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PA OPINION

How Fintech will impact the Nordic financial services industry

The speed of change is much higher today compared to the earlier adaption within the industry - Thomas Krogh Jensen

Knut Erlend Vik from PA met with Thomas Krogh Jensen, CEO of Copenhagen FinTech to discuss the disruption to the financial services industry.

The Nordic financial services landscape is changing as a result of regulations, new technologies, emerging new business models, and ever changing customer expectations. CEOs of large Nordic banks went to the World Economic Forum in Davos, not only to discuss macroeconomics and world trade, but also to meet and discuss with technology providers how technology will affect them and to understand how the banks can stay relevant and competitive in the future.

PA: From your perspective, what will the financial services industry look like in the next five years?

Thomas: There are many potential future scenarios. So far, payments has been the driving force in developing new customer experiences, with Mobile Pay and Vipps as two obvious examples. Recent developments have focused on transactions and customer interactions. We now see that the whole value chain of the financial services is in play. There will still be banks, but we will see new ways of cooperation and partnerships across the whole ecosystem. We will move towards more open platforms and “banking as a service”.

PA: And how will Fintechs contribute to the development of the financial services industry going forward?

Thomas: That is clear; Fintech allows for innovation and experiments. We will see a myriad of new ideas and solutions seeking to become sustainable businesses. We will also see a shift from a focus on developing products and features to more holistic customer experiences and services. We will of course see new functionality offered on mobile platforms, such as investments services and crowd funding solutions.

PA: For some time, we have been told that Fintech will disrupt the financial services industry. However, IT has been important for the industry for decades, and banks and insurers have always been adopting new IT solutions. What is different with the Fintech we see today?

Thomas: The speed of change is much higher today compared to the earlier adaption within the industry. The access to technology is much more open, and investment requirement is much lower due to reduced cost of technology. Lower barriers across industries to adapt technology also gives tech and app developers access to a much larger markets. Thus, they are able to capitalize on the investments much faster.

PA: Will investments continue on a broad scope and scale, or are there any particular parts of the value chain you expect to be radically changed or disrupted?

Thomas: I expect to continue to see most development on the front end and customer side and I think we will see completely new user experiences. Solutions that will work across technologies and industries, and help banks to move into new businesses. Everything will be on mobile platforms – however, we have to take into consideration that there are still generational gaps. We have seen that Fintech so far has been focusing on banking, first on the payments value chain and now on the lending side. Going forward, I expect to see stronger focus on insurance and pensions and investment are coming next.

PA: What are the most interesting solutions and developments we have seen lately?

Thomas: There are several examples and it’s difficult to select just a few, but Hive Online is an interesting example. It’s targeted towards SMEs and is basically a trust platform utilizing the blockchain technology, where handling of the administrative tasks and compliance could be automated, integrating all aspects such as accounting, VAT, tax and other compliance requirements related to the “order to cash processes”. It will make the every-day administrative life for leaders and owners of SMEs much better and seeks to solve core questions such as “can I trust my counterpart?”, and “will I get my cash when it is due?”

PA: Start-ups, accelerators and incubators. We have seen a lot of them growing over the last years. What will the more permanent state of the start-up camps and incubators be, when the buzz is gone?

Thomas: We are moving into a more mature state – where investors and businesses are more conscious about how to use technology and will be more specific on what they really want to achieve. Various models are available going forwards; we will see banks that could source innovation from accelerators and incubators, but also keep capability within the banks, particularly within the core. But all of this will be based on - and rooted in - a clear business objective and strategy.

PA: All banks and financial services companies today discuss and explore opportunities and threats related to open banking, banking as a platform and related regulations such as PSD2 etc. Will banks still be banks in the future?

Thomas: Yes, the banks are going to remain, but the ecosystem will be different. The whole value chain will be changed. This will be the start of a wave and current limitations within PSD2 will be solved over time. However, some Fintech companies maybe overestimating the impact. They also need to understand that the banks can take on various roles under the PSD2 regime and utilize the information between them. As a Fintech hub, we want the regulatory side to adapt to the situation and allow for a “regulatory sandbox” as we have seen in the UK where ideas can be tested. The industry also needs to see the benefit of sharing and to want to share information.

PA: How will the Nordic Fintechs be able stay competitive in a truly global market– and as such continue to support the Nordic financial services with world class solutions?

Thomas: I’m sure Nordic Fintechs have a strong future. We are already quite digitized in the Nordics and our customers are digitally savvy. We have a very strong infrastructure, a strong pool of well-educated and talented people and it’s easy to do business here. This makes the Nordics a very good test bed and launch base for global solutions. And one more thing; we are collaborating across the Nordics – that is unique and gives us an advantage we both need and will exploit going forward. Copenhagen Fintech is an innovative growth organisation based on the vision of creating a Danish growth adventure within fintech. We want to create a Danish Fintech ecosystem of the highest Nordic standard. To accomplish this, a central initiative is that the association has established and runs a co-working space called Copenhagen FinTech Lab. Additionally, Copenhagen FinTech runs the innovation network for the finance IT sector.

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