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Building bridges not walls: the Nordic Fintech Hubs

I was excited to represent the Stockholm Fintech Hub at the panel discussion on Nordic Fintech Hub co-operation at this week’s Oslo Fintech Fest.  As a recent entrant on the Nordic Fintech scene and a relatively recent immigrant to the Nordics, I’ve been privileged to witness both the common and unique strengths of the Nordic countries that makes the Fintech scene here so vibrant and promising.

I moved to the Nordics just over two years ago to work for Nordea and at the time was given the choice of Stockholm, Copenhagen or Helsinki to make my home, as my job was based in all those countries.  Consequently, like many of the Fintechs we’ll be attracting to the region, my choice of country was based on factors other than the professional draw of a particular skillset or national reputation for excellence; instead I chose the country where it was easier to cycle and swim outdoors, entirely personal reasons.  The tax advantages offered locally were a strong secondary reason, although the language was (and still is) a challenge that could have represented a drawback, although I rather naively assumed I’d pick it up, as I have been able to with other languages.

In my work for Nordea I was able to observe commonalities and differences between the Nordic people and cultures, forming opinions that were largely in line with the popular stereotypes but also observing that, like many close neighbours, the countries have more in common than differences.  The most striking difference to someone coming from London as I do, is that people identify first, as their nationality, but secondly, despite a healthy rivalry between the countries, as Nordic.  This is something I don’t observe so much in other close regions or even countries – people in the UK tend to identify as “English” or “Scottish” or even, as I do, as a “Londoner” but rarely as “British” or “European”.  Go to Spain, France, or Italy and the same applies; in Switzerland you identify as your Canton and then as Swiss, but that’s it.

Common Strengths

So I think the Nordics are unique in this respect, at least in this part of the world and in my direct experience, which gives them an automatic strength in solidarity.  Other factors struck me; the trust that people hold so dear, which is both a huge strength and sometimes a barrier to change, the common acceptance of intellectualism as a positive quality and the near absence of cash being three very obvious ones. And when I was researching to build hiveonline, I discovered statistics that backed up these observations with some strong rationales:

  • The Nordics are four of the top five least corrupt countries in the world.  This partly explains the trust, and is a huge strength.  It also means that people are more likely to trust governments and authority figures than in other countries, which means that Fintechs working with governments and regulators will have a smoother path than in some other countries where authorities are less trusted.
  • These are the most digitised and connected countries in the world; we’re rightly proud of our infrastructure, which is more advanced than nearly everywhere else, although we should also be wary of complacence as other countries start to catch up.
  • The populations of the countries are some of the most educated, thanks to historical free education and this has led both to greater respect for intellectual endeavour than any other country I’ve lived in, and pride in national cultural and intellectual achievements.  That’s an important draw for scientific refugees from plebocratic societies where we have to apologise for being interested in science!
  • They’re also some of the most equal on the planet, both in balance of the sexes and income equality between rich and poor, although as with everywhere, there’s still some way to go.  But this has led to acceptance of differences and many fewer barriers than I’ve experienced in Switzerland, France, the US and even the UK.
  • Everyone has an online National Identity, which as a market both makes being an online financial service easier and means people are comfortable logging in with certain credentials to everything they use.
  • And of course, these are the countries with some of the highest use of cashless transactions in the world, which is also a Fintech’s perfect test ground.  This has also led to a wide use of e-money and of course, central bank consideration of sovereign digital currency, which will become a key benefit to many Fintechs in the future, including hiveonline, as our digital platforms are ready-made to support sovereign digital currencies.

All of these shared characteristics make these countries an ideal place for Fintechs to set up.

Challenges Fintech Hubs are addressing

Of course there are also challenges, which the Hubs can work individually and collectively to overcome

  • Conservative government and regulation perceived as remote and difficult to access; however once accessed, governments are really keen to work with technology companies and to encourage growth.  The regulations are challenging and more complex than in other countries, and again I am confident that the Hubs can help both to support regulators in adapting and to support Fintechs in navigating the systems.  With collaboration across the countries, I also think there’s an opportunity for the Hubs to play a key role in normalising regulations across national boundaries, which will become a key enabler for Fintechs to become established locally and to grow internationally.
  • Traditional and very risk averse banks, which were largely protected from the worst effects of the global downturn because of this risk averse approach.  The downside of this is that, unlike all the other global banks I’ve worked in over the last 20 years, they have never been through the crisis that forced them to re-evaluate their operating models, and consequently are much less adapted for change than some less healthy global counterparts.  This puts the banks at risk of not being able to evolve and adapt; again I think the Fintech Hubs can play a major role in supporting banks to form collaborative relationships with Fintechs and move into the ecosystem.
  • Small scale, risk averse investors – like the banks, investors in this region are wary of taking risks, which is likely to strangle some of the more interesting emerging Fintechs, with the downside that they move to other regions such as Singapore, where investment in early stage businesses is much healthier.  The Hubs can bring their experience of coordinating investors and educating firms on both sides of the Fintech/investor divide, as I’ve witnessed at first hand since setting up hiveonline.
  • A lack of specialist financial and Fintech education – this is being actively addressed by the Hubs I’ve been working with, and while a lack of Fintech education is a problem locally, it’s also a problem globally and I think we have a great opportunity to become one of the leading regions in this space.
  • Immigration and setup challenges: while it was relatively easy for me, as an EU citizen, to move to Denmark, the combination of complex and unique local rules for everything from mortgages to taxation, with a “you just have to know” attitude, make these difficult countries to move into and start a business in; Hubs providing both legal and tax advice will smooth the rails for both local and international firms setting up here.

And of course, apart from addressing these regional challenges, the key benefit of Fintech Hubs the world over is providing community; local communities where people like me can meet, learn from, support and bounce ideas off other Fintech companies and broader, regional and global communities where we can access and share knowledge and experience.  Each of these countries has emerging strengths and while we shouldn’t let that limit the range of specialisms in any given Hub, we should also be able to celebrate and share the growth of mini-industries where they arise, such as the blockchain concentration in Copenhagen.

New opportunities for the Nordics

Advertising our strengths will help us to attract talent and new businesses to our Hubs.  I read this week that the British Fintech industry is deeply concerned by Brexit because 30% of its Fintech CXOs are non-British!  That’s not just a third of UK Fintech firms, but a critical mass of key people within a significant minority or possibly majority of UK Fintech firms, who may be looking for another home very soon.  While Berlin and other places are heavily promoting themselves as the natural destination, the Nordics should be the natural next step for these firms.

Let’s also not forget that, like me, they may look to the Nordics for our Fintech strengths but they’re also people, so we should also be celebrating the things that brought me here:

  • Open society
  • Great food
  • Equality
  • Beautiful, clean cities
  • Easy to get around
  • Fabulous design
  • The water and the sky

Let’s work together to make the Nordics the Fintech Capitals of the World!

Sofie Blakstad is CEO and Founder of hiveonline, resident in both the Stockholm and Copenhagen Fintech Lab and Advisor to the Stockholm Fintech Hub