Last year, Fintech was designated as one of Denmark’s strengths when Minister for Industry, Business and Financial Affairs Simon Kollerup launched the Business Development strategy in Denmark 2020-2023.
This position of strength stems from the fact that Danish companies and knowledge environments are among the best in their field, and that the economic activity has national significance and is competitive internationally.
In addition, Industriens Fond has just announced that they are supporting a new ambitious project that will help Danish SMEs increase productivity and competitiveness through the use of financial technology.
So there is still a significant focus on fintech in Denmark - but what trends are we actually seeing in 2021? The major trends that have emerged in recent years remain very current.
This includes, for example, partnerships between fintech startups and large established players in the financial sector. We also continue to see many initiatives in payments, which saw growth after PSD2 (Payment Service Directive 2) was put into full effect in the autumn of 2019.
However, some of the new trends emerging in 2021 relate in particular to the strong focus on anti-money laundering and increasing financial sector regulation. In addition, we are constantly seeing new opportunities based on the development of ever-improving technology.
It is no secret that the banks have been in the eye of a storm lately, with cases ranging from VAT fraud over money laundering to terrorist financing.
This has resulted in a significant tightening of anti-money laundering legislation, with the EU's AMLD6 (Anti-Money Laundering Directive 6) becoming a reality last year. The new directive tightens the requirements for what the financial institutions must do in connection with, for example, know your customer processes.
In the slipstream of that, we are seeing an increasing focus on regulatory technology, and fintech startups that concentrate on helping companies to live up to the increasing demands for regulation.
Focus on fintech for small and medium-sized businesses
Fintechs are becoming increasingly important in the development of small and medium-sized businesses. Fintech can help simplify the work of small and medium-sized companies across everything from pensions, bookkeeping, compliance and more.
It is increasingly evident that fintech startups are securing large numbers of customers in small and medium-sized companies, who often have neither the opportunity nor the need to purchase large systems, and therefore often find it easier to implement newer and ‘lighter’ systems.
Focus on digital platforms
In the ongoing global lockdown, which seems to continue indefinitely, focus has been placed on how much can be handled virtually and digitally.
This has created a lot of awareness about digital banking, rather than physical interactions. Many people have started working from home and more banks are starting to take an interest in getting their customers to adopt digital platforms.
This is creating the necessary focus on ever better platforms for both customers and employees, but it also creates an increased need for much better IT security, including an emphasis on data security and document management.
Financial solutions incorporated into subcontractors' solutions
Embedded finance, or loosely translated incorporated finance, is one of the financial sector’s main topics for 2021. This is about merging financial solutions into the solutions of non-financial service providers.
It can be, for example, used by retailers or carpooling providers who have built-in solutions for payment, lending or insurance in their own processes.
We are increasingly seeing service providers incorporate financial solutions into their own offering, in order to provide customers with a smoother process, so that they do not have to be sent back and forth between a payment provider and the service provider in the payment process.
The global pandemic has also had the result that many more private investors have arrived on the scene, and we are seeing a major trend in interest in sustainable investments.
It has created a major focus on screening for ESG and how to use these mechanisms. We see many fintechs gaining ground with sustainable pensions, and we are seeing partnerships between smaller fintech companies focusing on sustainable investments and working with the large pension companies.
There is a great deal of activity in fintech, and the financial sector continues to develop constantly. It is therefore more important than ever that the major players in the financial sector are aware of the ecosystem around them, and they should certainly look beyond their own ranks in terms of finding inspiration for future growth.
In other words, we have moved completely away from the idea that the approach in the financial sector has to be 'disrupt or die', and the industry has become aware that great things can be achieved together.