Nordic Fintech Magazine June 2023

JUNE 2023

p.18

The Race for Profit The Nordic region has long been a hotbed for innovation, particularly in financial technology or fintech. However, the ongoing crisis has dramatically shifted the investment landscape, compelling Nordic fintech startups to pivot their strategies and prioritise profitability and sustainable business models to secure funding from venture funds. p.08

How Technology is Reshaping the Insurance Industry p.24

From Woes to Woos: Baltic Fintech’s remarkable journey p.34

Collaborations Needed to Unleash the Full Potential of AI

The greatest Fintech event in the Nordics 2

Join Nordic Fintech Week 2023 and take part in unlocking the future of finance.

2,000 Attendees | +70 Investors Nordic Fintech Week opens the doors to a journey like no other. Come face to face with the forces reshaping finance in the Nordics Baltics and Beyond. Featuring our boldest agenda yet, learn how Finance is blending with other industries and how Fintechs and Financial Institutions are embracing Open Finance, WEB3, Decentralisation and Ethical Finance to build the next generation of financial services.

Open Finance Track

Decentralised Finance Track

Open Banking has transformed the banking industry, sparked innovation, improved experiences, and reduced costs that benefit customers, and financial institutions alike. The time has come to supercharge Open Banking principles to a new level. Enter Open Finance, the next evolution expanding beyond banking, to unlock a world of possibilities where hird-party providers can access diverse customer data savings, pensions, investments, insurance, mortgages and offer ultra-personalised financial products. Open Finance will redefine our understanding of finance, giving consumers control over their data, transforming financial services for unparalleled convenience.

Join us at Nordic Fintech Week 2023 to explore the boldest ideas in this industry shifting new trend!

Welcome to the world where individuals control their data, transactions are secure, and trust is inherent. The emergence of a decentralised alternative financial system that operates on smart contract platforms is upending what we’ve known about finance until now. Decentralisation in Financial Services brings a new range of secure alternatives to traditional finance empowering users with true ownership of assets and platforms but also providing new and exciting services made possible, only now, through decentralisation technologies. Get ready to embrace the limitless potential of DeFi and Web3 and learn what the decentralised future of the industry looks like, only at Nordic Fintech Week 2023.

3

September 27th & 28th nfweek.com

+100 Speakers | +200 FinTechs Ethical Finance

The Future of Finance

Blended Finance

Ethical Finance stands out for its commitment to community-focused values. It goes beyond just sustainability and actively uses people’s money to support projects that benefit society, promote local growth, and show international solidarity. In this track we will look at the efforts that financial organisations are going through to make a positive impact in business and society, catering for the needs of those overlooked by traditional financial institutions and meeting the growing demand from savers and investors who want their money used ethically. Join us at Nordic Fintech Week 2023 and find out what the industry is doing to combine doing good while doing well.

Join us for an exhilarating track that will take you on a journey through the cutting-edge realms of banking, regulation, insurance, payments, lending, and wealth. From reimagining the way we bank to uncovering the latest regulatory trends, this track is packed with excitement and innovation. Discover how exponential technologies like AI, machine learning and robotics are reshaping the financial landscape and paving the way for a more inclusive and seamless financial ecosystem. Be provoked to see the future of our industry like never before and here directly from those reimagining the global financial ecosystem, right here from the Nordics.

Brace yourself for the thrilling synergies unfolding at the crossroads of financial services, ecommerce, retail, mobility, travel, and entertainment. As boundaries blur, a new era of extraordinary value propositions emerges, surpassing our wildest dreams. Experience the awe-inspiring collaborations where industries combine their expertise and capabilities to delight customers in new and exciting ways.

Witness the birth of groundbreaking innovations that once seemed impossible and get ready to learn how the convergence of finance and various sectors is creating bleeding edge experiences, through the extraordinary fusion of possibilities!

4

NFM’S NORDIC FINTECH DISTRIBUTION COMMUNITY Nordic Fintech Magazine exclusively works together with selected Nordic Community Partners for insights and distribution, giving us unparalleled reach with audiences across the Nordics and Baltics

Editor in Chief: Chris Crespo Journalists: Jakob Frier & Paulo Delgado Layout: Vratislav Pecka Exclusive partner:

Published by Nordic Fintech Magazine Contact: Stian Faber, Head of Partnerships stian@nordicfintechmagazine.com

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Content

06–07

Pioneering a New Era: Unstoppable Forces Reshaping Finance in the Nordics and Baltics

08–13 The Race for Profit

14-15

The Nordic Fintech Ecosystem: Leading the Way Towards a Sustainable Future

16

Boldness and Vision. Lithuania’s Unwavering Commitment to Redefine Financial Services in the Baltics and Beyond

17

Wintermads Brings Curated Quality and Better UX to NFTs

18

How Technology is Reshaping the Insurance Industry

19

20-21 22-23

25-29 30

Will 2023 form the beginning of the next big transformation journey for insurers?

Nordic Insurance Companies Face Unique Challenges to Digital Transformation

European and Nordic Fintechs: A Radical Shift in Power Dynamics Unleashes a New Era for Payments From Woes to Woos: Baltic Fintech’s remarkable journey Fighting the Invisible War: The Power of Anti-Money Laundering Technology in the Fight Against Financial Crime

31 Open Banking: Now & a glimpse of the Future

32-33 34

Busting the super app myth: Why Europe is unlikely to get one-stop-shop apps Collaborations Needed to Unleash the Full Potential of AI

35 Inside the Mind of Financial Criminals

6

Editorial

between fintech and other adjacent in-

Pioneering a New Era: Unstoppable Forces Reshaping Finance in the Nordics and Baltics 2023 has kept our team on its toes, as we’ve raced across the fastest growing fintech ecosystems in the Nordics, delivered keynotes, and forged media partnerships. With a nonstop stream of innovation in fintech, insuretech, regtech, and wealthtech, our journalists, content creators, and editor-in-chief have been firing on all cylinders to bring you the boldest thinking from the Nordics and Baltics. In this issue, we reflect on the stories that have stopped us in our tracks, prompting us to rethink and retrace as we make sense of the industry’s rapid evolution.

dustries like ecommerce and mobility.

The passion and dedication of these individuals is truly inspiring, and it’s clear that their ambitions and grit is the catalyst driving the growth of fintech in the Baltics.

What’s truly remarkable about these New Nordic countries, as they are often referred to, is that they embody the best attributes of startup companies themselves. They are agile, innovative, fast, ambitious, and extremely talented.

Their recent history and the fact that they were reborn in the 90s have given these three nations an unprecedented impetus that is catapulting them into Fintech stardom.

Estonia, for example, has 10 unicorns, or one for every 130,000 people, while Lithuania is the largest fintech hub in Europe by the number of issued licenses and Latvia ranks among the top 10 countries with the highest number of fintechs per capita. This powerful combination of skills, strong focus on STEM, young minds, and collaborative ecosystems is bringing together regulators, academia, central banks, corporates, and entrepreneurs to supercharge the development of their ecosystem.

It’s inspiring to say the least, to see how the fintech community in these countries is co-creating an ecosystem that nourishes innovation, growth, and collaboration.

But as we all know, fintech is one of the most regulated industries and with good reason. In this issue we have also continued to explore how practitioners in AML and Financial Crime prevention are waging a war against highly sophisticated criminals who operate at the bleeding edge of technology to find new ways to ex-

By Chris Crespo

L

ploit system loopholes and generate profits from illicit activities. Thankfully,

ooking back at the first half of

to visit twice, once for Fintech Day,

preneurs to policymakers, who are all

AI, machine learning, and a whole

this year, it’s been a non-stop

masterfully organized by Rockit, and

working to build a thriving ecosystem

lot of inventiveness are resulting in a

stream of activity for Nordic

secondly as guest speakers at the Lith-

for fintech innovation. The second visit

flurry of new value propositions coming to market by companies that are

Fintech Magazine. We’ve done

uanian Davos conference. The energy

was even more exciting, as we were

keynotes and panels at some of the

and enthusiasm at these events were

invited as exclusive media partners to

emboldening their capabilities with

most exciting events in the Baltic coun-

palpable, and it was clear that some-

ECOM’21, an event unique in its class,

strong technical expertise, knowledge

thing truly special is in the making.

bringing together fintech and Ecom-

of financial markets, criminology, psy-

tries, and have started partnerships with several of the most visionary orga-

Our trips to Riga, the capital of Lat-

merce. There we met with some of the

chology, and deep knowledge from

nizations in the industry. In this issue we

via, were equally exciting. On our first

entities and organizations rallying peo-

the trenches in the field, from regula-

will tell you all about it!

visit, we had the opportunity to meet

ple and policy makers to accelerate

tors, controllers, and central bankers.

First, let’s talk about Vilnius, the cap-

some of the most exciting proponents

the expansion of fintech in the region

In this issue and as part of our AML

ital of Lithuania. We were lucky enough

of fintech in the country, from entre-

and to further blurry the boundaries

and Fincrime Deep Dive we got to

7

speak to subject matter experts

Chris Crespo Head of Content

from Denmark, France, Latvia, Estonia, Germany and Lithuania, and we’ll bring you some surprising findings from this wrongly overlooked function of financial services, which in our estimation, has got to be one of the most exciting areas in fintech where real life cat and mouse pursuits are waged out every day.

Unfortunately, the conditions in the market are changing. The slowdown in investment, as well as the failure of banks like Silicon Valley Bank, Signature Bank, and Credit Suisse, are creating an increasingly difficult scenario for fintech startups. It’s narrowing the funnel that once provided bountiful fuel for these organizations to realize their value propositions. This new reality means that those companies determined to expand their list of features and functionalities will have to turn on a dime to show profitability. Markets across Europe are prepping themselves for increased activities in mergers and acquisitions and investors are withholding their bets only for those companies who can really show solid plans to profitable growth.

Nevertheless, we are as excited as ever for the future of fintech. The passion, dedication, and hard work of the individuals driving the growth of fintech in the Nordic and Baltic markets is a testament to the fact that innovation and collaboration can overcome any obstacle. And we are certain the current challenges will result in a more mature and stable market, poised to accelerate the emergence of a fairer more reliable and resilient financial system.

With some fabulously inspiring Fintech events and gatherings behind us and with the return of Nordic Fintech Week, in September, we can’t wait to see the new directions the industry is taking as founders and innovators pioneer new tools, technologies, and business models. We’ll be here every step of the way, covering and celebrating the heroes transforming our industry, one innovation at a time. Join us, and if you can, avoid blinking else you may miss the birth of the next amazing thing that changes how you experience finance forever.

8

The Race for Profit The Nordic region has long been a hotbed for innovation, particularly in financial technology or fintech. However, the ongoing crisis has dramatically shifted the investment landscape, compelling Nordic fintech startups to pivot their strategies and prioritise profitability and sustainable business models to secure funding from venture funds.

By Jakob Frier

9

A

global pandemic, geopolitical uncertainties and a war on the European continent have affected global econ-

omies and caused a great threat of economic downturn. That has caused venture capital firms to become more cautious in their investment decisions.

Numbers from Copenhagen Fintech show that investments in fintech have declined since an all-time high in 2021.

“From what we learn from our online series of ‘Nordic Fintech Trends’ with all the Nordic countries represented, we can certainly say that the Nordics follow the global trend. No doubt that 2021 was an outlier, and what we saw in 2022 and are now seeing in 2023 is probably a return to ‘normal’,” says Thomas Krogh Jensen, CEO at Copenhagen Fintech.

He also points to the turmoil that evolved in the US banking sector and the collapse of Silicon Valley Bank have fueled some anxiety among investors and sustained a slowdown in investment activity.

These events also impact the Nordic region. Securing funding has become increasingly competitive today, and investors now emphasise sustainable business models and revenue generation more than chasing growth. This has caused a specific question from investors showing a new trend: “When it comes to business angels and family offices making seed investments, they all ask, “When can you become profitable?” It has definitely become a priority. It was not a question asked so early, just five years ago.

Today, it has come front and centre,”

Søren Nielsen Senior manager, Thursday Consulting PHOTO: Sebastian Stigsby Falck, Digital Hub Denmark

says Søren Nielsen, senior manager at Thursday Consulting.

Nielsen is a seasoned fintech

rewards if they succeed.

shares Nielsen’s perspective, which he sees as a healthy sign from the

entrepreneur, and today, he advises

“These platform-focused companies

high-growth startups on subjects like

can struggle in the current environment

fundraising and scalable commercial

because it requires larger ticket sizes

“It’s harder to raise money now, but

models. According to him, companies

and more patience, and they are uncer-

it’s good for the market. Over the last

that cannot control how it becomes

tain about how to make money from it.

few years, many B2C companies have

profitable will have difficulty raising

It is the same both internationally and in

shown much user growth but haven’t

capital today.

Denmark,” Nielsen says.

shown the ability to make money on

venture funds.

those users. And that’s the core prob-

He views the new trend as a backlash to several years of focus on volume

Harder to raise money

lem in B2C fintech. The industry is

and user growth without a clear path

Tjommi, a B2C fintech startup with

stabling down right now. But that also

to commercialisation from the users on

Norwegian roots, is currently raising

sets requirements to raise the money

the platform. Many platform-focused

funds with the goal of completing the

in terms of showing there’s actually a

companies require a lot bigger invest-

funding process within the next four to

possibility to make money on it, not just

ment with bigger risks and, thus bigger

five months. CEO Henrik Johannessen

having the user growth,” he says.

10

“One of the key metrics currently

Henrik Johannessen CEO, Tjommi

emphasised is Net Dollar Retention.

It also tells how many customers the company loses and how much extra it can sell to existing customers. It is a specific data point that is being asked about,” he concludes.

The need for a fundraising strategy The changes in the industry indicate that it now requires more time and a greater number of attempts to find success, necessitating the need to encounter and evaluate more opportunities. Founders have to prepare and devise a clear strategy, including a strong narrative, especially on how they plan for scale and a clear path to profitability, according to Krogh Jensen: “It is more important than ever to think about how the funding journey should look like one or two rounds down the journey. The investors do their due diligence, but so should the startup founders. More important than ever.”

According to Nielsen, many startups must look closely at and reduce their fixed costs. Salary costs are a significant factor, and reducing them is an effective measure. Additionally, many are trying to sell more to existing customers, as acquiring new customers involves more marketing costs. And that still requires some level of funding.

“Throughout the spring, I have seen several companies doing bridging rounds because they suddenly need to change their strategy. These bridging

He experiences firsthand how de-

sumers automatically claim money back

rounds have sometimes been as short

mands are higher around monetisation

if the price drops after purchase. Johan-

as four months to try to get closer to a

and unit economics. Investors are doing

nessen and the team is paying a lot of at-

calmer venture market and closer to

their due diligence thoroughly and are

tention to generating increased revenue

profitability at least.”

displaying heightened interest in various

for existing users on the platform.

His observations are that investors

metrics compared to previous rounds.

“With the increase of the ARPU (Av-

most often prioritise companies already

The investors are now delving into

erage Revenue Per User), it’s all about

in their portfolio. Nielsen often advises

greater detail during the due diligence

activating users to use the vouchers

startups to do a bridging round now

process, particularly concerning the

they get through our system. So every

and expects it to take some time before

cost of acquisition, revenue per user,

time there’s a refund, the customer gets

the investors become more risk will-

churn rate, and payback time. These

a voucher, and it’s our job to ensure it is

ing, which could easily be another six

are metrics that the team should know

used,” say Johannessen and adds:

months. He also points to public funding

“You need to have a solid path to

as a short-term solution, such as innova-

and follow closely.

“Today, only facts mean something.

profit. Not saying you need to have

You can forecast as much as you want,

everything sorted, but it needs to be

At Tjommi, Johannesson has decid-

but in the end, the numbers here and

a revenue model that shows a path to

ed to wait five months until closing the

now only mean something,” Johannes-

getting profitable.”

round to boost the metrics and be better

sen adds.

By scanning and registering prices across the internet, Tjommi helps con-

Nielsen also emphasises the need for

tion fund grants or Eurostars funding.

positioned to raise a round.

metrics that show much money a compa-

“I see a lot of companies fundraising

ny earns from its existing customer base.

all the time instead of setting a strategy

11

Thomas Krogh Jensen CEO, Copenhagen Fintech PHOTO: Sebastian Stigsby Falck, Digital Hub Denmark

for it. And if you don’t have a strategy for it, you just end up being a little back

startups are doing their best to navigate

some build wind turbines. And accord-

and weather the storm:

ing to Nielsen, we are somewhat in that

and forth everywhere,” he says and adds:

“It’s not easy if you get stuck ‘in the

“There are two ways to look at it.

middle’, so to speak, but I really do think

“The companies that have capital can

Times are harder now. But then you

that founders, the executive boards and

start buying and investing. There is a gold-

can also look at it differently and take

their investors are doing everything they

en opportunity to invest and buy talent

it as an advantage. Tough times mean

can and should to recalibrate and adjust.

and these new types of products now.”

there’s still money to deploy, but the

Being agile and adapting to a changing

Large financial incumbents are capi-

bar is higher. So how do you stand out?

environment is in the DNA of a startup.”

talising on the uncertainty in the market

I think you stand out by week after

situation today:

by seizing the opportunity to snap up

week, showing the progress, executing

Securing a bargain

struggling startups at a discount at a

during the hard times, and getting the

Venture funds are telling their portfo-

lower valuation than what they were

team to focus on the product and the

lio companies to shelter in place for

worth 18 months ago.

metrics. And if you do that over time,

uncertain months, and some have laid

you will have the metrics they seek.

off staff. Those startups that don’t have

unpredictable market conditions, these

So right now, we have decided to just

a clear bridge to the other side of that

big players in the financial industry can

focus on the metrics.”

chasm will be looking for buyers.

negotiate favourable deals and secure

At Copenhagen Fintech, Krogh Jensen is confident that Nordic fintech

A Danish proverb says that when the storm blows, some build shelters, and

“By leveraging the volatile and

bargains when acquiring these startups,” says Krogh Jensen.

12

Deal count VC vs CVC year-over-year growth 2012-22 80% 74%

60%

42% 42% 40%

37% 31% 28% 26%

20%

21% 16% 15%

8%

17%

9%

7% 2%3%

3%

4%

8% 6%

0%

2012 2013 2014 2015 2016 2017 2018 2019 2020

2021

2022 -2%

-20%

-25%

-40%

Total CVC

Total VC

Sources: PitchBook, GCV

13

The lower valuations of these fintech

rounds compared to the previous year,

ation where some venture funds are

companies compared to their previous

rounds that involved corporate backing

holding onto the money because the

values make them attractive targets for

experienced a 2 per cent decline.

markets are challenging to invest in.

acquisition, enabling the larger com-

But eventually, they need to invest. The

panies to expand their portfolio and

The return of venture investment

enhance their competitive position in

Today, more money is earned on inter-

While that timing remains uncertain,

the industry. This strategy allows the

est by putting it in a passive account or

Johannesson is optimistic about secur-

big financial companies to leverage the

investing in bonds than in recent years.

ing a fair valuation:

market uncertainty to their advantage

Consequently, there is less risk-taking

and make strategic investments at a

capital available. But the venture funds

lot of capital to solve meaningful

more favourable price point.

are obligated to invest the money and

problems. And the investors know

cannot keep it idle.

that to go through that long journey,

A survey from Global Corporate Venturing with numbers from Pitchbook

“We experienced the same situation

question is when.”

“The bar is higher. But you need a

the valuations must be higher on the

shows that the market turbulence led

during the pandemic when several

seed stage because otherwise, the

traditional venture capital investors to

funds had money but were cautious

cap table would be unbalanced all

reduce their involvement in startup

about investing due to uncertainties.

the way out. So, if you’re solving a

funding deals, while corporate investors

That caused a ketchup effect and a

meaningful problem and taking that

demonstrated greater stability. Despite

sudden surge in investment activities,”

long journey, it’s about being con-

an overall 25 per cent decrease in the

says Nielsen and explains:

vinced that you are on that journey

number of venture capital funding

“We might be seeing a similar situ-

and have the profitability.”

14

Opinion

The Nordic Fintech Ecosystem: Leading the Way Towards a Sustainable Future

By Thomas Krogh Jensen, CEO at Copenhagen Fintech

15

In the realm of financial technology, few regions can rival the prowess and innovation of the Nordic countries (I know I am biased). With a progressive mindset, robust digital infrastructure, and unwavering commitment to sustainability, the Nordic fintech ecosystem has emerged as a shining example of excellence. In this article I will take a deep dive into the strengths of the ecosystem, explore the outlook, and ponder whether the Nordics can maintain the global lead in the face of increasing competition from many other regions around the world.

S

o let us begin with green fi-

periences and increased competition for

the Nordic fintech ecosystem’s contin-

nance and sustainability. The

the benefit of the consumer. However,

ued success is the role played by cor-

Nordics have long been pio-

the region is now on the cusp of a new

porate innovation units. They possess

neers in sustainable practices,

era, where open finance will further ex-

a unique advantage: the resources,

and our fintech industry is no exception.

pand data access to include insurance,

industry expertise, and customer base

With a strong focus on environmental

investment, and other industries. This

of their parent companies. Through

responsibility, Nordic fintech companies

transition will hopefully also position

partnerships, corporate innovation

have embraced green finance, fos-

the Nordics as pioneers in shaping the

units can tap into the innovative spirit

tering the development of innovative

global landscape of open finance.

and agility of fintech startups, integrat-

solutions that align with the region’s

Moreover, the adoption of financial

ing their cutting-edge technologies

commitment to combating climate

technology is not limited to the tradition-

into their core offerings. This collab-

change. From carbon offset platforms

al banking sector alone. Other industries,

oration allows traditional players to

to sustainable investment tools, the

ranging from retail, mobility and gaming,

stay ahead of the curve, meet evolving

Nordics are at the forefront of leverag-

are increasingly incorporating fintech

customer demands, and unlock new

ing fintech for a greener future.

solutions into their core offerings.

revenue streams.

A robust digital infrastructure. The

The advent of Web3 technologies has

Nordic countries boast a world-class

brought forth a new era of digital trans-

both parties can benefit from each

digital infrastructure, providing a solid

formation, disrupting traditional business

other’s strengths. Fintech startups gain

foundation for fintech innovation. With

models and empowering individuals in

access to valuable resources and a

high internet penetration rates and

ways previously unimaginable. In this

wider customer base, while established

advanced telecommunications net-

context, legacy brands, with their es-

companies gain fresh perspectives,

works, the region offers a seamless

tablished reputation and loyal customer

innovative solutions, and a competitive

and secure digital ecosystem. This

base, are seeking ways to embrace this

edge in the rapidly evolving fintech

infrastructure allows fintech companies

decentralized and open landscape.

landscape. The success of corporate in-

to develop cutting-edge products and

Fintech and Non-Fungible Tokens (NFTs)

novation units and their fintech partner-

services, making the Nordics a hotbed

emerge as powerful tools, enabling

ships in the Nordic region is evident in

for technological advancements in the

these brands to seamlessly transition

numerous industry collaborations. From

financial sector.

into the Web3 era while redefining

banks partnering with payment service

customer engagement, ownership, and

providers to retailers integrating mobile

monetization.

payment solutions, these partnerships

Yes, we like to collaborate. In fact, collaboration lies at the heart of the Nordic fintech ecosystem. The region

By aligning their interests and goals,

have transformed traditional industries,

fosters strong partnerships between

Staying Ahead of Global Competition

enhancing customer experiences and

traditional financial institutions, fintech

While the global fintech landscape

driving digital transformation.

startups, regulators, and academia.

becomes increasingly competitive, the

This collaborative approach promotes

Nordic region has the necessary ingre-

Conclusion

knowledge sharing, innovation, and the

dients to maintain its lead. By building

The Nordic fintech ecosystem is a

creation of groundbreaking solutions. By

upon their existing strengths, the Nor-

force to be reckoned with. With a

working together, Nordic fintech players

dics can continue to set new bench-

strong emphasis on sustainability,

harness their collective strengths to

marks for innovation and sustainability

robust digital infrastructure, and a

drive progress and maintain a competi-

in fintech. Furthermore, the region’s

collaborative mindset, the Nordics

tive edge on the global stage.

commitment to regulatory excellence

have carved a niche for themselves in

ensures a secure and trustworthy

the global fintech landscape. The

The Future Outlook

environment for both businesses and

transition from open banking to open

A notable trend is the transition from

consumers. The proactive approach of

finance, along with the increasing

open banking to open finance. The

Nordic regulators in fostering innova-

adoption of fintech across various

Nordics have already embraced open

tion while safeguarding against risks

industries, promises a future where

banking, which enables secure data

gives the region a competitive advan-

the Nordic region will remain at the

sharing between banks and fintech

tage over its global counterparts.

forefront of financial technology.

firms, leading to enhanced customer ex-

One crucial aspect contributing to

Consider yourself invited to join us.

16

Boldness and Vision. Lithuania’s Unwavering Commitment to Redefine Financial Services in the Baltics and Beyond In the ever-evolving landscape of financial technology, Vaiva Amulė stands as a driving force and visionary leader within the Lithuanian fintech ecosystem. As the Head of Fintech Hub LT, the largest association of licensed fintechs in Lithuania, she has played a pivotal role in spearheading the fintech movement, fostering ongoing dialogues with regulators and key industry players. Recognized as the Fintech Leader of the Year 2023 Vaiva Amule’s relentless commitment to ensuring an adequate balance of regulatory compliance and innovation within the ecosystem has paved the way for a thriving fintech industry. In this exclusive interview, we delve into her insights, exploring the vital role fintechs play in transforming Lithuania, the Baltics, and the wider European financial landscape.

development of policies that promote innovation, consumer protection, and financial stability. Overall, collaboration within the global fintech ecosystem drives innovation, market expansion, and better customer experiences.

What role do Lithuanian fintech companies play in shaping the future of finance, and what innovations are on the horizon?

Lithuanian fintechs are actively developing innovative products and technologies that combine classical finance with blockchain, in response to new European regulations like eIDAS and MiCA. This includes introducing decentralized finance protocols,

By Chris Crespo

promoting digital wallet adoption, and implementing new methods for

Where do you see Lithuania on the

investment. The electronic money and

ferGo, Paysera, Bankera, and Ondato

startup journey - are you a startup,

payments sector experienced nota-

have achieved remarkable success.

scaleup, or a unicorn?

ble growth in 2022, with a 1.6 times

These companies prioritize understand-

of artificial intelligence and machine

Lithuania’s startup ecosystem has

increase in licensed activity revenue

ing customer needs and developing

learning to improve lending decisions,

transitioned from the startup to scale-

compared to 2021, serving over 25

innovative solutions locally and abroad.

and big data analytics to enable per-

up phase, rapidly gaining recognition

million clients. Lithuania current-

They attract top talent globally due

sonalized investment recommenda-

in Europe. Despite its small population,

ly has seven specialized banks, 87

to favorable business conditions and

tions. Our fintechs are not only disrupt-

Lithuania attracted €295 million in

electronic money institutions, and 51

government support. Lithuanian fintech

ing the local market but markets in

investment in 2022, making it the sec-

payment institutions. Fintech com-

companies succeed through innovation,

Europe and beyond.

ond-fastest-growing startup ecosys-

panies in the country also secured a

customer focus, regulatory compliance,

tem in Central and Eastern Europe. The

record financing of 67.9 million euros

and strategic partnerships.

ecosystem’s value has increased 17

in 2021, accounting for 28% of total

times since 2017, reaching €9.5 billion.

investments. Active policies, a strong

What opportunities do you see for

years, and what are the key drivers of

Additionally, 800 startups contributed

ecosystem, collaboration and a culture

collaboration between Lithuanian

this change?

€297 million to the Lithuanian budget

of compliance and risk management

fintech companies and other players in

Our fintech companies are driving

in 2022, a 51% increase from the previ-

and collaboration between institutions

the global fintech ecosystem?

advancements in areas like payments,

ous year. With a focus on sustainability

and the market have all contributed to

Collaboration between Lithuanian

lending, digital identity, and regulatory

and profitability, Lithuania’s startup

the growth of our ecosystem.

fintech companies and global players

compliance. They are introducing

offers opportunities for growth. One op-

cutting-edge products and services that

What are some of the key success

portunity is leveraging expertise from

enhance convenience, security, and

stories of Lithuanian fintech

fintech companies in different regions

efficiency for both businesses and

How has the Lithuanian fintech

companies, and what do you think sets

to expand into new markets. Collabora-

consumers. Moreover, Lithuania’s fintech

industry evolved in the past few years,

them apart from their competitors?

tion with traditional financial institutions,

ecosystem fosters collaboration between

and what major trends have emerged?

Lithuania’s fintech ecosystem has gained

such as banks, allows fintech compa-

startups, traditional financial institutions,

In recent years, Lithuania’s fintech

attention for its global fintech unicorns,

nies to utilize existing infrastructure and

regulators, and other stakeholders,

industry has become an integral part

including Revolut, SumUp, and NIUM.

customer base while offering innovative

creating a vibrant and dynamic environ-

of the country’s economy showing

Alongside them, other Lithuanian fintech

solutions. Working with government

ment that will continue to grow and

resilience and attracting foreign

companies like ConnectPay, Trans-

agencies and regulators fosters the

innovate in the years to come.

ecosystem is poised for future success, attracting more investors.

customer identification.

They are also harnessing the power

How do you see the Lithuanian fintech industry evolving over the next few

17

Wintermads Brings Curated Quality and Better UX to NFTs

By R. Paulo Delgado

Two major barriers for NFT adoption are authenticity and user experience.

A new platform out of Sweden attempts to solve both.

remains low despite the

M

ence in lowering barriers to entry

surge in interest after

in this space,” Serod Nasrat, CEO of

precedent-setting sales

Wintermads, tells NFM, “and we’re

such as Beeple’s First 5000 Days and

dedicated to doing that with Winter-

PAK’s The Merge—selling for near-

mads for both new and experienced

ly $70 million and over $91 million

users. Buying an NFT should be easy.

respectively.

Users shouldn’t need to go through

“Our team has extensive experi-

ass adoption of NFTs

the superfluous step of buying cryp-

But only 7% of the U.S. population are active NFT owners, and only 25% are

to to do that.”

familiar with NFTs.

As a result, Wintermads has

Buying an NFT is a byzantine process

implemented an ingenious solution

that can take days for inexperienced

of letting users pay directly with fiat

users, sometimes requiring multiple

currency for NFTs, something un-

calls to “that friend who knows about

heard of in other marketplaces. The

crypto”, or dozens of Google Searches

closest those marketplaces come to

to understand what a wallet is, what a

achieving this is by letting users buy

blockchain is, and what gas fees are.

crypto—not NFTs—with a credit card.

On the flip side, we have NFT

Even then, they only do this for a

natives—users who are firm believers

Web3 community, which derided the

labyrinth of complexities, including pass-

in NFTs, crypto, and Web3. They’re

project as a cash grab.

ing the necessary KYC and AML checks

small number of collections.

“We also want to help the incred-

community-driven and often vocal

NFTs go far beyond an NFT’s price.

to purchase crypto, which is only nec-

ibly talented pool of NFT creators,

about projects they consider inau-

For artists, NFTs also rekindled the

essary because the crypto-fiat offramp

and match them with the right

thentic. To them, NFTs and Web3 are

hope that they could regain power in a

is considered a currency exchange—a

audience,” Nasrat says. “Popular col-

philosophical movements more than

world dominated by technologies that

regulated activity.

lections elsewhere aren’t necessarily

an investment.

had eroded an artist’s ability to earn a

NFT natives insist on quality, and the influx of NFTs into existing marketplaces makes it challenging to find that

People visiting a marketplace expect

popular in the Nordics, so we’ve

living. NFTs symbolise an opportunity

to take out their credit cards and walk

partnered with regional agencies

for artists to shine as artists.

away with a product. Years of UX studies

who know how to communicate with

aren’t going to be suddenly disproven

the Nordic audience. Our focus on

That idea remains strong in the NFT

quality. The rise of natively created NFT

community, but with a lack of dedi-

because “blockchain is such an awe-

regional markets is something com-

marketplaces on different blockchains

cated curation to let the cream rise,

some technology.”

pletely overlooked by the larger NFT

only adds to the confusion.

these artists might struggle to gain the recognition they deserve.

NFT authenticity

Failing to lower barriers to entry for

marketplaces.”

Swedish startup Wintermads solves

Every NFT on Wintermads is hand-

both problems

picked from hundreds of collections

Porsche bulldozed into the NFT space

newcomers also contributes to keeping

Swedish startup Wintermads is on a

by an in-house veteran art seller

with overconfidence and learned

promising artists in obscurity.

mission to solve both problems by

highly familiar with the NFT space.

quickly that Web2 branding means

reducing friction during the purchase

The company is still in early stages,

nothing in Web3. The luxury brand

UX barriers

process, and providing quality col-

but might be defining a model that all

sold only 16% of its NFT collection, and

And then there’s the UX factor. New users

lections of superlative NFTs that have

successful NFT marketplaces will

suffered enormous backlash from the

wanting to buy an NFT must navigate a

been curated for specific markets.

eventually follow.

18

How Technology is Reshaping the Insurance Industry The insurance industry is undergoing significant changes driven by digitalisation and data. Insurance companies like Tryg are adapting their business models to meet customer expectations in the digital age.

not worried about inflation you are making a big mistake” Bonde concludes.

He emphasizes the impact of new regulations as well as the increasing demand for addressing environmental issues, where insurance companies can play a crucial role in addressing

By Jakob Frier

T

environmental concerns and making a positive impact. Bonde acknowl-

he insurance industry is un-

optimise internal operations. Tryg is build-

has developed

edges that while individuals must also

dergoing significant changes

ing a new claim system. Bonde explains:

Tryg 360, a com-

consider their daily activities, insurance

due to advancements in

“Over the last five years we have re-

prehensive data or-

companies have a unique opportunity

technology, that presents

to contribute to sustainability efforts.

ceived a growing number of claims year

ganization system.

opportunities in new business models

by year. To make sure we can manage

Bonde explains:

“Where we can really make a

and challenges in stricter regulation. As

the number of claims most efficiently,

“Tryg 360 is

difference as an insurance company

digitalisation and data become increas-

we want the customers to fill them digi-

our new way of

ingly prevalent, insurance companies

tally. When doing so, we can provide the

organising data so

are adapting their business models to

customers with the compensation within

all business units

to be more sustainable, that would lead

meet the evolving needs and expecta-

a couple of minutes. And going forward,

can use it in an ef-

to something. When you look at the

tions of their customers.

we aim that 80 percent of the claims will

fective way. We build the system with

CO2 saved when we repair windshields

be registered digitally,” says Bonde.

open API’s to share data with partners

instead of replacing them, we save

and try to find out which ecosystems

double the amount of what the entire

talisation is one of the key factors shap-

Adapting to the Age of Digitalization

we should be a part of and then we

company of Tryg is emitting over a year.”

ing the insurance industry. As customers

The increasing availability of data

build a system where we can control

The approach aligns with their com-

increasingly embrace digital channels,

comes with great opportunities for the

the consent of the customers. So, we

mitment to sustainability and demon-

insurance companies must adapt and

insurance companies to better calcu-

know when and with whom we can

strates their proactive efforts to make a

provide convenient, user-friendly experi-

late risks and prices on the customers.

share data.”

tangible difference. Bonde emphasizes

ences. Bonde highlights the importance

While Bonde acknowledges a need for

of serving customers in a digital way to

open data to be regulated by institu-

Overcoming Challenges and

only crucial for the environment but also for meeting customer expecta-

According to Lars Bonde, the COO at Tryg, a Danish insurance company, digi-

Lars Bonde COO at Tryg

is on the claim side,” Bonde says and continues: “If we can help repair shops

that sustainability initiatives are not

tions as the EU he also emphasizes

Embracing Sustainability

“Customers today demand a digital,

that a company like Tryg is not able

Inflation, regulatory changes, and en-

tions, and Tryg aims to enhance their

seamless and effective case process-

to share how they calculate prices

vironmental concerns pose challenges

value proposition and meet customer

ing and digitalisation provide us with a

since that would force the company to

to the insurance industry. Lars Bonde

needs effectively.

great opportunity to meet that demand

reveal the secret sauce.

highlights the uncertainty surrounding

“Claims is where we will spend a lot

future prices due to inflation, urging in-

of time in the future, both getting more

meet their expectations efficiently:

and enhance customer experience,”

However, Tryg is working on finding ways to share data with partners. To

surance companies to closely monitor

sustainable and reducing claims

By embracing digital channels Tryg

embrace the increasing availability of

and adapt their strategies accordingly.

expenses, and creating better prod-

can leverage data-driven insights and

data and enhance collaboration, Tryg

“If you are working in insurance and

says Bonde.

ucts for our customers.”

19

Opinion

Will 2023 form the beginning of the next big transformation journey for insurers?

By Joachim Allerup, Expert Partner, Bain & Company

The Nordic insurance industry has been performing well in the last decade, with significant investment and focus on driving internal digitalization and automation to optimise profits and improve customer experience. However, with the advent of artificial intelligence (AI), there are new opportunities for both automation and new revenue generation, and insurers need to think beyond just the core business. The next wave of transformation and innovation is prime to affect the industry, and insurers must engage with insuretech and other tech companies to strengthen their future position and growth potential. hile the future growth

W

Nordic insurers have already made de-

speed of change is once again accel-

of the Nordic in-

cisive attempts at using AI and digitali-

erating. Hence, leveraging an efficient,

surance market is

zation for better incremental services,

digitalized, optimized and re-thought

expected to remain

few have started really branching out

Engine 1 (core business) to develop

relatively flat in the coming years, with

to new Engine 2 initiatives or started

Engine 2 (new business) is becoming a

market forecasts for non-life premiums

rethinking the core. 2023 seems to be

pivotal priority for insurance leaders.

suggesting a moderate annual growth

the definitive breakthrough of AI and

of ~3-4% until 2026, there are still scale

possibly also blockchain and hence

and efficiency gains to be captured

might very well be the final initiator of

from the core business. AI digitalization

making insurers go from incrementally

The next wave of transformation and

and automation will remain a strategic

optimizing the core to re-defining the

innovation is poised to affect the indus-

focus area for 2023, as the industry con-

core - and beyond. Hence it also offers

try. Insurers need to focus on partnering

tinues its path to optimization

an opportunity for true differentiation

with companies that offer value to their

for those who understands how to

customers and use their expertise (and

significant topline increase or unlock

implement the new technologies with

data) to expand their offerings beyond

ground breaking differentiation. Insur-

the customer experience in focus and

traditional risk transfer products in

ance companies need to use the new

an eye for new eco-system driven

order to ensure that they are well-posi-

technologies to not only optimize the

revenue streams.

tioned for the future.

However, this alone will not drive

Joachim Allerup Expert Partner, Bain & Company

In conclusion; The Nordic insurance industry has done well in driving digitalization and automation internally.

Especially in the long run technolo-

As a natural starting point, insurers

the traditional risk transfer mandate

gies like AI and blockchain will signifi-

should identify the long-term impact of

into a more holistic set of services

cantly affect the industry; especially as

AI and other technologies and use this

and new arising eco-systems, which

automation of transactional engage-

to define their “future back” opportu-

will eventually expand their footprint.

ments leaves insurance companies with

nities. To inform this process, insurers

Typically within home, mobility and

even less options to differentiate on the

must at all times keep abreast of the

health services.

core offering - unless they add an ad-

industry’s ongoing risk assessment and

Bain research shows a gap in the

ditional focus on how AI can be used to

comply with evolving ethical guidelines.

market with ~60-80% of Nordic con-

deliver innovative customer experiences

sumers interested in integrated eco-

with new creative marketing efforts,

strategic impact of these emerging

system services, and see the insurance

personalized UX, digital membership

technologies can companies start the

companies as the natural (and trusted)

assistance, new product generation

next big transformation journey on the

owners of these. So, whereas most

and re-thought claims prevention. The

right foot.

core business but also think beyond

Only with a clear view of the

20

Nordic Insurance Companies Face Unique Challenges to Digital Transformation The Nordic insurance market is highly unique, running on legacy systems that are challenging to modernise, but serving a highly satisfied user base that isn’t complaining about any lack of change.

By R. Paulo Delgado

T

Insurance has traditionally been

Tryg’s Head of Nordic Innovation

most mature insurance mar-

the laggard in fintech, not only in the

Discovery, Line Dalsfort, is eager to

kets in the world, operating

Nordics. That’s changing now. Sweden

establish meaningful partnerships with

on mainframes that are large-

currently leads the way, hosting 60% of

insurtech startups because it would

ly incompatible with modern systems.

the region’s insurtech startups, includ-

help the insurance giant embed its

But they also have a highly satisfied

ing mobile insurance company Bima;

insurance products in other apps. Tryg

customer base—customers rarely

home insurance provider Hedvig; em-

is currently the largest non-life insurer

change providers in their lifetimes.

bedded insurance product Omocom;

in the Nordics. “You don’t always have

and several others.

to go into your core system to innovate,”

he Nordics are one of the

Although customer retention remains high, nothing stands still. Insurance com-

In Denmark, an insurtech called

she tells NFM. “We have really added value with several insurtech startups.”

panies in the Nordics will eventually need

Undo simplifies signing up for car insur-

to upgrade their legacy systems or risk

ance and offers pay-as-you-go travel

Tryg has several partnerships with

being raided by an aggressive disrup-

insurance—you only pay on travel days.

insurtechs, including one with Undo,

tor—but only if that disruptor’s software

Products of this type are highly

can handle the complex way that Nordic

challenging to launch using the existing

insurance policies are renewed.

infrastructure, Vasanthkumar tells NFM,

app’s service.

But Dalsfort agrees that the user must

and sometimes downright impossible.

ultimately benefit. Where integrations

But insurtechs might be just the

exist, they must be seamless. And if that

backstop needed to hold any poten-

can’t be achieved, then an infrastructure

the Scandinavian countries experience

tial disruptor off until the major insur-

upgrade might be the way to go.

more challenges to innovate than less

ers can carry out a full-scale digital

mature markets.

modernisation.

“Nordic companies have typically

Managing Director, Europe, the Middle East and Africa (EMEA)

where Tryg is the insurer behind the

The Nordic legacy infrastructure means

Innovation challenges

Shreyas Vasanthkumar

“We have a responsibility to our customers,” she says. “Even though people are currently happy with us, as shown

handled innovation using middleware

Insurtech symbiotic relationship

by customer retention, we have an

solutions,” says Shreyas Vasanthkumar,

In the banking sector, the symbiotic

obligation to ensure they remain happy.”

Managing Director for Europe, the

relationship between incumbents and

That means insurance companies

Middle East and Africa (EMEA) at Duck

fintechs is well established. Many of

must keep their guard up and innovate

Creek Technologies, a global insur-

the world’s large banks have embraced

in-house to avoid overly depending

ance software company. “But they’ve

ready-made solutions provided by

on too many intermediaries that could

reached a point where it’s no longer

fintechs because it means those banks

ultimately push the costs up for the

viable to maintain.”

can innovate faster.

end user.

Line Dalsfort Head of Nordic Innovation Discovery, Tryg

21

In other countries, customers renew

FACTS

policies individually.

Renewing policies in bulk is great for customer retention, but it’s a nightmare

40%

Nordic policyholders who are aware of embedded insurance. Almost half are not.

from a technical standpoint. Renewing everything at once is highly complex, and finding a software system that deals successfully with that for the private insurance market is difficult.

“Most insurance systems are architected product-line by product-line,” he

20%

Scandinavians who trust embedded insurance because they trust the provider.

says. With multiple products in one basket, you need the capability to renew the entire basket as well as individual products. You need to account for mid-term adjustments, cancellations of individual policies, account for endorsements—

+50%

Percentage of Scandinavians who are aware of embedded insurance that also trust it.

written amendments that change the terms of the policy—and other factors.

When in Rome, do as the Romans do. When in the Nordics, sell insurance in bulk.

“At Duck Creek Technologies,” Vasanthkumar says, “we’re lucky that we can handle these packaged products out of the box because our DNA is in commer-

Exclusive first findings from the 2023 Global Consumer Insurance Insights Survey, extracted for the Nordic region.

cial and specialty insurance.”

Commercial and specialty insurance operates much more complexly than private insurance. Large commercial in-

Customer satisfaction makes the Nordic insurance world go round

ers in the Nordics. The situation isn’t the

surances have highly complex ratings and

same in the UK.”

policies, and multi-risk policies—policies

That sense of obligation to the customer

This has forced the UK market to

is a core principle of the Nordic market.

innovate far more rapidly than the

“The United Kingdom is also a very

Nordic one.

that cover several risks under one policy.

Technically speaking, dealing with the factors of a multi-risk policy would

mature market,” says Vasanthkumar,

“Retention levels in Norway are

“in terms of spending and penetration.

around 80 or 90 percent,” Vasanthku-

But the Nordic level of satisfaction with

mar says. “They’re nowhere near that

their insurance company is far higher

in the UK. Loyalty, or lack thereof, is a

An interesting battlefield

than in the UK. People love their insur-

big issue in the UK. In stark contrast,

The complexity of renewal might be

it seems to be a non-issue for Nordic

another reason that no disruptor has

insurers, particularly in Norway. The

successfully entered this field—it’s

reason is their commitment to quality

simply too complex to implement. Or

and the ability to deliver excellent ser-

perhaps the right player simply hasn’t

vice in return for customer loyalty.”

seen the opportunity.

Something will happen in the market. Ultimately, there will be a player or two that will have the power, finance, eagerness, and aggression to compete harder. And then this market will become an interesting battlefield.

Shreyas Vasanthkumar, Managing Director, Europe, the Middle East and Africa (EMEA), Duck Creek Technologies

This high customer satisfaction has

be the same as dealing with multiple policies in a single basket.

In either case, Nordic insurers will have

directly contributed to the massive

no defence if that player does appear and

profitability of Nordic insurance com-

shows the aggression typical of an upstart

panies, some of which consistently hit

newcomer hungry for market share.

a Combined Ratio of 80-90%, Vasanthkumar says.

“We have an interesting situation in the Nordics,” Vasanthkumar says. “It’s an unusually profitable market that cannot

Highly complex renewal process

really innovate much because of its

Vasanthkumar tells NFM that the Nordic

legacy systems. Something will happen

market maintains its stability mainly

in the market. Ultimately, a player or

because of the way insurance is sold in

two will have the power, finance,

the Nordics—in bulk.

eagerness, and aggression to compete

When a customer renews, the insurer renews the customer’s entire portfolio.

harder. And then this market will become an interesting battlefield.”

22

For example, the “pure” Dankort has been incompatible with popular

European and Nordic Fintechs: A Radical Shift in Power Dynamics Unleashes a New Era for Payments

payment systems such as Google Pay

Despite high market penetration, the Nordic region’s payments ecosystem remains fragmented, favouring a handful of dominant players. But this power dynamic is changing.

Ruben Frimand Nielsen, Vice President

and Apple Pay. This has led to the rise of so-called “co-branded” Dankorts, issued in combination with Visa or Mastercard.

“Pure” Dankorts accounted for a mere 1.3% of all card payments in Denmark for Q1 2023. Co-branded Dankorts, however, made up over 65% of card payments for the same time period.

In the past, capturing the Dankort market meant signing up with the only company legally allowed to process Dankort payments. Today, the strategy is completely different: You can just ignore it. The negligible volume of transactions, coupled with more competitive pricing from entrants means that merchants are now finally willing to reject Denmark’s “preferred means of payment”—at least the non-Visa version of it.

The same is true in Norway with its BankAxept card, the most popular debit card in the country. Few of the “pure” BankAxept cards exist anymore. The majority is now co-branded with Visa or Mastercard, making it possible for other payment processors to process them.

“One of our Fintech clients is already disrupting the market in Denmark,” says of Sales and Business Development for the Nordics at Finaro. “Because of superior pricing, and the ability to own the entire relationship, the company could offer payment terminals to merchants for free. This was previously unheard of

By R. Paulo Delgado

P

in Denmark. In light of this major saving, the merchants didn’t care that they

YMNTS recently reported that

fintech hoping to tap into it—if they can

the Nordics have been a “glob-

overcome the hurdles.

al digital payments frontrunner

To successfully enter the Nordic payments market, a player would need to

MobilePay, and MobilePay is available though Finaro’s gateway, as well as

Nordic payments fragmentation

methods. Previously, that meant build-

The fragmentation of this zone comes

ing an in-house solution, and typically

fragmented, making it challenging for

about because of different currencies,

teaming up with multiple partners.

any fintech to gain access to the zone.

languages, and myriad local card and

But new market entrants—powered

A 2022 report by Swedish bank Riks-

wallet implementations. In Denmark, for

by Finaro’s end-to-end white-labelled

bank revealed that more than 80% of

example, the nationally issued Dankort

payments solution that caters to every

in-store purchases are made with a card

dominated for years due to higher trans-

Nordic region’s payment idiosyncra-

or mobile phone in Norway, Sweden,

action fees for foreign cards.

sies—introduce an interesting shift in

and Denmark. According to Denmark’s

In Norway, the country’s BankAxept

official government statistics, card

card still dominates the market, even

transactions in the Danish zone alone

over Visa and Mastercard.

power dynamics to the region.

FACTS •

Only 1.3% of card transactions in Denmark were made with “pure” Dankort in Q1 2023.

•

Swedes paid over $106.3 billion by card in 2021.

•

Over 80% of in-store purchases in Norway, Denmark, and Sweden are made with a card or mobile phone.

•

100% of Danes aged 20 - 29 paid with MobilePay in April 2021, and 99% aged 30 to 39.

Loss of market share opens the

topped $93.5 billion (DKK642 billion) in

The Swedes love to pay with Swish,

2022. And in 2021, Swedes paid a total of

while the Danes use MobilePay. In April

A changing global ecosystem has

$106.3 billion (SEK1,115 billion) by card.

2021, 100% of Danes in their 20s, and

resulted in enough loss of market share

The Nordic payments sector is a

99% in their 30s, paid with MobilePay at

for major players, so that entrants now

least once.

stand a chance of competing.

promising revenue stream for any

Finaro is also officially an acquirer for

support each of these different payment

small region is also one of the most

for decades.” But the relatively

couldn’t accept Dankort.”

door to new entrants

23

Fintechs are asking themselves, ‘Why are we paying for payment services when we could develop our own? By partnering with someone that can process those payments, they can immediately compete at an equal level with established players.

Ruben Frimand Nielsen, Vice President of Sales and Business Development for the Nordics at Finaro

own?’” says Nielsen. “By partnering with someone that can process those payments, they can immediately compete at an equal level with established players in the Nordics. Companies that already have merchants using their products can take full advantage of the payments infrastructure. For example, a fintechs providing a billing system could add a white-laballed payments solution that they could run on their own terms.

Companies can go all-in with Finaro or use only what they need, such as Finaro’s acquiring service. But every gap can be immediately filled. Additionally, Finaro is currently focusing on long-term partnerships in the Nordics rather than on contracting directly with merchants, almost all major international wal-

Finaro provides the full gamut of

thereby greatly reducing the chances

lets, including Google Pay, Apple Pay,

payment services from gateway to

of any conflict of interest—something

and WeChat Pay. In total, Finaro offers

processing to acquiring. Because it’s an

that has historically been a problem in

access to over 250 different payment

acquiring bank, it can set its own card

Denmark, says Nielsen.

methods globally.

transaction fees for partners. The com-

The benefit for fintechs is Finaro’s

pany is also a licensed bank, giving it the

global reach: Companies entering Eu-

How Finaro empowers fintechs in the

power to set its own rates for FX trades,

rope or the Nordics using Finaro’s back-

Nordics and beyond

provide lines of credit, loans, or even

end would immediately gain access to

Loss of market share hasn’t been

open up business accounts.

international markets using the same

enough on its own to radically disrupt

In essence, any fintech wishing to

the Nordic payments market. But if you

plug into Finaro’s payments solution

add the ability to own the entire pay-

would own the entire relationship with

recognized how much control they can

ments relationship, and charge more

its merchants and be able to offer the

take of the payment processing cycle,”

competitive rates to merchants, a lot

full list of financial services.

says Nielsen. “It could become an

more opportunities exist for players bold

“Fintechs are asking themselves,

infrastructure.

“Even many big companies haven’t yet

entirely new revenue generator for them

enough to try and take a slice of the

‘Why are we paying for payment

because everything is streamlined

market from the giants.

services when we could create our

under Finaro’s umbrella.”

Ruben Frimand Nielsen Vice President of Sales and Business Development for the Nordics, Finaro

24

25

From Woes to Woos: Baltic Fintech’s remarkable journey to become a Global Fintech Innovation powerhouse As the Baltic countries of Lithuania, Estonia and Latvia continue to solidify their position as frontrunners in the global fintech landscape, their success story serves as an inspiration for other nations grappling with the growing pains of fast developing fintech ecosystems. By embracing a renewed determination for regulatory rigor, innovation, and security, these fastrising nations are proving that with the right strategies, a rocky past can be transformed into limitless opportunity, fertile ground for collaboration, investment, technological advancements and economic growth.

By Chris Crespo

P

icture this: you’re at a bustling

their upward trajectory in the fintech

their past challenges, taking significant

tech conference, surrounded

industry with a highly skilled workforce,

measure to overhaul their regulatory

by the brightest minds in the in-

favorable taxation, rigorous regulations,

and supervisory functions and address

dustry, and everyone is talking

and a strong startup culture.

these issues head on.

about the same thing – the Baltic region.

But that has not always been the case.

Recognizing the gravity of the situa-

This small European region has been

All three states have in recent years,

tion, the Baltic states have implement-

making waves in the fintech industry,

been forced to overcome challeng-

ed stringent anti-money laundering

and it’s not slowing down anytime soon.

es related to compliance and money

regulations, signaling their unwavering

Similar to a scaleup that has achieved

laundering. Reputations have been

commitment to combating financial

product-market fit and is experiencing

bruced, licensens have been suspended

crimes. Moreover, they have actively

rapid expansion, the Baltic countries

and the Baltic states have had to pull

increased collaboration and coopera-

of Lithuania, Estonia and Latvia, have

themeselves through scandals that have

tion with international law enforcement

established a thriving fintech ecosystem

tarnished their aspiring ecosystems. In

agencies, demonstrating their proac-

attracting attention from investors and

spite of these challenges the Baltics

tive approach in tackling the issue at a

entrepreneurs worldwide. Moreover, the

have demonstrated remarkable resil-

global level and emerging as formida-

Baltics are well-positioned to continue

ience and determination to overcome

ble players in the fintech arena.

26

In this article, we explore how the

Vaiva Amulė Head of Fintech Hub LT

countries in the region are rising above this legacy and evolving into a brighter future as global fintech hubs.

Sustainable growth Lithuania’s startup ecosystem is no longer in its infancy; it’s in the scaleup phase and growing exponentially. With a population of just 2.8 million, it is not only the most populated Baltic country but also a leading fintech ecosystem with 263 fintech companies registered as of the end of 2022 and the most licensed payment or electronic money institutions in the European Economic Area. Its relatively small size might make it easy to overlook this hidden gem in the European startup scene, but, investors are taking notice, and for good reason.

In 2022, Lithuanian startups attracted 295 million euros in investment. According to Dealroom, Lithuania is the second-fastest-growing startup ecosystem in Central and Eastern Europe, with a value that has steadily increased nearly 17 fold to 9.5 billion Euros, all between 2017 and 2022.

Many Lithuanian startups focus on sustainability and profitability, financing their development from profits rather than relying solely on investments. Half the founders use their funds or shareholders’ contributions, demonstrating a commitment to long-term success. As Vaiva Amulė, head of Fintech Hub LT, the main Fintech association in Lithuania puts it: “There is a focus on sustainable growth and developing business models that can be scaled.”

So, what does the future hold for Lithuania’s fintech ecosystem?

Strict but progressive regulator The Lithuanian government has played a significant and proactive role in fostering the growth of the Fintech industry. Among these measures, a notable accomplishment has been the inclusion of fintechs in the Bank of Lithuania’s payment system, CENTROlink, which grants them access to the Single Euro Payments Area (SEPA).

In addition, the government has created a Center of Excellence in Anti-Money-Laundering, the first public-private sector partnership in Europe, operating as a separate institution. Currently, the country is actively seeking to attract

27

AMLA, the Anti-Money Laundering Authority of the European Union.

While Lithuania has made significant

“The Lithuanian fintech industry is poised to continue its growth trajectory over the next few years as it solid-

progress in developing a favorable

ifies its position as a leading fintech

regulatory environment for fintech,

hub in Europe. The key drivers of this

there are still some challenges that

change will include a continued focus

need to be addressed. As the Lith-

on innovation, collaboration between

uanian fintech industry continues to

institutions and the market, and the

mature, it will be essential for players

ability to adapt to new and upcoming

to strike a balance between regulatory

regulations.”

compliance and growth.

“The Lithuanian regulatory environ-

Breaking the waves

ment for fintech has indeed evolved

Like Lithuania, Estonia is experi-

over time and is now much stricter

encing an expanding fintech boom.

than before. As the industry grows and

Catalysed by an impressive lineup of

matures, regulators have shifted their

unicorn founders who upon exiting

focus towards ensuring stability and

their organisations have chosen to

minimizing risks in the financial sector.

reinvest capital, and know how in the

This has led to more rigorous com-

country, this small nation of only 1.3

pliance requirements, which can be

million inhabitant has already been the

challenging for fintech companies to

launchpad for 10 unicorns and a line

navigate.” Says Amulė.

of hopeful “soonicorns” to follow. With

She continues: “It is crucial to note

the highest density of unicorns per

that these measures are sometimes

capita in Europe, Estonia has claimed

necessary for the long-term stability

the “unicorn stable” title in the Nordics

of the industry. Ongoing collaboration

and Baltics.

between fintech companies, regula-

With a young and highly digital pop-

tory bodies, and traditional financial

ulation, Estonia’s emphasis on STEM

institutions will be needed to create

(science, technology, engineering and

an environment that fosters innovation

maths), a culture of pragmatism and

while ensuring the safety and stability of

tight knit startup ecosystem, offers a

the financial system.”

glimpse into the success of the coun-

Towards the end of last year, Lithuania implemented significant changes to

try’s ascending Fintech scene. But it doesn’t end there.

the laws governing virtual asset service

According to Kaido Saar, chairman

providers (VASPs) in order to enhance

of Finance Estonia and co-founder and

risk management and ensure effective

CEO of Mifundo, a data solution for

prevention of money laundering within

cross border credit products. One of the

the country. Under the new regulations,

strengths of Estonia’s fintech ecosystem

companies engaged in such activities

today is its regulatory environment,

are required to maintain an initial capital

which is known for being both innovative

of at least 125,000 euros. As a result of

and efficient. Saar explains:

this increased financial requirement, the

“Estonia is still a small country. There-

number of VASPs operating in Lithuania

fore, it is easy to set up the contacts.

has decreased from approximately 840

Moreover, regulatory institutions are

to around 300.

ready to meet with fintech companies,

In addition to the regulatory environment, Lithuania offers various other

if relevant, and provide feedback on licensing if required.”

advantages to fintech companies.

Openness and accessibility to and

The country has a highly educated

from the governmental institutions are

workforce, with many people skilled

essential to the future of Estonian fintech.

in technology and finance. Lithuania’s

“We have actively worked with

cost of living is relatively low com-

Estonian governmental institutions

pared to Northern European countries,

to design and build the dedicated

making it an attractive location for

Fintech Strategy for Estonia. Hopefully,

startups looking to keep their costs

it will soon be approved by the gov-

down while scaling and enjoying direct

ernment and launched later this year,”

access to the European market and

says Saar when asked about the future

financial system.

of Estonian fintech.

28

Kaido Saar Chairman of Finance Estonia and co-founder and CEO of Mifundo

its regulatory duties brought adverse

the market. Like Single.Earth, Arbon-

ing pains. In 2017, the Danske Bank

effects to Estonia’s financial sector rep-

ics, and Kwota. Also, strong growth is

Estonian branch was embroiled in a

utation, the country has swiftly turned

visible in regtech (regulatory technolo-

major money laundering scandal

crisis into opportunity, sparkin a surge in

gies red.) and usage of open banking in

involving billions of euros, which led to

demand for companies offering cut-

Estonia,” says Saar.

investigations and reforms by the

ting-edge solutions in compliance and

government and financial regulators.

anti-money laundering measures.

But Estonia has experienced grow-

“The Estonian Financial Supervision

One standout example is Salv, a

While the initial scandal may have tarnished Estonia’s financial sector reputation, it has served as a catalyst

Authorities stopped the activities in the

leading firm providing innovative

for positive change, allowing Estonia

branch and forced Danske Bank to quit

services to assist financial institutions in

to emerge stronger and more resilient,

operations in Estonia. The supervisors

meeting the ever-increasing regulatory

solidifying its position as a global leader

gained good experience to advise

requirements and effectively combat-

in innovative financial technologies.

other regulators and Estonian financial

ting money laundering.

companies dealing with related matters,” says Saar.

While the scandal involving a foreign company’s negligence in fulfilling

“New business models have also ap-

The perfect testbed

peared. For example, so-called climate

As Estonia is a small country, each newly

fintechs and carbon credits-related

founded fintech company must be inter-

companies have widely popped up on

national from the beginning, says Saar.

29

“Besides global ambitions, we have a strong knowledge base and supportive startup ecosystem which helps fintech companies to grow. After the successful growth of Estonian unicorns, e.g. Skype, Wise, Veriff, we have seen the collected

Ričards Švītiņš Leading expert from the Investment and Development Agency of Latvia (LIAA).

knowledge and financial resources are widely used for planting new companies in Estonia, hopefully, new unicorns as well,” he adds.

Estonia holds several records for the number of startups and unicorns per capita. According to Invest Estonia, there are more than 1.000 startups and 7,7 unicorns per million per capita.

As Estonia is a small and open country, our fintechs are constantly searching for partnerships with other players in the global ecosystem. Therefore, Estonian fintechs can provide high-level technology and people with the right spirit behind the technology.

“Estonia is a perfect testbed for new technologies due to the size of the country and people’s willingness to consume new solutions. Still, scaling out the global partners are highly essential, but due to the international mindset, Estonian fintechs have the potential to shape the future of the financial industry,” says Saar.

Estonia’s fintech industry is thriving despite the country’s challenges. The industry’s focus on sustainability, transparency, innovation, and a supportive regulatory environment, are key factors driving growth in the sector.

Coping with a crisis The governmental support to cope and rise from a crisis has also pushed the fintech ecosystem forward in the “We are now at a point where block-

Latvian Financial and Capital Market

FinTech Forum, where industry players

As a result, Latvia has been growing

chain and crypto industries are seen as a

Commission (FCMC), offer professional

from Latvia and abroad could network,

and evolving in recent years, thanks to

valuable asset and a usable technology

support and consultancy services to all

discuss new ideas, and address the

various factors such as the emergence

solution,” Švītiņš says.

market players on existing and upcom-

challenges,” says Švītiņš.

country in the middle of the Baltic region.

of innovative solutions and the support of

The country implements different

government institutions. To understand

European Union strategies to support

the current state of the industry and its

startups, including those focused on sci-

A future crypto stronghold

to-Assets (MiCA) Regulation will be a

prospects, we spoke with Ričards Švītiņš,

ence-intensive and DeepTech business

Despite the Latvian Fintech indus-

major development in the industry.

a leading expert from the Investment and

ideas - including in the fintech industry.

try’s success, it still faces numerous

This regulation will establish crypto as

“LIAA works with state support pro-

challenges, according to Švītiņš. This

a legitimate and regulated industry

“The financial crisis in 2008 was a

grams for companies of different sizes

includes regulatory and licensing pro-

and help many entrepreneurs in the

turning point for the Latvian Fintech

and industries. Although the state does

cesses, company operational work, and

field to flourish. Additionally, with

industry” says Švītiņš,. At that time,

not offer specific support programs

anti-money laundering.

approximately 20 per cent of all

alternative financial institutions began to

for fintech companies, they can apply

emerge, offering fast, innovative credit

and benefit from the support programs

are ongoing collaborations between

fintech sector, the country’s fintech

solutions. Over time, the industry ma-

offered to all startups,” Švītiņš says.

Latvian Fintech companies and other

industry will continue to expand and

tured, and new trends, such as block-

Today, The Innovation Hub and

players in the global Fintech ecosys-

innovate, especially in blockchain and

Regulatory Sandbox, provided by the

tem. In 2022, Latvia hosted its first-ever

crypto-assets.

Development Agency of Latvia (LIAA).

chain and crypto, emerged.

ing regulations.

Looking ahead, Švītiņš believes that the European wide Markets in Cryp-

“Everyone is up for the task, and there

Latvian startups operating within the

30

Fighting the Invisible War: The Power of Anti-Money Laundering Technology in the Fight Against Financial Crime

By Chris Crespo

As the global community continues to tackle the issue of financial crime and money laundering, it has become increasingly clear that preventing such crimes is vital to safeguarding society’s financial systems. Non-compliance can result in significant repercussions, including damage to reputation and legal consequences. Financial institutions must therefore take proactive measures to address these issues. hroughout the month of

T

assessments as they are not econom-

March, Nordic Fintech Maga-

ically viable. However, due diligence is

on the sidelines as the fight against

zine ran its first Deep Dive of

becoming increasingly necessary when

financial crime intensifies. Several

2023 focusing on the heroes

it comes to digital assets as the lack

technology companies are opting to

that are tirelessly working to fight finan-

of regulation in Web3 environments is

tackle the challenge head-on, leverag-

cial crime. This is the first of a set of ed-

creating loopholes that criminals are

ing everything that exponential tech-

itorial deep dives aimed at uncovering

exploiting to commit fraud and laun-

nologies have to offer. Georg Hauer,

the real challenges and true innovation

der money. A recent court filing in San

COO of Hawk:AI, a fintech startup intent

that is revolutionizing financial services

Francisco alleging that hundreds of

on using AI to detect patterns in large

from inside the ranks of the industry in

Roblox accounts are laundering money

data sets, believes that artificial intelli-

the Nordics and the Baltics.

by using in-game currency to purchase

gence can be used to combat financial

fake in-game goods hints at new trends

crime and turn it into a competitive

Dive, we spoke to over a dozen experts

to watch in the fight against financial

advantage. He notes that criminals are

in the field. One of them was Joosep

crime. Such cases illustrate the lengths

becoming more advanced in their tac-

Vahtras, a former Compliance Advisory

criminals will go to find new, innovative,

tics, making it difficult to detect fraud

Lead at Danish Unicorn Chainalysis

and creative ways to hide funds.

without the help of artificial intelligence.

As part of our AML & Fincrime Deep

and an expert in compliance. Joosep

However, companies are not sitting

To combat financial crime, Louie Var-

In conclusion, preventing financial

likens compliance to the brakes of a car.

gas, the ACFCS Nordics Chair, founded

crime and complying with anti-money

“Brakes don’t make the car go faster, but

the Association of Certified Financial

laundering regulations are essential in

they enable the driver to control it bet-

Crime Specialists Nordic Chapter to

safeguarding society’s financial systems.

ter.” Compliance is essential for venture

create a community that shares infor-

Compliance is not only a resource-con-

capital and private equity firms investing

mation, benchmarks, and fights financial

suming cost but also enables organiza-

in new fintech or crypto businesses. The

crime in the region. According to Vargas,

tions to navigate potentially challenging

Estonian Danske Bank scandal serves

the biggest challenge in combating

situations. The financial industry has a

as an example of what can happen

financial crime is data, and companies

responsibility to protect against financial

when compliance is not taken seriously.

need clean, good data during the Know

crime, maintain a good reputation, and

Compliance is expected to continue to

Your Customer (KYC) onboarding pro-

build trust. As the financial industry

be a crucial factor in the next generation

cess, a practice that has yet to penetrate

continues to evolve, transparency, trust,

of financial services, fintech, and crypto

the gaming industry where platforms

and control are more critical than ever.

businesses seeking to raise capital.

have been allowed to create their in-

With collaboration between financial

Web3 environments’ emergence

game currencies, often convertible to

institutions, technological advance-

is making it increasingly difficult for

fiat. Vargas argues that many regulated

ments, and a focus on purpose, we can

financial institutions to determine the

companies have outdated data ware-

work towards a more stable and secure

legitimacy of a digital item on a pop-

houses that are not integrated, making

financial future where the threat of

ular gaming platform. As such, banks

it challenging to fight financial crime

financial crime, while not totally eradi-

are not keen on conducting such

effectively and stay ahead of criminals.

cated, can be significantly thwarted.

Chris Crespo Head of Content at Nordic Fintech Magazine

31

Opinion

Open Banking: Now & a glimpse of the Future

By Sarah Häger, Regional Manager Scandinavia and DACH, Enable Banking

Throughout 2023, I have observed a growing skepticism about the potential of Open Banking.

Some investors believe it reached or passed its peak. Some have lost faith in financial institutions’ ability to develop user-friendly services, and claim their APIs will never be functional but will remain limited to its current applications. I have a different view, let me elaborate.

Analogy with the iPhone

closely integrated with emerging tech-

I often compare the adoption of Open

nologies, and interact with non-financial

Banking to the wide adoption Apple’s

technologies. This will enable new use

iPhone has seen, being a large tech-

cases and provide even greater value to

nology shift that opened the ecosys-

consumers and businesses alike.

Sarah Häger Regional Manager Scandinavia and DACH, Enable Banking

tem for smartphones.

However, if we rewind to the first

1.

AI-driven financial services

iPhone in 2007, it had only predeter-

Chat GPT has proved there are

mined apps. Features like videos and

several applications to AI that

flashlights were unavailable. At the

we are only now gaining under-

time, industry leaders scoffed at the

standing of. Think of financial

iPhone. That skepticism is similar to

APIs that could be used to fuel

the situation of PSD2 APIs today.

AI-powered advisory platforms

According to the Gartner hype cycle,

that provide personalized finan-

financial APIs are still in an early stage,

cial advice optimizing spending,

which means that the technology is

saving, and investment strat-

not yet widely adopted. This stage is

egies based on real-time data

characterized by innovation, but also a

and predictive analytics. The

high degree of uncertainty.

level of personalization here Cross-industry integrations

to create immersive virtual or

The Tipping Point

goals, risk tolerance, and market

Financial APIs could enable

augmented reality financial

Looking forward into the future, perhaps

trends, automating wealth

the integration of financial

experiences, such as virtual

5-6 years from now, what use cases will

management and optimizing

services into non-financial

bank branches, where custom-

we see come to life then? Open Banking

investment strategies for each

platforms, such as social media,

ers can interact with AI-powered

APIs will undoubtedly become more

person’s unique needs.

healthcare, e-commerce, or

financial advisors or explore

even education–creating new

investment opportunities in an

revenue streams and enhancing

engaging 3D environment.

could include an individual’s

2.

EXPECTATIONS

user experiences. For example,

Financial Data APIs

3.

Hype Cycle for APIs, 2022 (as of August 2022)

by integrating financial APIs into

In conclusion, the ecosystem is still in

the healthcare industry, patients

its early stages, and as exemplified

could easily and securely pay

with the iPhone analogy, there is still

for medical bills or manage

significant potential for growth and

health savings accounts. APIs

innovation. I look forward to looking

could also enable healthcare

back in 5-6 years to see how these use

providers to streamline their bill-

cases have changed the way we do

ing processes and better track

business, and what is possible with the

financial transactions.

APIs then. I look forward to the oppor-

Virtual and augmented reality

tunity to enable them, and continue to

experiences

find ways to push the boundaries of

Financial APIs could be utilized

what is considered realistic.

32

Opinion

Busting the super app myth: Why Europe is unlikely to get one-stop-shop apps

By Mads Birk Nielsen

Financial services are changing with increased white labelling and outsourcing through BaaS, BPaas, PaaS and SaaS. But for substantial change, this trend needs to be taken further to super app territory, where a single app seamlessly integrates services from an unlimited number of providers, enabling innovators to focus on improving the user experience. This would create a win-win marketplace, unlike the banking world of today, which is caught in pricing competition and zero-sum games. But is this a reality that would ever come to pass in Europe?

exist are in sole position to

T

structure. They’re not likely to disrupt

the incumbents and the disruptors.

lead this monumental task.

the more traditional branches of

Most of the incumbents are off the ta-

They have the resources,

financial services like lending because

ble because they’re regionally focused

skills, and ingenuity to pull off such a

they already own the ecosystem, the

or are moving towards the top right

feat. However, it’s challenging to create

hardware, and the OS. Traditional ser-

corner of the market, focusing on more

a vendor lock-in, and there’s growing

vices like lending are also very manual,

affluent customers. Remaining are only

distrust from users, governmental

which does not suit tech companies

the largest incumbents, digital chal-

bodies, and politicians who seek to limit

that want to automate. But if anyone

lengers, and non-financial platforms

the influence of American tech giants in

is going to eat the other’s lunch in the

like social platforms, ride-hailing, and

Europe. This makes it harder to create

highly commoditized payments space,

food delivery services.

a super app ecosystem like those in

it’s the tech giants. They manage the

It’s possible to create a super app in

China, where 360 profiling is the norm.

ideal ecosystems for this, are glob-

the west or Europe, but it’s unlikely to

he biggest companies to ever

underlying hardware and data infra-

The ones left on the battlefield are

Tech giants have been making

al, and have the resources to make

succeed due to the following rea-

moves into banking and payments,

international payments a smooth

sons:The tech giants have enormous

but they’re focused on owning the

experience.

revenues from their current platforms

33

and will work against other companies

are often resistant to change. And

reign supreme, possessing an impreg-

gaining leverage over them. This makes

then there is Open banking and de-

nable lead. Any new entrant seeking to

it difficult for any new entrant to pursue a

centralized finance (DeFi) which have

usurp their position must compete on a

super app without entering direct com-

the potential of tying the ecosystem

grand scale, with formidable infrastruc-

petition with Alphabet and Apple, which

together so well that it feels like a

ture and network effects. However,

should deter most contenders.

super app, reducing the need for

history teaches us that disruptive

centralized providers.

change continues to accelerate at a

Competition is also a major factor, as any move towards super app func-

Despite numerous attempts, the road

breakneck pace. Though it appears

tionality will provoke counter moves

to a super app in the Western market

improbable that a super app could

from equally skilled and well-funded

remains obstructed by unfavorable

flourish under the present conditions,

competitors. Slow disruption in finan-

market dynamics, rigid industry silos,

the tiniest wrinkle in the status quo

cial services is another challenge, as

and segmentation. Only a seismic shift

could unleash the type of disruption

legislative friction makes it difficult

in competitive, regulatory, or customer

that opens up unprecedented opportu-

for new players to gain a foothold.

behavior landscapes can create the

nities for partnerships, collaborations,

Legacy and tradition are also factors,

optimal environment for a super app to

and cross-industry blends, whether

as both incumbents and consumers

blossom. The tech behemoths currently

strategic or hostile.

34

Collaborations Needed to Unleash the Full Potential of AI AI is driving the transformation of the financial industry in the Nordic region, providing more accurate forecasting and robust risk assessments, and opening up funding opportunities for businesses. The collaboration between fintech companies, traditional financial institutions, and regulators is crucial to ensure that this development continues to advance and benefit society.

By Jakob Frier

A

rtificial intelligence (AI) is

Eliminates Bias and Boosts

critical data before. “Most people in the

a crucial element in the

Funding Access

AI space have experience from com-

modernization of the fi-

One of the main concerns with using

puter vision or text-based models,” says

nance sector. AI in financial

AI in the financial industry is ensuring

Landgren.

services has revolutionized com-

that the algorithms used are ethical and

According to Landgren, a collab-

panies’ operations, from assessing

unbiased. However, Landgren assures

oration between fintech companies,

risk to automating processes. In this

that Ark Kapital doesn’t use black-box

traditional financial institutions, and

interview, Henrik Landgren, co-found-

AI methods but instead uses AI as

regulators is crucial in the development

er and CPTO of Swedish fintech Ark

part of a detailed forecasting and risk

of AI in the industry.

Kapital, shares his thoughts on the

assessment process.

“This is the next step in the evolution,

state of AI in the Nordic region and

“Therefore, we control exactly how

and it’s key that regulators and institu-

how crucial the technology is to the

AI is used along the process. Thanks to

tions follow and support this develop-

company’s growth.

AI and our data-driven approach, we

ment, so we - as a society - can reap

eliminate bias typically seen in such

its benefits,” says Landgren.

Ark Kapital is a fintech company that uses AI to generate more robust risk assessments, quicker and continu-

processes,” he says.

The use of AI in the financial sector has

The Nordic region has been at the forefront of data-driven tech and

ously updated, to provide funding and

the potential to establish a new standard

fintech, making it a crucial player in the

growth tools to founders that previous-

across the entire finance sector, especial-

global development of AI in fintech.

ly could not access them. According to

ly in the way financial services are deliv-

However, other markets have made

Landgren, AI is essential to the product

ered to customers. For example, Land-

giant leaps, and it is important that the

and services of Ark Kapital.

gren explains that AI helps Ark Kapital

ecosystem continues to jointly invest to

“When companies connect to our

generate more robust risk assessments

ensure that the Nordic region keeps its

growth forecasting engine, AIM, they

quicker and continuously updated, which

competitive edge, says Landgren.

connect the raw event data to it. This

makes it possible to give funding and

allows large-scale data operations to be

growth tools to founders that previously

required for employees in the financial

run, including the latest methodologies

could not access them.

industry. According to Landgren, it is

AI is also changing the skill set

in AI,” says Landgren and continues:

“This has the potential to establish a

crucial to find people who are special-

“Thanks to the data richness and

new standard across the entire finance

ized in their field and who understand

sector,” he adds.

AI so they can drive the exploration and

the methodologies, the platform can generate forecast accuracy and growth

the frontier forward.

tolling, which would have been impos-

Collaborations are critical

sible without it. It also makes it possible

Implementing AI in the financial

been a complete change of pace in AI

for Ark to issue growth loans, with up

industry comes with its own set of

development. With LLMs, getting

to 3 years of interest only and up to 7

challenges. One of the challenges that

people who understand modern AI, not

years to repay it in full, which would not

Ark Kapital has faced is access to talent

just the previous generation AI is even

be possible without it.”

who’ve worked on AI with large-scale

more important,” Landgren conclude.

“But with the latest events, there’s

Henrik Landgren Co-founder and CPTO, Ark Kapital

35

MAP Group is not your run-of-themill financial crime prevention or tech company. Instead, it was founded by two police officers who worked with financial crimes and developers who created a system to prevent and understand financial crime.

“My role as Chief FinCrime Officer is to put the knowledge of the criminal mindset into the machine. For me, preventing financial crime is not just about data. It’s about understanding what motivates someone to commit these crimes and building scenarios to analyze patterns so that future crimes can be prevented before they occur,” Schnell says.

Being ahead of the curve is critical to preventing financial crime. Mona Lisa Schnell emphasizes. It requires understanding the criminal’s mindset and their next move, whether it be a situation in the community or a war in

Mona Lisa Schnell, Chief FinCrime Officer at MAP Group.

another country.

“All of these factors play a critical role

Inside the Mind of Financial Criminals Uncovering the roots of financial crime is about understanding motivations and the money trail. Mona Lisa Schnell stresses the significance of preventing financial crime to protect the most vulnerable in society and highlights the need to comprehend the consequences and impact on society fully.

crime,” Schnell says.

Everybody can commit crimes Schnell has spoken with all types of criminals, from gang members to highly educated individuals with big careers and families.

“One example I can cite was an older man who had his own company for 20 years. When the market changed, and the company’s economics went bad, he needed to get more money to survive,” she recounts and continues: “He created an invoice factory and committed money laundering for over 200 million Danish kroner. I believe he wasn’t evil. He just couldn’t see his life’s work go down the drain. The consequences were devastating. He lost everything, including his family and children. When he finishes his prison term, he will have few options left and may be forced to commit new crimes.”

Understanding financial crime is not

By Jakob Frier

F

in solving the big puzzle of financial

just about one thing. The money must come from somewhere, whether stolen

inancial crime is a heinous

Chief FinCrime Officer at MAP Group.

and destructive force that can

“When there is less money in the state,

consultant, but on my dime, to get a

activities like narcotics or human traf-

devastate anyone, but it is the

everyone from children to education,

first-hand look at the individuals who

ficking. The money laundering process

most vulnerable among us who

innovation, and new companies suf-

have fallen into this abyss,” she says.

is a way to cover up the origins of the

fers,” she says.

“When I speak to these inmates, they

money, making it difficult to trace back to its source, according to Schnell.

are often hit the hardest.

“I have visited prisons, not as a paid

from the government or from illegal

“The consequences of financial

Mona Lisa Schnell has dedicated

often don’t understand why I’m talking

crime are dire, with the poor and the

herself to understanding the dark im-

to them. But I know that under different

“People involved in money launder-

elderly often bearing the brunt of its

pulses that drive individuals to commit

circumstances, I could just as easily be

ing are often the next step in the chain

impact,” says Mona Lisa Schnell, the

financial crimes.

in their shoes.”

of criminal activity,” she concludes.

36

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