital incubators to get in on the opportunities provided by new technology. Who will customers choose when the user experience and price level of banks and fintech begin to meet?

According to the Finnish Financial Supervisory Authority, domestic investment service companies and investment fund companies are mainly trying to get by on their own, even though automated investment advisory and big data will have a major impact on these sectors. Fortunately, Finnish banks have woken up to Nordic competition and have taken some major steps in payment services.

One example is the real-time mobile transfer service Siirto, which enables customers of different banks to make real-time money transfers ‘from cell phone to cell phone’. In Sweden, the Swish app is developing consumer habits towards a future without cash: in Sweden, as many as four out of five transactions are made using cards or mobile applications, and even children have adopted card payments. Vipps, which is owned by Norway’s largest commercial bank, and Danske Bank’s MobilePay are holding their positions as the most used mobile apps in their respective countries.

According to the bank relevance index published by EY, Finnish consumers are more loyal to traditional banks and the financial services offered by them than their neighbours. The index shows that Finns do not lightly change service provider or seek out alternative providers. This may also be a factor cooling the eagerness of Finnish banks to act as fintech pioneers.

Focus Still on Financing Rounds, Not Large Transactions

With the exception of a few shooting stars, fintech mergers and acquisitions in the Nordic countries have remained small, and the focus is clearly still on financing rounds for fintech start-ups. However, now that traditional players have become active, financing has become easier to acquire and the numbers are rising. Swedish fintech giant Klarna raised 35 million dollars of debt capital in June of 2016. Of Swedish banks, Swedbank and SEB have been particularly active shoppers. SEB was one of the largest investors in private financing service company Tink’s 85 million krona investment round, to name just one example.

Our colleagues in other Nordic firms all agree that the clear trend is toward traditional players increasing their cooperation with or buying up start-ups rather than competing with them.