Copenhagen Fintech magasin juni 2017

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Fintech startups most popular among investors

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Regulators are tightening the grip on banks

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Unexpected competitors are stealing banks’ business

Copenhagen Fintech...

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New Nordic Fintech?

Copenhagen is rising towards the world’s fintech top. Here’s how industry leaders plan to keep growing

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Tag cloud

crowdfunding MobilePay entrepreneurship blockchain regulation corporate innovation

fintech startups alternative financing

unicorns

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investments leadership artificial intelligence insurance banks bitcoin GDPR fintech lab sharing economy card fraud financial fintech hub disruption NFC & contactless

technology

financial tools mobile payments predictive analysis peer-to-peer economy lack of talent encryption methods gender diversity APIs PSD2 automation sharing bank data

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Disclamer ...

Copenhagen Fintech was produced by Berlingske Media's commercial team in close cooperation with Copenhagen FinTech. This magazine helps fintech professionals and Berlingske readers navigate the rise of the Copenhagen fintech ecosystem. We thank the sponsors, sources, Money20/20 and the editorial team for contributions.

Colophon: Advertising: Berlingske Media • Editor in chief: Henning Andersen, hean@berlingskemedia.dk Published by Berlingske Media • Project owners: Stian Faber, sf@reach-media.dk, Cell: +45 50809160 • Malene Bentzen, mb@reach-media.dk, +45 50809158 Journalists: Elías Lundström (editor), Simone Okkels, Dan Mygind, Sebastian Kjær, Klaus Thodsen, Mathias Caspersen Layout: Berlingske Media, Client Service: Nicole Vesth Langer & Julie Hugger Petersen

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With words from...

Thomas Krogh Jensen Brian Mikkelsen Anna Mee Allerslev Ivan DamgĂĽrd Simon Haldrup

Copenhagen Fintech...

Contents p.

p. p.

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12 Debate: Copenhagen fintech hub at a crossroads 18 Investors love Danish fintech startups 22 Upcoming businesses brewing at Copenhagen Fintech Lab 24 Startups in new gold rush for bank data 30 Bad news for gender equality in (fin)tech 34 The payment war is escalating 36 Welcome to a future of invisible payments (sponsored) 38 EU regulation is shaking up the financial industry 44 Government makes surprising fintech move 48 Banks are learning from startups for future survival 50 Customer experience, and artificial intelligence for banks (sponsored) 54 Crowdfunding is taking off in Denmark 60 New encryption method revolutionises data sharing 66 Fintech in Copenhagen: A love story

10 Sponsored content

...

Thomas Krogh Jensen, CEO, Copenhagen Fintech

Sponsored content 11

Editorial

The Danish fintech scene is flourishing In just a few years, Copenhagen has taken off as an internationally renowned fintech centre with a host of initiatives supporting technological innovation in the financial sector.

By Thomas Krogh Jensen, CEO, Copenhagen Fintech

F

intech in Copenhagen (and Denmark in general) is really accelerating. This is fueled by Denmark being the most digital country in EU and number 1 in Europe for ease of doing business. Right now, more than 140 fintech startups are working on a better customer experience by increasing transparency, lowering costs and experimenting with new and innovative ways of distributing financial products and services using technology. More than 30 of them are residents in the Copenhagen FinTech Lab – Scandinavia's first co-working space and incubator dedicated to fintech entrepreneurs. It is 1,500 square meters of pure fintech in the heart of Copenhagen, with room for 130 entrepreneurs, academic thinkers and corporate innovators. You will meet many of them in this magazine and get insights into how they are working on reshaping the financial services industry.

Building a Nordic fintech hub The raison d'être of Copenhagen Fintech Lab is to create growth and new jobs in an industry that is going through a massive digital transformation. In a report published by Deloitte, 44 of the world’s different fintech hubs are analyzed and Copenhagen makes a strong first entrance as number 16. But

we do not rest on our laurels. Our aim is to be in the global top 10.

Luckily, we are not alone on this journey: our ambitious goal is supported by the government. Brian Mikkelsen, Danish Minister of Industry, Business and Financial Affairs, decided in April, 2017, to further strengthen the FSA’s fintech activities and he also visited the Lab himself in May, 2017 − a very positive and strong signal that shows the attention this area is attracting on the highest level. Anna Mee Allerslev, Mayor of Employment and Integration in the City of Copenhagen is also personally engaged in this cause.

She strongly supports the initiative and believes that we have the potential to be “part of the big fintech league.”

Many exciting new initiatives The technologies that are being developed and utilized within the fintech industry have massive implications beyond the financial world − just think of blockchain. Denmark boasts many interesting startups and experiments in this area and there is also world-class research being done at university level. As evidence of this, the European Blockchain Center has recently been established in Copenhagen by several Danish and foreign universities.

Artificial Intelligence (AI) is no longer

a technology of the future. Again, Denmark is taking the lead with the announcement of the Danish Centre for Applied AI by Alexandra Instituttet.

Having such a centre will give Denmark the opportunity to take full advantage of cooperation between public and private companies working on data sharing and Artificial Intelligence solutions.

Both initiatives are extremely important for our efforts to develop Copenhagen as a fintech hub and to attract and retain talent.

The talent challenge and an invitation to join us It is becoming increasingly apparent that there will be a global war for fintech talent in the years to come. The industry has to work together with universities to encourage students to acquire the relevant education and skills.

Denmark needs more young and ambitious people with a strong background in finance and technology to get ahead in fintech’s competitive world.

There is no doubt that Copenhagen has some more ground to cover in the global fintech race, but we know what needs to be done, and the whole ecosystem is working together to get us in pole position. Consider yourself invited to join us.

12 Sponsored content

Tags: community, capital, talent, startups, established players, regulation, foreign relations

Representatives from the Copenhagen fintech community got together to discuss the future of the Danish fintech hub and how to keep the impressive momentum built up over the last couple of years. The conclusion: collaboration is key to moving forward.

Copenhagen fintech hub at a crossroads

...

Left to right: Mark Gervasini Nielsen (Danske Bank), Ken Villum (Lunar Way), Nicholas Meilstrup (CrediWire), Kent Petersen (Financial Services Union), Tanja Lind Melskens (Kammeradvokaten), Michael Busk-Jepsen (Finance Denmark), Christian Visti Larsen (NewBanking), Thomas Brenøe (Financial Services Authority), Simon Schou (Copenhagen Fintech), Anna Mee Allerslev (City of Copenhagen), Fritz Henglein (University of Copenhagen), Jan Sirich (Nordea), Mikael Nilsson (November First), Bent Dalager (KPMG), Susanne Brønnum (Nets), Louise Ferslev & daughter Elna (MyMonii), Thomas Krogh Jensen (Copenhagen Fintech).

Sponsored content 13

O

nly a few years ago, the Danish fintech sector was close to nonexistent. Today, a thriving community around financial technology innovation is flourishing in the centre of Copenhagen with Copenhagen Fintech Lab, a busy office space, as its heart.

The people involved do not rest on their laurels, however. In order to position Copenhagen as a strong international fintech hub, key representatives from the community got together at the Fintech Lab to take stock of the situation and address some of the challenges ahead.

“We are at a crossroads,” said Anna Mee Allerslev (R), Mayor of Employment and Integration in Copenhagen, at the meeting in April and continued: “In a short period of time we have become a huge success in both Denmark and internationally. Now the time has come for us to decide whether we want to act together and be a part of the big fintech league.”

Strong Danish fintech community The meeting included representatives of startups, large banks and other financial institutions, as well as the University of Copenhagen, The Financial Supervisory Authority (FSA), Poul Schmith Law Firm, KPMG, Finance Denmark, Copenhagen Fintech and the Financial Services Union. Despite the diverse background of the attendees, there was a general consensus that a lot of progress has been made in building a well-functioning fintech community.

“The attitude of startups has changed from ‘banks must die’ to something more like ‘let’s work together’,” said Jan Sirich, leader of Group Digital at Nordea, which − like other Danish banks − is establishing partnerships with fintech startups and participating in accelerator programs, in order to boost financial innovation.

While applauding these initiatives, the Financial Services Union also urges the companies to think further ahead: “We need to strengthen collaboration both across these corporate fintech hubs and in general. Otherwise, we risk getting into a situation with unproductive competition” explained the union’s chairman, Kent Petersen.

Capital still needed Capital remains one of the key components of a fintech hub, so startups can grow. According to both Copenhagen

Municipality and the Financial Services Union, Danish fintech startups still need better access to risk capital.

“Nine out of ten startups we meet say there’s a lack of risk capital,” said Mayor Allerslev, whose viewpoint is supported by a recent study by the Danish Entrepreneurship Association, which showed particular difficulties for entrepreneurs of getting financing through bank loans.

The mayor’s opinion was contrasted by Nordea and several of the startups at the meeting, including Lunar Way and NewBanking.

“We’ve never had so much capital as today. It’s not an issue,” said Ken Villum Klausen, founder and CEO of banking startup Lunar Way. Jan Sirich from Nordea was quick to agree: “As long as you’re competent enough, capital isn’t a problem.”

When looking at the investments in Danish fintech startups, the numbers paint a picture of angel and venture capital growing in importance. Last year, fintech became the most popular of all startup sectors among investors, attracting 19 investments, according to The Nordic Web (see p. 18-20). With that said, the average funding round of about 6 million kroner still indicates that investments typically happen at the earlier stages of startup growth.

In other words, Danish fintech startups are still short of larger, latestage investments. This is also reflected in the general view presented at the meeting, namely, that many companies choose to go public in Sweden, where capital is more abundant, instead of Denmark.

Is Denmark perhaps lacking a growth mentality? Louise Ferslev, founder and CEO of fintech startup MyMonii thinks so: “There are very few people in Denmark who have the desire and ambition to make a big company. I don’t know how to change that mindset, but I believe we have to try.”

Startups & established players have to work together One of the steps towards growth, which several participants highlighted, is corporate partnerships with startups. But while this phenomenon is receiving a lot of attention at the moment, it may still be too early to call it a trend.

“We are still in the early days of establishing corporate partnerships with startups. We have to build more of them and share our experiences of how

they work,” said Michael Busk-Jepsen, Director of Digitization at Finance Denmark.

This statement received comments from both sides of the table. “Danish fintech startups need to work on being more customer oriented. A lot of those I have met just try to push new products instead of putting them in a context of how they’re improving life for the customer,” said Mark Gervasini Nielsen, Head of Concept Development and Digital Hub at Danske Bank.

On the other hand, it can be a challenge for startups to share confidential information with larger companies, according to Mikael Nilsson, founder and CEO of money transfer startup November First.

When he founded his company, he reached out to banks in hopes of establishing a partnership. It took several years of fruitless efforts to get their attention before finally negotiating a deal with a big bank. Now, that the product is out on the market, the tides have turned.

In a short “ period of

time we have become a huge success in both Denmark and internationally.

Now the time has come for us to decide whether we want to act together and be a part of the big fintech league ...

Anna Mee Allerslev (R), Mayor of Employment and Integration, City of Copenhagen

14 Sponsored content

We are struggling to find qualified “ employees − we interviewed 20 candidates for a position and none of them qualified. ...

Christian Visti Larsen, cofounder and CEO of blockchain startup NewBanking

“All of a sudden, Nets and the other banks are willing to collaborate,” Nilsson said with a hint of irony in his voice before concluding his reflection upon the initial phase of his startup: “It’s hard to find a way of collaborating at an early stage without exposing yourself too much.”

Wanted: Technical talent Both startups and larger companies agree that there is a dire lack of technical talent in Copenhagen, especially when it comes to programmers and financial experts.

“We are struggling to find qualified employees − we interviewed 20 candidates for a position and none of them qualified,” said Christian Visti Larsen, cofounder and CEO of blockchain startup NewBanking.

In order to get the people the industry needs, education often comes up as the answer. At the moment, however, there is no specific education in the cross-section between finance and technology. Therefore, the universities need to get together to create such an education, recommended Petersen from the Financial Services Union. It is not that simple, though, according to Fritz Henglein, computer science professor at the University of Copenhagen. To get more talent is not just a question of education: it requires top tier researchers

to teach the next generation of technical students.

“Researchers could and should attract talent, but the problem is that research within fintech gets practically no financing,” Henglein said at the meeting.

Regulation separates the sheep from the goats Several Danish fintech startups have mentioned regulation as a substantial barrier for growth. The Financial Supervisory Authority acknowledged at the meeting that it had been slow and difficult to work with in the past. That, however, has changed, said Thomas Brenøe, Deputy Director General at the FSA − whose message was recognised by many of the participants of the meeting.

The FSA has recently got extra funding from the government to support fintech startup growth. According to Brenøe it will cover the expenses of regulatory guidance, creating a sandbox for quicker financial licenses, and efforts to raise awareness about technology within the financial sector.

“It will be easier for startups to get advice about regulation in the future,” he said.

Regulation, however, is important to maintain high standards within the coming wave of fintech services − an as-

pect far too often overlooked by entrepreneurs, warned Tanja Lind Melskens, attorney from Poul Schmith Law Firm, legal advisor to the Danish Government.

“It’s not easy to make a fintech company because you need to follow certain very strict procedures and meet capital requirements and so on. In my experience, a lot of fintech startups don’t take abiding by the regulation seriously enough,” she said.

New Nordic fintech?

Although recently ranked no. 16 on the global fintech hub index by Deloitte, Copenhagen still has a long way to go to stand anywhere near London − or even Stockholm, for that matter.

That is why the conclusion of the meeting was not only a call to action for more collaboration within Denmark but also with the rest of the Nordic countries. Larger companies, such as Nets, do business in those markets as well. If Denmark sees itself as part of the Nordics rather than an independent market, investors might just take it more seriously, said Klausen from Lunar Way. “We have to think bigger and start partnerships with other Nordic countries. It gives us so much more power if we focus on cooperation and not competition,” Sirich from Nordea concluded.

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COPENHAGEN FINTECH Photo: Thomas Høyrup Christensen

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Tags: payments infrastructure, startups, innovation lab

Danish payment infrastructure ready for fintech startups The infrastructure is ready for the next generation of payment apps and innovative solutions, says Nets CEO, Bo Nilsson, inviting fintech startups inside.

E

ntrepreneurs who are passionate about financial technology now have a chance to work with the backbone of Danish payment systems.

“We see a role for Nets in establishing partnerships with startups that want to use our payment infrastructure,” Nilsson says.

Nets is a leading provider of payment services in the Nordics, connecting banks, businesses and consumers. It’s mostly invisible to the general public, while being the enabling force behind most card transactions provided by Dankort, the direct debit service (Betalingsservice) and NemID, the national login solution − to name a few Danish finance-related services. It handles 98% of all digital payment transactions in Danish stores − a task that requires continuous innovation.

In the last couple of years, Nets started forming partnerships, acquiring startup companies and holding hackathons to come up with new ideas. In just two years, Nets has acquired seven other companies and is currently looking at 80 other fintech-related firms for potential partnerships.

Nets invites startups to innovation lab Digital receipts are a recent example of how the experience around payments is changing. Instead of a paper receipt, you get a virtual copy on your phone.

The startup behind this innovation,

Storebox, was acquired by Nets in late 2015, making it even easier to roll out the service throughout the Nordics.

“Fintech startups have an innovative force that benefits Nets. At the same time, they need us to scale their solutions, and maybe grow internationally. That’s why we are now focusing more on partnerships to create innovation,” Nilsson says.

Another similar example is Nets’ partnership with Danish blockchain startup Chainalysis. It helps Nets and its customers to make sure that new types of blockchain-based payments comply with legislation and aren’t being used for criminal purposes.

In the same field, Nets has also partnered with Danish bitcoin company Coinify. Together they have established the Blockchain Development Lab, where Coinify develops new blockchain solutions for Nets.

This way of working with startups is now becoming a recipe for future partnerships. Each new startup is invited to Nets Innovation Lab to make a proof of concept and test if their idea has commercial potential.

“The startups go through a process where they ultimately get access to our extensive payments infrastructure,” Nilsson explains.

Denmark is an ideal test bed There are several reasons why Denmark and the Nordics provide a particularly good place to test out new fintech ideas.

For one thing, the countries are absolute frontrunners in digitizing everything from payments to the identities of citizens. Combined, the Nordics have the highest number of card payments and lowest number of cash payments per capita in all of EU. Especially if you include NemID, this makes for a large market to test out new digital payment solutions.

“There’s room for growth within fintech if you are looking at payments.

The Nordic payments infrastructure is state of the art and we support a wide range of new types of payments,” Nilsson says, adding: “As a fintech startup, you’ll be able to get started quickly.”

...

Bo Nilsson, CEO, Nets

Sponsored by

Nets by the numbers Employees

Revenue (2016)

~2,400

DKKm 7,385 ~8m

~35m

digital identities

the number of cards for which Nets processed transactions in 2016.

are handled by Nets

98%

FTEs

of all digital payment transactions in Danish stores involve one or more of Nets’ services.

7.7+bn

card transactions (issuing and acquiring transactions)

>90%

of Danish households use Betalingsservice for their recurring bills 1

3 Business Segments

CORPORATE SERVICES

FINANCIAL & NETWORK SERVICES

MERCHANT SERVICES

Corporate Services comprises Betalingsservice and NemID in Denmark, eFaktura, AvtaleGiro and BankID in Norway as well as the national clearing systems.

Financial & Network Services manages domestic card schemes such as Dankort and BankAxept and processing services for international card schemes.

Merchant Services provides payment solutions to all types of merchants, from small shops to large multinational retail chains and e-commerce. Merchant Services also acquires international cards.

NetAxept

300,000+

30,000+ online

240+

use Nets’ services

served by Nets

corporate customers

banks

1

of which

240,000+

Nets estimate

merchants

18 Sponsored content

Fintech is the most popular startup sector in Denmark among investors

Author: ElĂ­as LundstrĂśm

Sponsored content 19

Tags: investments, startups, fintech hub, unicorns, Brexit

Investors put money into more fintech companies than any other type of startups in Denmark in 2016. While showing impressive growth, Copenhagen is still a young fintech hub a few years behind major European cities.

Journalist: Elías Lundström

B

uilding financial technology has become widely popular.

A surge of alternative banks, crowdfunding platforms, payment services and many other types of fintech startups has helped Denmark (and especially Copenhagen) become a flourishing fintech hub.

In just a few years, fintech has grown from being practically invisible on the startup scene to being the dominant vertical. In 2016, 19 investments were made into Danish fintech startups according to The Nordic Web, the most comprehensible data source on investments in the Nordics.

Combined, these investments accounted for 15 percent of total investment rounds in Danish startups, making fintech the single most popular startup category among investors, overtaking even enterprise software, one of its biggest rivals.

“Fintech is coming through as one of the strongest verticals in Denmark right now. Considering that no fintech investments were made a little over two years ago, that’s a really dramatic rise,” says Neil Murray, co-founder and CEO of The Nordic Web. A blossoming hub It’s not just the growing number of investments that is telling the story of a Danish fintech hub in the making.

Last autumn, Copenhagen launched Fintech Lab − a coworking space dedicated for fintech startups − which was the first of its kind not only in Denmark but also in the rest of the Nordics.

“There’s a concerted effort to make Copenhagen a fintech hub. The city still has a lot of work to establish itself as one, but there are many promising signs,” Murray says.

Over the next couple of years, Murray expects the growing number of investments to translate into bigger companies sharing both network and talent.

“There’s nothing to stop Copenhagen from becoming a strong fintech hub,” he says.

Still a teenager If you take a closer look at the investments in Danish fintech startups, it becomes apparent that they’re still at an early stage − pretty much like the teenagers among startups.

Fintech startups together received around 118 million kroner of investments in 2016, a relatively small amount when comparing it to the 3.1 billion kroner invested in Danish startups in general that year. In other words, there’s a big proportion of fintech startups receiving a small proportion of the total investments.

20 Sponsored content

Fintech is coming through as one of the strongest “ verticals in Denmark right now. Considering that no

fintech investments were made a little over two years ago, that’s a really dramatic rise ...

Neil Murray, CEO & founder, The Nordic Web

In Stockholm, which is considered one of the larger fintech hubs in Europe, startups are generally at a later stage in their growth. On average, investors laid 20 million kroner on the table for each fintech investment in Sweden last year, more than three times as much as the average fintech investment of 6 million kroner in Denmark.

“On a comparative scale, Copenhagen’s fintech companies are very much in their early days,” Murray says.

In Sweden, fintech startups − like e-commerce giant Klarna and payment

...

Neil Murray, CEO & founder, The Nordic Web

card reader company iZettle − are already valued at several billion dollars, and Klarna alone employs over 1,400 people. By contrast, there are still no Danish fintech startups in this weight class.

The importance of this fact shouldn’t be underestimated. A unicorn (a startup with a valuation of over one billion dollars) has many spillover effects on the local startup environment.

“As these companies scale up, more and more people will have experience

working at large fintech companies and these people are more likely to start their own company,” Murray says.

“What this means is that more fintech companies will pop up and grow, making more money available and keeping talent within the area,” he continues.

Brexit-hopes may be cooling off It is impossible to talk about European fintech hubs without mentioning London. The British capital has long held the title of fintech capital of the world, but as soon as Brexit became an openly talked-about topic, speculations about London losing its leading position began to circle. Assumptions were made that if London became weaker, other European fintech hubs, such as Stockholm and Copenhagen, could stand to gain importance − perhaps even become leaders.

Initially, the investment numbers seemed to back up this theory. After the Brexit referendum in June 2016, fintech investments did decline sharply in the UK. From 2015 to 2016, investments plummeted by 29 percent to around 5 billion kroner in the UK, while growing by 38 percent in the rest of Europe, according to Dealroom, a European investment platform.

But things are already reverting to normal. At the end of last year and in the first quarter of 2017, fintech investments in the UK were rising again.

“Fintech as a sector, and London especially, was hit hard after Brexit, but investments are picking up again,” Murray says, adding that the power balance between the European fintech hubs will probably not change that much.

“London has such a strong history and

experienced talent that it’ll remain a natural hub for fintech,” he says.

Will fintech prevail in 2017?

All in all, investments in Danish fintech startups show that while Copenhagen may not replace stronger hubs like London or Stockholm, it still has a lot of potential to assert itself as a noteworthy fintech hub. There is a lot of activity going on and, in time, the startups may grow to cement the status of Copenhagen.

The first quarter of 2017 marked a slow start with only three Danish fintech investments. It is yet unclear whether the fintech sector will prevail as the most important vertical on the Danish startup scene this year as well.

...

Most funded Danish fintech startups (total funding) • • • • • • •

Clearhaus: Credit card payments (52 million kr.)

Pleo: Company credit cards (43 million kr.)

LunarWay: Digital bank for millennials (29 million kr.)

Cardlay: Automated company expenses (25 million kr.)

Coinify: Bitcoin payments (25 million kr.)

Chainalysis: Anti-money laundering for bitcoin (11 million kr.)

Ernit: Smart piggy bank (6 million kr.)

Source: Dealroom.co and news sites.

Sponsored content 21

19

Number of investments in Danish Fintech startups

5 3 7,9%

15,5% 7,7%

Share of total startup investments Investments rounds Source: The Nordic Web

Year

2014

2015

2016

118

Money invested in Danish Fintech startups

45

Amount invested in fintech startups (million kroner)

25

Share of total startup investments

3,8% 3,9%

1,3%

2014

2015

Source: The Nordic Web

Year

2016

European fintech hubs by comparison, 2016 Source: The Nordic Web & Dealroom

- Number of investments rounds

118

843 4.874

19

- Money invested in 2016 (million kroner)

43

104

22 Sponsored content

Tags: office community, startups, ecosystem

On the journey to becoming one of the fintech hubs in the world, Copenhagen opened up the first ever fintech collaborative in Scandinavia last autumn. Both corporations and startups flock to the offices in central Copenhagen to put Denmark on the fintech map of the world.

Copenhagen's got Scandinavia's biggest fintech collaborative Journalist: Simone Okkels

S

omething new and exciting is brewing in the historic inner city of Copenhagen: a new collaborative was formed to bring together new and already established fintech startups with the ambition to provide a platform for creation, innovation and growth. The fintech wave is sweeping through Scandinavia with full force and the Danish capital is determined to ride high.

Today, more than 14,000 people are employed in the area and the fast-growing fintech industry is expected to create 6,500 more jobs by 2020, according to

Copenhagen FinTech, a non-profit cluster organisation dedicated to developing financial technology.

Last year, on the journey to becoming one of the notable fintech hubs in the world, Copenhagen FinTech teamed up with Rainmaking Loft, the largest Nordic coworking space, and together they opened the first fintech collaborative in Scandinavia called Copenhagen FinTech Lab. Copenhagen Fintech Lab is a coworking space where fintech talent, startups, corporations, sponsors, and partners can

meet, share their knowledge, contacts, struggles and help each other grow.

A physical place to be inspired The idea of the Lab was born in 2015, when Rainmaking Innovation together with Oxford Research Hub created a report about how to develop Copenhagen into a fintech hub. One of the suggestions was to establish a physical place, a sort of technological epicentre, to make it possible for different people in the field to meet. The Finance Sector Union, the municipality of Copenhagen, The Dan-

Sponsored content 23 ish Bankers Association, Rainmaking Loft, and Copenhagen FinTech − back then known by the acronym of CFIR − decided to act upon the report's results and it didn’t take long before Copenhagen FinTech Lab welcomed its first residents.

Today, more than 30 startups and fintech companies reside in the Lab. Among them are Chainalysis, Ernit, Cardlay, Crediwire, and goBundl. The Lab organizes and conducts different weekly activities for both the residents of the lab and outsiders wanting to get to know the industry. In that way the Lab has become a melting pot of all the different participants, interests and layers of the fintech business.

“We can contribute to elevating Danish fintech by creating a common space where corporations and startups can meet each other. According to Deloitte, 70 percent of startups believe partnerships are important to develop their company but it can be difficult to partner up with corporations. That's where we come in as a strong facilitator,” says Rasmus Bjørn Dahl, General Manager at the Lab. “We see the interest for our

Lab as a sign that all parts of the fintech environment want to be a part of the growth.”

Fintech is a key part of the future of finance To Dahl and the Lab, fintech is a key part of the future. To further increase the strong fintech profile of the city, Copenhagen FinTech Lab collaborates with hubs in Sweden, Finland and Norway. More initiatives will be launched during 2017, the assembly of an advisory board to strengthen Copenhagen as a financial centre being one of them.

“We’re working in the wings to get Copenhagen to grow. Denmark has come a long way on the path to becoming a digital and cashless society and that’s where fintech as a business sees a lot of potential in this region. We have to face the progress that we see both in society and the development of new technology. This is where the big, old institutions are not always the frontrunners, and startups know that and grasp the possibilities. The ecosystem is flourishing right now,” Dahl concludes.

...

Copenhagen Fintech Lab •

•

•

•

•

Opened November 10th by the canals of Christianshavn next to the Financial Services Union - Finansforbundet.

It’s Scandinavia's first coworking space dedicated to fintech entrepreneurs.

The lab consists of a 1500 square meter office space where around 100 people and 35 different startups reside.

Some of the startups include Chainalysis, Calcabis, Crediwire, and goBundl.

The Lab hosts weekly events for both residents and curious outsiders.

We see the interest for our Lab as a sign “ that all parts of the fintech environment want to be a part of the growth ...

Rasmus Bjørn Dahl, General Manager, Copenhagen FinTech Lab

24 Sponsored content

...

Hufsy founders Maria Flyvbjerg Bo and Rafal Lipinski

Sponsored content 25

Tags: startups, bank data, predictive analysis, regulation, disruption

What used to be proprietary bank data is now being utilised by startups to launch new financial services that are eating their way into the business foundation of the banks.

A treasure trove of bank data is opening up and startups are swarming in Journalist: Elías Lundström

T

hink about all the data your bank has about you. The time you bought that new gadget in the middle of the night you didn’t really need. Your last holiday destination. How late you are at paying rent.

So far we’ve been used to all this transactional data being synonymous with the bank we use. But that is about to change. A new generation of businesses is being built at this very moment with the sole purpose of separating this data from the bank and offering us new services we didn’t even know we wanted.

For one, the personal finance app Spiir has offered people a graphic overview of their finances and budgets for some years. That, however, is changing fundamentally with the service gradually transforming into an “automated

lifestyle advisor”, as cofounder and CEO Rune Mai puts it. “Want to buy a pair of 1,800-krone Nike sneakers? Spiir will draw on your past bank data and behaviour to advise you how to finance that purchase − for example, by recommending you to buy less fast food.

“We are going from being an analytics tool for personal finance to a lifestyle enabler that rewards you for the life you live and optimizes it, so you can live the way you want,” Mai says.

He is not the only one about to change the way we think about bank data and finance. A new industry of fintech startups are on that same path to transforming financial data into new services that don’t just tell you how something has happened in the past. Instead, they look into the future by predicting trends and

advising users what to do to save money or avoid bankruptcy.

Data doesn’t belong to the banks anymore When Maria Flyvbjerg Bo, back in 2014, came up with the idea of making a new kind of bank for businesses called Hufsy, she was a little too ambitious. Her idea was to build a bank that would draw upon data from existing banks and accounting systems to automate the finances of the business users. Getting access to that data, however, was harder than it seemed.

“The banking infrastructure wasn’t ready back then,” says the cofounder and CXO of Hufsy. “Banks don’t want to give access to their customers’ data. They are afraid that others might offer better

26 Sponsored content

services than them, plus it’s not easy to create interfaces on top of their old legacy systems to exchange data.”

Fast forward to 2018, when this will supposedly change. According to the revised European Payment Services Directive (PSD2), banks will be forced to open up their data vaults to other businesses. This means that companies like Hufsy and Spiir will be able to get access to everything from transactional data to account balances from banks and will also be permitted to conduct money transfers on behalf of the bank customers. Provided the users allow them to, of course.

“There’s a new movement happening, where it is the customers and not the companies that own the data,” says Nicholas Meilstrup, CEO of the intelligent accounting tool CrediWire. “Companies that gain the biggest advantages at the moment are opening up their data to others.”

Free is the new black There’s a stark contrast between the established banks and the new breed of data-driven fintech startups. While banks are ramping up customer fees, many of the new fintech services are almost or completely free.

Take the accounting tool CrediWire, for instance. It builds on data from a company’s accounting system to benchmark that company against its competitors. This information allows a clothing store, for example, to see if it spends more or less on employees than other stores like it. The price for the service?

It’s free.

“We have a dream: we’d like to help companies better understand their finances. We think that it should be free,” Meilstrup says.

Whether it’s only a dream or not, the truth is that it’s very profitable indeed to give access for free. The more users and data are gathered, the better the platform becomes at predicting market trends, and a better chance it has to sell its product.

“Our benchmarking tool, without doubt, requires a lot of data and for that our platform has to become a market standard,” Meilstrup adds.

Instead of charging users, CrediWire requires a fee from banks and accountants that want to offer the platform to their customers. Spiir also shares this business model, granting the core ser-

vice to users for free, while imposing a fee for businesses.

Data doesn’t come without a fight For as long as banks have existed, the core services haven’t changed a lot. You can deposit money, transfer funds, get a loan, etc. With the new wave of fintech services, however, the traditional data from banks and accounting gets a new life. Hufsy, planned to be launched later in 2017,

...

Nicholas Meilstrup, CEO, CrediWire

sources to make predictions and recommendations about the future.

“Banks are outdated because they only work as a registry, showing the past. We want to give our users a look into the future as well,” says Rafal Lipinski, Hufsy’s other cofounder.

This change may seem scary for banks that are used to customers that only have their salary deposited into their account and use a credit card to buy groceries. Suddenly, the banks see themselves as only providers of all the infrastructure, while startups are given the extra advantage of using those banks’ data to offer new services that the customers have never seen before.

“I think the banks are afraid of becoming just that infrastructure,” Flyvbjerg Bo adds.

This fear became evident when, in 2014, Jyske Bank reported Spiir to both the police and the consumer ombudsman. Spiir, the bank claimed, had unlawfully copied their customers’ bank data. Since the customers had given Spiir permission to do that, the case was dismissed. Though it eventually won, Spiir had to spend one million kroner for the lawyers, according to Mai. From next year on, banks will have no other option but to give access to their data, which will make it even harder for them to withstand the wave of startups like Spiir, Hufsy and CrediWire.

Banks are “ outdated

...

Rune Mai, CEO, Spiir

will offer users a forecasting tool that predicts if and when they are going to run out of money. CrediWire plans to alert users when a larger portion of their clients are showing signs of nearing bankruptcy. Spiir is going to use artificial intelligence to learn how the users spend their money and will automatically make a budget for them.

What all these services have in common is that they are combining data

because they only work as a registry, showing the past. We want to give our users a look into the future as well. ...

Rafal Lipinski, cofounder & CEO of Hufsy

Sponsored by

Tags: startups, workspace, jobs, competencies, automation, union

Financial jobs are disappearing – Copenhagen Fintech’s job is to get them back Disruptive technologies are already replacing a range of jobs in the financial sector.

As a response, The Financial Services Union founded Copenhagen Fintech with a mission to bring back jobs that are relocating to other countries. “The demand for competencies is changing rapidly,” says the union’s chairman.

W

hen the financial crisis hit in 2008, massive layoffs in the financial sector were an inevitable result. So, once the crisis waned some years later, it was not unreasonable to expect jobs to reappear. But, although a lot of new jobs were created, it was not the ones that many people in the financial sector expected.

“We saw how digitisation took over after the crisis and how the demand for traditional financial workers declined,” says Kent Petersen, chairman of the Financial Services Union, before elaborating further: “Once we took a closer look, we discovered that the number of employees in the financial world was rising, but not in traditional areas such as banking, mortgages, or insurance. If you count in financial technology, employment is not decreasing, but the demand for competencies is changing rapidly.”

This discovery fueled the union’s decision to found an association called Copenhagen Fintech and its appurtenant startup office space in order to support the growth of fintech innovation in Denmark. Ultimately, the goal is to bring back

some of the new jobs, which have been going abroad lately, Petersen adds.

Not the typical founder A bet on fintech of this magnitude is not a typical move from a union, which used to stand in opposition to the financial companies on behalf of the workers. It may, in fact, be the first time in history that a financial union is the founding force behind a fintech hub − an act that might be surprising but is completely justifiable, according to Petersen.

“A lot of research show that once a job gets automated, at least one new job is created. The problem was that we couldn’t see it happening in Denmark,” he says and adds that this was mainly because of a lack of the required talent in Copenhagen and because other foreign financial hubs were more attractive to companies.

“So, we realised that if we were to attract the right competencies and establish a hub, we needed to get better at entrepreneurship.”

Three years have passed since that recognition and Copenhagen Fintech is now a thriving hub, where startups, es-

...

Kent Petersen, chairman, Financial Services Union

tablished financial companies, universities and public authorities are working together to revitalise the financial sector.

Broad support in society One of the strengths of Copenhagen Fintech lies in its broad base of partnerships.

They give fintech startups certain advantages by providing easy access to a workspace, legal advice, data from established companies, mentoring, education and contact to the Financial Services Authority.

Thomas Krogh Jensen, CEO of Copenhagen Fintech, also believes that it makes good sense to have the union as a founding partner: “They have 50,000 highly qualified employees as members, which allows us to build a bridge between the old and new sector − not only through management but the employees as well.”

In the future, the union’s ambition is to integrate the hub with universities to create education specific to the fintech sector and to attract foreign talent and companies to Copenhagen.

“I believe the foundation for that is already here,” Petersen concludes.

Sponsored by

Tags: property valuation, mortgages, financial tools, automation

e-værdi gives accurate property valuations For ten years e-nettet has been working with statistical property valuations and has created a model that can be adjusted to the individual financial institutions and form the basis for positive customer experiences.

T

he financial sector uses statistical property valuations to ensure solvency both for portfolio management of property values and for credit evaluation of homeowners who want to take out new mortgages.

Statistical property valuations, which are based on carefully prepared data, are essential for homeowners and homebuyers: for example, if one wants to sell one’s home or buy a new one.

With the e-værdi product, e-nettet has developed a model to calculate the current property value of homes whose high quality can be documented. And this is a valuable tool for employees in the financial sector. ”The tool is based on a regression analysis, with a number of explanatory variables that have significance for the property value as input. For example, it has data about prices in the local area within a given radius from the property in question,” says Steen Høy Hansen, a consultant at e-nettet’s Property Data Solutions. ”We examine the properties that have been sold in the area. I mean the properties that have been for sale “on the free market,” where they have been visible at an estate agent’s. This is important, because if you only base things on what is registered on the public registers as free sales, this can include things like transfers within

families, where the price is often lower. We crosscheck with properties that have been on offer, and therefore we can say with certainty that they have been in free sale. This increases the quality of our data,” he points out. e-værdi streamlines work in the financial sector Since the model automates the process of estimating the value of properties, a fair amount of time can be saved at the mortgage and financial institutions.

This time can be spent on giving better advice to bank customers.

Several financial institutions have developed their own solutions based on e-værdi, which have reduced the number of physical valuations carried out by consultants. ”In the financial institutions, you have a streamlined work process, where, in many cases, you can get a good idea of the property right at your desk, without having to go out and look at all the properties in a valuation. Accordingly, it is important for us to be able to demonstrate that our model has a high performance,” Steen Høy Hansen says. ”Our overall statistics reveal how accurate our evaluations are: our performance measurement shows that 90% of our city property valuations deviate less than 20% from the actu-

...

Jørn Knudsen, CEO, e-nettet

...

Steen Høy Hansen, consultant at Property Data Solutions, e-nettet

Sponsored by

al sales price, and that figure is even slightly lower on a national basis,” he adds.

The optimal circle These high performance numbers are due to the long series of disparate data that are taken in and refined by the regression model.

Some of that data include asking prices and reduced prices, as well as amenity values such as the size and age of the property and its location in relation to a motorway or a lake, which can influence the valuation in diverse ways. ”As well as that, the idea is to include properties that are close to the property you are valuing, and which have been sold within the shortest possible period of time. This is what we call the optimal circle. Less recent sales over a larger geographical area provide less certain data,” Steen Høy Hansen explains.

Tailor-made solutions e-nettet is in possession of a considerable amount of diverse data, which can be supplemented with one’s own valuation data or other property data products. By doing this, a financial institution can get a tailor-made solution that meets the exact need that it has in relation to property valuations.

“We have made an additional standard solution that we call rating.

We supplement the model value with some rating figures that can give the

user a feeling of how safe the basis of e-værdi’s calculations is. This means that we can give an exact indication of when it makes sense to look more closely at the model-estimated property valuation made by e-værdi,” Steen Høy Hansen says.

...

e-værdi was launched in the financial sector back in 2012. It is merely one of many examples of how e-nettet is working with data and data quality, and, by collaborating with the financial sector, how it is generating the benefits of digitisation for bank customers.

e-nettet connects the financial sector The financial sector has discovered that it does not necessarily make sense or give value to only create individual systems and solutions, and that there are great benefits to be obtained from working across the industry. e-nettet brings the sector together and creates shared infrastructure solutions that form the basis for positive customer experiences in the future e-nettet has been involved in managing the digitisation of Denmark in several important areas. e-nettet has, for example, made it easier to register land documents, exchange documents in a property sale and change banks quickly and efficiently. e-nettet’s aim is to be the impartial and trusted partner of the financial sector. This means, for example, that where others can be driven by a purely commercial focus, e-nettet’s success has to be measured by its ability to create the benefits of digitisation for the customers in collaboration with the financial sector. ”At e-nettet we have a strong position at the centre of the financial sector as the focal point for both infrastructure and collaboration. We connect the financial sector and link it to the public sector,” says Jørn Knudsen, e-nettet’s director. ”We have to strengthen this position, because we want to be a dynamic company that has an important role as a partner of the financial sector.

By creating positive digital user experiences along with the sector, we can help to make a difference for all Danes,” he says.

30 Sponsored content

Tags: startups, gender equality, leadership, investors

The lack of diversity in (fin)tech:

Still staring through the glass ceiling Tech is still a business dominated by men. Despite gender quotas, a surge in feminism and the awareness of equality, there are more male founders than female, more venture capital goes to companies founded by men than women and there are fewer female investors than male.

Journalist: Simone Okkels

... Louise Ferslev, founder & CEO,MyMonii

Sponsored content 31

B

ehind every successful man there's a woman, the saying goes.

But behind every successful business there is probably a man.

It is not a secret that women are underrepresented among startup founders, board members, and executives. But even though there's a lot of talk about gender quotas and equal pay for equal work, the ratio isn't changing.

Although one-quarter of startups say they have programs in place to increase the number of women in leadership positions, 70 percent of the startups have no women in executive positions. In the UK, 56 percent of startups have no women in C-level positions and in Denmark the number of founding females has fallen from 34 percent in 2012 to 29 percent in 2016.

The lack of women is a problem In Denmark, a good number of female founders are based in Copenhagen. You will find them at startups such as Deemly, Queue-it, Learningbank, Hufsy, Gigga, and MyMonii.

According to Louise Ferslev, the founder of MyMonii, the lack of women in tech is a problem.

“Right now a lot of potential goes wasted. As a company, you perform better if you represent different backgrounds, ages, skin colors, and sexes because you get to tap into a whole lot of varied experiences and competencies. I believe that if you have different people working on a problem, you'll end up with a better solution because of the diversity,” she says.

MyMonii is made up of men and women in equal proportion and they all come from different professional and geographical backgrounds.

“There’s so much positive energy when we have room for differences.

When a former hairdresser and a girl with a degree from CBS enter into a dialogue, the inputs and outputs vary. They see different things and come up with different solutions,” Ferslev says, having actually hired a female hairdresser as digital marketing manager.

Ferslev is well aware that she is one of the few female founders and leaders in the startup industry. That is why it is important for her to be a good role model.

Before she launched MyMonii she had been watching closely the careers of Ida Tin, the founder of the female health app Clue, and Mette Lykke, the co-founder of the fitness app Endomondo.

“It is very important that women with the ideas and will to become an entrepreneur have access to good role models. It is hard for a 17-year-old girl to look up to a 40-year-old male founder. He can be an example, too, but he is far from that girl’s reality and self-image,” Ferslev says.

When Ferslev got pregnant last year, it was important for her to show other women that having kids does not necessarily mean the end of your business. She was certain that she could handle her obligations to both her family and company.

There were quite a few naysayers, however, who warned her against the idea and hoped she would “grow wiser” in time.

Right now a “ lot of potential goes wasted ...

Louise Ferslev, founder & CEO of MyMonii, about the lack of diversity in (fin)tech.

“I showed them, didn't I? After I gave birth to Elna, I actually became more efficient as well as better at putting my foot down and prioritizing,” Ferslev says, who is still running her business and speaking at keynotes. Since the birth of her daughter, she has received a lot of messages from women saying that she's an inspiration to them because she has shown the world that raising kids and running a company can go hand in hand.

Conquering Mount Everest In 2015, 14 percent of fund managers in Denmark were female, up from just above 10 percent in 2010, according to Morningstar, Inc., an American investment research and management firm.

To put this in perspective, venture capitalists are also more inclined to invest in male founders. Nine out of ten founders that get funded by venture capitalists in Denmark are men, according to Mandag Morgen, a Danish business and political magazine.

“I usually say that we are going to climb Mount Everest but we only have Himmelbjerget to practice on,” says Elena Hove-Aggerholm, founder of Gigga, an insurance-related fintech company.

Himmelbjerget is the highest Danish hill, reaching only 147 meters.

As far as Hove-Aggerholm knows, she is

the only woman in a startup within insurance technology (insurtech) in Denmark at the moment.

“There are not many women who found tech companies just like that.

I guess women generally have a stronger push towards safety and knowing what tomorrow will bring, whereas men are more prone to take risks,” Hove-Aggerholm says, hoping that more women will find the courage to follow in her footsteps, and those of other female tech founders.

It is for this reason that she has started her movement called Kvinde, lån mine nosser (Woman, borrow my balls) which enables women to get together and help each other in what is still a male-dominated world.

Ferslev is a part of a similar initiative called Women in Tech, an organisation promoting diversity in startups. She says that many women tend to underestimate their abilities and hold back at job interviews – which is why role models and organisations like Women in Tech are so important.

“We need to tell the world our true stories and unify all types of women.

I didn't know a thing about coding when I started but you learn as you go. It is important that we show other women that you don't have to know everything to be able to start and run your own company.

We are about courage and shattering stereotypes,” Ferslev concludes.

...

Lack of progress in gender equality •

• •

•

70 percent of startups have no women on their boards and 54 percent have no women in executive positions, according to the U.S Startup Outlook 2017.

In 2015 the numbers were 68 and 53 percent, and in 2015 they were 66 and 46 percent.

In 2016, 56 percent of startups in the U.K. had no women in C-level positions. In 2017, the number has only increased by two percent.

In Denmark the number of female founders has fallen from 34 percent in 2012 to 29 percent in 2016, according to the publication Mandag Morgen.

Sponsored by

Why the GDPR Is Such a Big Deal Staying ahead of the game when it comes to the EU General Data Protection Regulation (GDPR), in an age of ever increasing mountains of data and the associated potential for abuse – is quite some task.

C

ompanies are not only obliged to have clear documentation and policies on how they handle personal data, they must know the whereabouts of data, its usage and who is accessing it.

...

The task becomes difficult because: 1 Personal data can be elusive – Data on its own could be meaningless or

without risk, but pieced together with other personal data, it could become high risk because you can link it to a real person.

2 Efforts needs to be ongoing – This is not just a matter of fix and forget.

With GDPR, the less governed your data is, the harder it is to stay compliant.

3 GDPR calls for an organization-wide focus – If a consumer withdraws consent, the erasure of the consumer’s data is the consequence of this. That could prove tricky if duplicate consumer data resides in various formats and systems. Therefore improving data quality and data governance processes throughout the organization becomes necessary.

5 Steps to Help your Journey to Compliance It’s clear that GDPR will affect your entire organization. You’ll need to rethink how personal data is handled from the source of origin to the point of consumption. With industry-leading solutions for data management and analytics, SAS can help you meet evolving data protection compliance demands. We recommend five steps to help make your compliance efforts more manageable.

• Access data sources for personal data investigation or business usage.

• Access workflows that define actions, policies and processes for personal data.

• Access audit, monitor and risk reports on personal data.

• Find and catalog personal data.

• Analyze personal data attributes, patterns and contexts to evaluate the need for de-identification.

• Analyze personal data for risk assessment.

• Define personal data terms to align business and IT users.

• Link systems, processes and business owners via data flows.

• Ensure integrity of personal data so that it’s accurate, complete and consistent.

• Implement data protection safeguards.

• Log and monitor personal data usage.

• Apply privacyspecific measures such as pseudonymization, anonymization and encryption.

• Audit usage of personal data to demonstrate compliance with privacy controls.

• Minimize data to the purpose for which it is being collected.

• Analyze and report to prove that personal data is not at risk.

Source: SAS Institute

Compliance with the GDPR may be your primary goal today. But keep the larger goal in mind.

With a solid data strategy, and better data quality and governance processes, it’s not just your GDPR efforts that will be rewarded.

The insights uncovered can provide a foundation for faster, better business decisions across the enterprise. So you’ll be positioned for the next regulation that comes into play – and gain a competitive edge along the way.

WELCOME TO NewBanking Next banking generation of identity management and verification, KYC data, AML screening and payment transaction monitoring.

SOLUTION

AML

KYC

DATA PRIVACY

PAYMENTS

CONTACT

NewBanking is the next banking generation of identity management and verification, KYC data, AML screening and payment transaction monitoring. We bring innovation in the heart of financial services. NewBanking is a company registered in Denmark with registration number 37153176.

Address: Klausdalsbrovej 601, 2750 Ballerup, Denmark Email: info@newbanking.com Website: www.newbanking.com

34 Sponsored content

Tags: payments, mobile, competition, tech giants, NFC, PSD2

Two national rivals − Nets and Danske Bank − are fighting to gain the favour of consumers with their new mobile payments solutions. But the national battle may just be a foretaste of what’s to come.

The payment war has just begun Journalist: Dan Mygind

D

enmark became a pioneer in electronic payment systems with the introduction of the national payment card, Dankort, in April, 1983. Back then, it was one of the very few forms of payments, but fast forward to today, and there are countless alternatives with more to come. The launch of the Dankort mobile app this spring marks the beginning of a war between national and international payment providers. It is still unclear who will win − besides, perhaps, the consumers.

tween the leading Danish financial institutions, for a mobile payment solution, because it felt Swipp was too slow to react against a new threat in the form of a mobile payment service introduced by the big telecommunication companies in Denmark. MobilePay became a big success and when Nordea, another big Nordic bank with a strong presence in Denmark, announced in October, 2016 that it would leave Swipp to join MobilePay, the remaining banks in Swipp followed suit quickly.

Mobile Dankort versus MobilePay Unlike in 1983, the new Dankort app has a competitor called MobilePay, an app introduced in May, 2013 by Denmark's biggest bank, Danske Bank. In 2012, the bank had left Swipp, a cooperation be-

MobilePay excluded from 65 percent of Danish retail All major Danish banks have now decided to support MobilePay, so you would think that it is destined to be the mobile payment solution. Well, you’d better

think again. Despite the success of MobilePay, two of the biggest retailers in Denmark, Coop and Danish Supermarket, have decided not to accept payments through MobilePay. That's around 65 percent of the Danish retail market excluding MobilePay. Why exclude a payment solution which around 3.3 million Danes have in their pocket?

Even though MobilePay is used a lot to transfer money between individuals and smaller businesses, its widespread usage has not spread to the shops.

“It's too difficult to pay with MobilePay in shops. Compared to a contactless Mastercard or Dankort, it is too cumbersome to get the mobile out, unlock it, start the MobilePay app, enter the PIN and swipe the amount,” says Jan Damsgaard, professor at Copenhagen

Sponsored content 35

It is the “ customers that

will decide.

In the end, retailers will accept whatever the customers want to use as payment. ...

Jan Damsgaard, professor, Copenhagen Business School

Business School, who follows the payment industry closely.

The shoppers normally use their – often contactless − Dankort or international cards, he adds.

The need for black screen payment Contactless is key to the mobile payment kingdom.

“The challenge is to make black screen payment work,” Damsgaard explains referring to the ability to use smartphones as contactless cards without the need to unlock a mobile, start an app, enter a PIN and so on. Most new smartphones have the required Near Field Communication (NFC) chip that makes contactless payment possible, but there's a caveat when it comes to iPhones. Although iPhones have NFC chips, they are reserved to Apple's own ApplePay which has not been introduced in Denmark yet.

Nets, the owner of the Dankort system, introduced a contactless wallet in February through the smaller banks organized in the Bokis cooperation and a beta version of a Dankort app with contactless technology was introduced late April. The competition for the contactless mobile payment market was on.

Also in April, MobilePay released a contactless smartphone solution for both Android and iPhone.

Similarly to the Dankort app, the MobilePay for iPhone will not be using

...

...

Mark Wraa-Hansen, Director of Mobilepay, Danske Bank

Jan Damsgaard, professor, Copenhagen Business School

NFC for contactless payment, but will rely on Bluetooth.

players from the global payment world are added to the narrative.

“The Great Nordic Payment War has just started. The skirmishes between Swipp, Nets and MobilePay are far from being over,” Damsgaard says, and points to the global IT companies such as Apple, Google and Facebook which are leveraging their user bases of many hundreds of millions to enter the payment sector. ApplePay and Android Pay are already in use in the UK and Facebook has recently got a money service license for Europe.

“Apple, Facebook and Google are in a strong position to offer payment services. The compelling side of their solution is that it is free. They don't earn money through the actual transactions − their revenue comes from their relationship with the users. Consumers aren’t charged for payments and the retail sector will have to pay less in order to receive payment via their solutions,” Damsgaard adds.

Who is going to win?

MobilePay’s contactless smartphone solution was only available in the retail chain KIWI when it was introduced, but the rest of the retail chains in the Dagrofa-concern will follow. At the time of writing, the two most important retailers, Coop and Danish Supermarket, were still betting on the Dankort app, but it is too early to call the winner.

Transaction costs and terminals Contactless is not the only factor determining whether the mobile Dankort or MobilePay will be the prevailing mobile payment solution in Denmark.

There's also the question of transaction costs. When Danish Supermarket announced it would not support MobilePay in its shops, it argued that MobilePay transactions were too costly compared to what the shops have to pay for Dankort transactions.

Perhaps as a response, Danske Bank lowered its prices in April, so the highest fee for a transaction is now 0.75 kroner instead of 5.

The beasts: Apple, Google and Facebook The unfolding battle for the Danish payment market is fascinating, but it reaches truly epic dimensions when

Who will win?

With the coming Payment Service Directive (PSD2) there will also be more minor players in the market, so it is difficult to predict the winners.

“It is the customers that will decide. In the end, retailers will accept whatever the customers want to use as payment,” Damsgaard concludes.

Sponsored by

Tags: payments, mobile, customer experience, tokenization

Paying with a mobile phone instead of a card is just the first step on the way to a future, where payments become more intelligent and ultimately disappear altogether.

The dawn of invisible payments W

hat if you could just walk into a supermarket, grab whatever you need and walk out without touching your wallet?

Up until recently, this has been known as stealing. Today, however, we are looking at a future, where this could be legal and a part of everyday life. It is already possible now to make payments through your phone and not just by card or cash, and in just a few years, they might even become completely invisible. Take the Amazon Go store that has opened in the US recently as an example: customers log in with an app upon entry, take the stuff they need and walk out. The systems automatically charge the customers’ Amazon account.

“The end goal is to have invisible payments. That’s the road we’re headed,” says Hans Henrik Hoffmeyer, Senior Vice President of Nets Mobile Services.

“The technology is there. Now it’s only the innovative pace at the retail stores which sets the limit,” he adds.

Mobile payments becoming the new standard We already saw the first major step towards invisible payments earlier this

...

Hans Henrik Hoffmeyer, Senior Vice President of Nets Mobile Services.

year. The introduction of card-based or ‘dankort’ payments on the mobile phone marks a seemingly small but highly significant change in the way we pay for goods at the stores.

“Mobile payments indicate a renewed dialogue with the customer in the store. Payments are becoming more than payments, because shops now attract the customers’ attention through their mobile phones, where they can give offers, sell more and improve the customer experience,” Hoffmeyer says.

When you pay for groceries at the supermarket, the scenario usually unfolds like this: You start packing the food at the end of the counter, but when the cashier tells you the price, you have to elbow your way back to the terminal, get your credit card out, type the pin and press “accept,” while people are waiting impatiently in line.

This is the kind of inconvenience invisible payment will change.

Nets has been testing a new checkin and check-out feature on its Dankort payments app, which means that you can check your card in when you pass the terminal and continue on to pack your groceries. Once the final payment is due, it will appear on the phone display.

You can then simply swipe to accept the payment directly on the phone instead of having to walk back to the terminal.

It might seem like a small change, but history shows how that can still make a big difference.

“Since we introduced contactless cards, our users have been enabled to simply tap their card instead of inserting the card and entering a pin, which is really a minor change if you think about it,” Hoffmeyer says, adding that this improvement by itself caused contactless

Sponsored by

“

The end goal is to have invisible payments. That’s the road we’re headed ...

Hans Henrik Hoffmeyer, Senior Vice President of Nets Mobile Services.

payments to gain so much popularity that they accounted for over 25% of payments in a little more than 18 months, which is unprecedented globally.

“It shows that even if you marginally improve the experience, the customers will take to it immediately,” he says.

Accelerating change It’s still only less than two years ago that contactless card payments were introduced in Denmark, but now the next wave of mobile payments is ready to take over. Experts predict that at least 50% of payments will be carried out by phones by 2020. According to Hoffmeyer, this could easily happen even before then. “The transition is already well underway. Though people mostly associate payments with physical stores, they have been paying with their phone on many occasions − for example for parking,” he says.

It wasn’t long ago, however, when cash was still the prevalent form of payment. During the 1990s, cash accounted for 60% of all payments, but fast forward to 2017 and you will find that coins and paper notes were down to 20%, according to the Danish National Bank. Nets

anticipates that the launch of Dankort on mobiles will help drive this trend further.

“We have gone from decades to months between new technologies being brought to consumers,” Hoffmeyer says, referring to the time it took for payment cards with magnetic stripes to get chips and to become contactless and, ultimately, to appear on mobile phones.

“It’s all part of a future trend, where technologies are introduced at an accelerating pace and where consumers adopt the technologies faster − as long as they work and increase convenience,” he says.

"I forgot to cancel my Netflix subscription again…"

The shift to mobile payments also marks the coming of an era of more intelligent payments, for example when managing online subscriptions.

It can be hard to keep track of the increasing amount of online subscriptions from streaming services like Netflix and Spotify. They all have access to your card, but, at present, it’s not possible to manage these payments centrally. With mobile card payments, however, that is going to change.

Take the smart token from Nets, for example. It can be best described as a virtual copy of your card, which can be programmed to work the way you want it to. Let’s say, you only want your Spotify subscription to last for three months.

All you have to do is put a limit on your token, and it will expire after three payments.

Another possibility is to create tokens for your kids. These tokens can be customised to only work during daytime hours or at certain stores. They may even be limited, so they can’t pay for alcohol or cigarettes.

“Tokenization makes payments more secure and it gives you programmable money,” Hoffmeyer says.

Towards invisible payments While programmable money and invisible payments can seem futuristic, they are actually indicating a return to the past.

In the old days, shopkeepers used to keep a tab on every customer, who could then take whatever he or she needed from the store without paying for the goods each time. The shopkeepers also knew when someone was too young to buy alcohol or cigarettes.

This is not very different from a future, where payments happen automatically and intelligently with no need to tap a card for every transaction.

“We have to remove the complexity from payments,” Hoffmeyer concludes, anticipating a future where mobile payments become invisible: “It’s not so far away.”

38 Sponsored content

Tags: Legislation, privacy, data sharing, EU, PSD2, GDPR

Attorney: Radical EU demands for data sharing in the financial industry will not end off in Wild West A directive advocating third-party access to bank customers’ financial data and a regulation strengthening data protection for European citizens. Are they on collision course?

Journalist: Dan Mygind

Fotos: Stine Heilmann

Sponsored content 39

F

rom a bird's eye view they do seem contradictory. From the beginning of next year, European financial institutions have to give third parties access to their customers' personal financial data and thereby potentially unleashing a digital Wild West, where sensitive data is up for grabs for anyone.

At the same time, financial institutions are forced with a big stick in the form of eye watering fines to do more to protect European citizens' personal data.

Is the EU asking financial institutions to square the circle?

To find out how this will actually play out, Copenhagen Fintech Magazine reached out to attorney Tanja Lind Melskens from lawfirm Poul Schmith, known as Kammeradvokaten in Danish.

She advises Danish authorities as well as fintech companies about the regulation in question: the EU General Data Protection Regulation (GDPR) and the EU Payment Service Directive II (PSD2). Although they may seem incompatible, she doesn’t think they are: “They are not contradictory. GDPR defines how data should be handled and processed by companies and authorities in general. It specifies what the data can be used for, what data usage requires consent from individuals and describes how individuals must be informed of how their data is used. PSD2 is then a special directive within the scope of GDPR,” she says.

Not a Wild West An important part of PSD2 is that third party companies that want to be account information service providers and/or payment initiation service providers are required to comply with the new payment law.

“One of the biggest misunderstandings about PSD2 is that all kinds of companies can get access to financial data.

That's not the case. Companies need a license from the Financial Supervisory Authority and, to get that, they need to have certain processes and policies in place. The board have to ensure there is an IT-policy formulated with special consideration to IT-security − there has to be a plan in case of cyber attacks and so on. It's not going to be like the Wild West where everybody can just access the data,” Melskens says and points out that she sometimes meets fintech startups that are not quite aware of the im-

“

One of the biggest misunderstandings about PSD2 is that all kinds of companies can get access to financial data. That's not the case. ...

Tanja Lind Melskens, lawfirm Poul Schmith

plications of becoming account information service providers.

“Some startups do not realise what it entails to get the license from the Financial Supervisory Authority. It's a bit of a shock when I explain that it requires well-defined policies and that the Financial Supervisory Authority can make unannounced inspections and ask to see all emails, business documents and so on,” she says.

Data for marketing and credit evaluation GDPR is a binding legislative act from that will be applied May 25, 2018, across the EU, while each individual member state has to implement PSD2 in their own laws. In Denmark, this is expected to happen by the January 1, 2018, in the form of a new payment law currently on its way through the Danish Parliament.

Implementing PSD2 in a new payment law was not plain sailing, however. The old Danish payment law did not allow financial institutions to use data about purchases for marketing purposes or for credit evaluations − something which the fintech companies were not happy about. Part of the business model for many of them is to collect data about the customers and resell it or provide new interactive services.

The government responded to the objections from the fintech companies by making a proposal with a list of al-

lowed usage of collected data. This list includes targeted marketing and credit evaluation based on the collected data.

“The old payment law did not allow the banks to use purchase history. Not even if the customers gave their consent.

Now, if the customer gives explicit consent, the banks can use the data according to the specifications in clause 124 of the new payment law,” Melskens says before explaining the banks’ obligations regarding the acquirement of their customers’ agreement: “The conditions should be stated very clearly. You can't hide them on page 17 in the terms and conditions and it has to be precisely stated what the data is being used for.”

Data breach – Who is responsible?

Despite the best intentions, well-defined processes and the best security practices, there is a risk that breach of personal data can happen. In that case, who is responsible if a third party, with the customer's consent, got access to the customer's bank data and that data is compromised? The bank or the third party?

“It is determined by the circumstances. Is the leak at the third party, at the bank or at the very transfer of data?

It all depends on how the leak of data occurred,” Melskens says.

Causing or allowing data breach will have serious consequences after the new payment regulation goes in effect.

GDPR specifies heavy fines for breaches of the regulation: up to 150 million kroner or 4 percent of the global turnover – whichever is higher. PSD2, however, is less articulate in this respect and does not specify any fines for non-compliance. Each member state is supposed to implement its own law to deal with such issues.

Considering the obligations regarding the protection of customer privacy and the ramifications of misusing data, the question arises: should financial institutions focus more on GDPR since they can be hit very hard if everything is not in order? Or, in other words, will they be able to take full advantage of the PSD2 directive?

“They have to ensure that they are compliant with both GDPR and PSD2,” Melskens answers in a very true-to-attorney style, but acknowledges that banks, of course, could prioritise their efforts so that they benefit their business.

Sponsored by

Tags: banks, identity management, GDPR, regulation

Regulators are tightening the grip on banks' identity access practices It is no longer enough to only manage access to core IT systems within financial companies. In order to efficiently protect personally identifiable information and stay compliant with regulations, companies have to rethink their entire approach to managing the access and entitlements of their employees, says CTO of Omada.

I

n 2008, a rogue trader nearly brought down French bank Société Générale. Jérôme Kerviel, then a junior trader at the company, single-handedly managed to make unauthorized trades of 50 billion euros, which ended up costing the bank 4.9 billion euros.

It is not the first – and probably not the last – time a big bank has seen a rogue trader running amok, damaging both the financials and reputation of the company.

What is more alarming, however, is that it is not only the proper risk control mechanisms to prevent this sort of behaviour was not only missing from Société Générale and other similarly impacted companies. Even today, many financial companies struggle with the authorization and segregation of duty mechanisms. In other words: who gets access to what, when and how.

“When we run audits in financial companies, we often find things that don’t meet the standards of the regulatory authorities,” says Santeri Kangas, CTO of Identity Management Solution-provider Omada.

Risk of unauthorized access According to Kangas, it is not uncommon for Omada to discover so-called “orphan accounts” in the IT systems of financial companies in an audit.

These accounts do not have any owner – perhaps because the person has left the company without the account being shut down. Sometimes the password is even changed after the person has left, which keeps a door open for people who should no longer have access to the systems. Omada has also discovered accounts that never expire.

“It means somebody could be using the account indefinitely” Kangas says.

On a general level, he says, companies risk not complying with the general principles laid out across EU in recent regulations such as Basel II and Solvency II. They require companies to step up their game in terms of control and compliance across their IT environments and monitor the entire lifecycle of identities in the organization, among other things.

For example, to follow the principle of segregation of duty, a person who makes purchases in a company cannot have the role of approving those purchases as well. In addition, the principle of re-certification implies periodically reviewing access rights to everybody in the company, so no one gets access to something they shouldn’t.

In Germany, where Omada also operates, financial regulators have taken

When we “ run audits

in financial companies, we often find things that don’t meet the standards of the regulatory authorities ...

Santeri Kangas, CTO of Identity Management Solution-provider Omada

this a step further to prevent convenience shortcuts. In the past, one bank manager was enough to authorise re-certification, but such shortcuts are now strictly forbidden and it is mandatory to have two people approve requests.

Kangas stresses that these principles are also important to increase security and prevent data breaches.

“Over 35% of breaches are committed

Sponsored by

... Santeri Kangas, Chief Technology Officer, Omada by insiders, and in nearly all APT (Advance Persistent Threat) attacks today their identities are being used as an attack vehicle,” he says.

Identity management key to protecting personal data If these things sound complicated today, it is nothing compared to next year.

When the EU General Data Protection Regulation (GDPR) comes into effect on May 25, 2018, many financial companies will have to rethink the way they approach identity management, according to Kangas.

Financial companies usually have measures to reduce risk in systems that involve moving money around.

But when the GDPR comes into play, companies will have to expand the scope, he says.

“Now everything needs to be governed. Not just the core banking systems but all those that handle personally identifiable information, like a customer’s name, phone number or email address.”

Implementing these requirements could be complicated without proper tooling. It is not uncommon for a financial company to have hundreds of systems with user access, and because many of those companies still manage

accounts and their entitlements manually through IT service management systems or with aging, homegrown systems, expanding the scope can seem overwhelming.

“It’s no longer just a paper exercise once a year – you need to maintain a full log on who has access to information and who authorized the access.

It becomes so expensive and cumbersome, that it doesn’t make any sense to do it manually anymore,” Kangas says.

Automating identity management The key to managing access in financial companies with a complex environment is, according to Kangas, to automate some aspects of it using role-based access control (RBAC).

That means integrating with existing HR-systems and automatically assigning the proper user role for each employee based on his or her position in the company. The solution automatically calculates which “birth right” resources employees should have access to, and automatically provisions the right resources to them. It also automates common employee lifecycle operations, such as changing department or position, holiday deputy arrangements or going on a maternity leave.

Financial companies in Germany have already adapted to most of these new standards according to Kangas.

“Germany has been leading this movement which promotes risk governance,” he says and concludes: “In the rest of Europe, large financial institutions, insurance companies, municipalities and others are now responding to the call.”

...

About Omada •

•

•

Founded in 2000, Omada is a fast-growing, independent cyber security company providing identity management and access governance solutions and services.

Core services are identity lifecycle management, compliance control, provisioning, and access risk management.

Omada's customers include large and midsize enterprises within regulated industries such as finance and pharma, as well as other sectors, predominantly in Europe and North America.

42 Sponsored content

Tags: bank data, standards, PSD2, APIs, innovation

Danish banks are preparing for Payment Service Directive II, but some fear that innovation will be delayed because the banks are missing a standard approach to exchanging data.

Wanted: A Standardised Way to Access Banks' Data Journalist: Dan Mygind

“T

he banks in Scandinavia are lagging behind in making open APIs.” Rafal Lipinski, cofounder and CEO of Hufsy, a Danish fintech startup, is calling for a more unified approach to open APIs in the Nordic countries.

One of the core elements in the Payment Service Directive II (PSD2) is the requirement for banks to provide open APIs that give third parties access to account information and make payment initiation possible.

Some Danish banks have already established partnerships with fintech startups and given access to some of their systems by means of APIs, but they still lack an overall standard for the APIs. Germany leading the way At Hufsy, Lipinski and his colleagues have chosen to launch their service in

...

Bjarne Stech,

Chief of Innovation, BEC

Germany where effort to standardise bank interfaces have already paid off.

“In terms of readiness, the German banks are frontrunners. They chose the HBCI (Home Banking Computer Interface) standard for interfaces for banking.

Thanks to that you can create an API and connect to the banking infrastructure based on legacy systems. In Germany, you have companies that are just API providers − like Figo that can connect to 98% of German banks. In other countries there are no such standards,” Lipinski says.

Focus on standard API This concern is echoed by Bjarne Stech, chief of innovation at BEC which provides IT and services for a number of financial institutions in Denmark.

“I am a bit worried that there is not one standard for the API. We can end up with a situation where there is one standard for BEC financial institutions, one standard for SDC financial institutions, one standard for Bankdata, one for Danske Bank and one for Nordea. This can hinder innovation,” Stech assesses.

He mentions a UK initiative called Open Banking Working Group (OBWG) that could be an inspiration for Danish and other Scandinavian banks. OBWG is working to provide a framework for open banking and data sharing via APIs for UK's banking industry.

Need for a technological sandbox In Germany, Hufsy is cooperating with Fidor Bank and, due to standardisation, it is much quicker to start the technical implementation of a solution.

“With Fidor, we didn't have to have lengthy negotiations, do business process work or speak to lawyers − things that take so much time. It only took three weeks to do a test in a sandbox and move to production. That's pretty speedy,” Lipinski explains.

Despite the lack of a standardised approach similar to the German one, Danish fintech startups are using APIs to build new functionality on top of the traditional banks’ systems. One example is Lunar Way, which developed a mobile app that accesses Nykredit's systems.

“Lunar Way is using our existing APIs to get access to our backend systems,” Stech says, and expects many banks’ internal APIs to be used as a foundation for PSD2-APIs. He is convinced that the way forward for API standardisation is more cooperation.

“If we can establish a technical setup where cooperation and innovation are encouraged, i.e. a common sandbox environment with data and APIs, we will go a long way,” Stech predicts.

...

What is an API? API is an Application Programming Interface, which is a technical term for the interface IT systems use when they exchange data with each other.

Sponsored content 43

Copenhagen fintech hub Author: ElĂ­as LundstrĂśm

16

Copenhagen ranks number out of 44 on the global fintech hub index ahead of Paris and Oslo (Singapore & London ties for 1st place) Source: Deloitte, Global FinTech Hub Review 2017

The fintech sector employs

over 14,000 people and is expected to create

6,500 more jobs by 2020.

1

Source: Copenhagen Fintech

Lack of coders: Copenhagen is the #1 most attractive city for talent in the world based on factors such as talent performance, high quality of life, high connectivity, and high levels of opportunities for international exposure and careers.

Even if we double university intake, Denmark will be lacking around

19,000

technical experts by 2030.

Source: Copenhagen Capacity

Source: Global Cities Talent Competitiveness Index 2017, INSEAD

140

15 %

There are currently fintech startups in Denmark.

Fintech startups in Denmark received of all startup investments rounds in 2016, thereby making fintech the single most popular category of startups among investors.

Source: Copenhagen Fintech

Source: The Nordic Web

Danish fintech startups attracted investments of

118

million kroner in 2016.

Source: The Nordic Web

44 Sponsored content

Tags: government, regulation, innovation, Financial Services Authority

The government makes U-turn concerning fintech Fintech has suddenly appeared on the radar of the Danish government, which recently put in motion several initiatives concerning the sector.

One year ago, the predecessor of the current Minister of Industry, Business and Financial Affairs had no such plans. What happened?

Journalist: ElĂ­as LundstrĂśm

Sponsored content 45

T

he Danish fintech sector is booming and the government has now chosen to back up that growth with several new initiatives.

According to Brian Mikkelsen (K), the Minister of Industry, Business and Financial Affairs, these initiatives aim to strengthen fintech entrepreneurship in Denmark.

“Fintech is an incredibly exciting area. Both because new innovative solutions create jobs and growth by themselves and because fintech companies disrupt the existing market for financing, payments, investments, etc.,” Mikkelsen writes in an email in lieu of a personal interview due to his busy schedule.

One of the minister’s new initiatives is a so-called “Fintech Lab” within the Financial Services Authority (FSA), with a budget of five million kroner. The Lab is supposed to help fintech startups navigate the complicated financial legislation − something which several startups have pointed out is very much needed. Some startups have had to wait over a year to get a financial license and one even chose to get regulated in Sweden in order to get started faster.

“It can be difficult for digital entrepreneurs to get an overview of what financial legislation they are governed by because they often come up with entirely innovative solutions,” Mikkelsen goes on, adding that he’s working to get the parliament’s approval for the Lab’s establishment this year.

U-turn from the government One year ago, the fintech sector didn’t attract much attention from the gov-

ernment. Mikkelsen’s predecessor, Troels Lund Poulsen (V), even stated in the previous edition of Copenhagen Fintech magazine that “the government has no plans to introduce the British model” referring to a special branch within the British FSA, which assists fintech startups with regulatory issues − quite similar to the Danish FSA’s Fintech Lab that Mikkelsen is now about to establish.

The new minister’s move cements fintech as a sector of growing importance in the Danish industry. Plus, it coincides with 2016 being the year when fintech became the most popular vertical among investors on the Danish startup scene.

“I, of course, have a great desire to see Copenhagen become the new centre for fintech companies in Europe,” Mikkelsen writes, while also sharing his concerns: “We are up against very big players.

Compared to London and Frankfurt, Copenhagen is just a small city in the outskirts of Europe. With that said, I still believe Copenhagen has good conditions to rise through the ranks, especially among fintech startups.”

Revised payment legislation and a startup panel The government has recently put in motion three other initiatives to strengthen fintech entrepreneurship in Denmark.

One of them was a proposal to revise the current payment legislation, which, among other things, dictates how companies may use customers’

data such as their payment history. The proposal allows companies to use customers’ payment information for marketing and other purposes.

“Our proposal eases the requirements for small payment services providers and allows payment data to be used in new, innovative, data-driven solutions,” Mikkelsen writes.

Additionally, the government has also appointed a digital entrepreneurship panel consisting of entrepreneurs, investors and other experts from the business world. The panel is supposed to come up with new initiatives to strengthen entrepreneurship in Denmark in fintech and other areas.

Lastly, the government is currently revising the entire financial legislation to identify and remove some of its overly bureaucratic procedures. What gives this initiative special significance is that when Deloitte named Copenhagen the world's 16th most important fintech hub, regulation was mentioned as one of the key areas keeping the city from advancing on the list.

“All in all, making it easier to start a fintech company in Denmark is well under way,” Mikkelsen concludes.

Fintech is “ an incredibly

exciting area. ...

Brian Mikkelsen, Minister for Industry, Business and Financial Affairs

Sponsored by

Tags: niche banks, digital disruption, analytics, data insights

Next five years are crucial for Danish banks’ survival Danish banks are resting assured, while new, unexpected competitors are challenging their business. If the banks don’t act now, they will be in trouble within five years, Experian estimates.

S

ubstantial profit is yet again normal in the bank sector after the financial crisis has come to an end.

According to analytics experts at Experian, however, this might soon enough change. Not because a new recession is lurking, but because new competitors are sneaking up unnoticed.

“When the largest banks are keeping an eye on each other for their next strategic moves, they are looking in the wrong direction. Non-finance companies with a massive customer base are entering the bank industry – those are the ones to worry about. They will steal market shares, but banks have not yet realised this,” says Mads Heindorff, Commercial Strategy Director Nordics at Experian.

Forrester Research has recently conducted a survey in cooperation with Experian to find out how business leaders see the future. Their report shows that almost three out of four top executives think that traditional business models will disappear in the next five years due to the digital revolution.

“Continuing with business as usual is the biggest risk the financial sector faces today. They simply have to invest in innovation,” Heindorff says.

Airline steals market shares from banks New competitors from other industries have already started attacking traditional banks by focusing on digital niche markets. One of these newcomers is Bank Norwegian, which offers savings products, credit cards and personal loans online.

The bank, established by low-cost airline Norwegian, has automated the process that assesses customers’ creditworthiness. The result is more than 1

million Nordic customers – managed by only 69 employees.

“In the future, more competitors like Bank Norwegian will come from other industries. Companies with huge customer bases will enter the banking business and take over parts of the banks’ business,” says Jacob Carlstedt, Sr. Global Business Consultant at Experian.

Utilizing the data gold mine In order to survive the digital challenges and increased competition, banks must optimize customer experience by using data, according to Experian.

“Banks need to know their customers very well. A lot of banks – and businesses in general – currently don’t. Instead of optimizing customer experience and hence earnings from existing customers, they are mainly focusing on acquiring new ones,” Carlstedt says.

Today, data means so much more than just a collection of facts and figures.

By using advanced analytics and automated decision-making software, banks can generate insights and decisions on how to interact with their customers. Not just to improve customer experience, but also to increase profit by upselling at the right moment.

“Many banks have a gold mine of data – but if they don’t have the right competencies in-house to harness insights, even the most advanced software is of no use,” says Carlstedt, adding: “Experian can help banks with exactly that, so they can focus on optimizing customer experience instead and automate more processes using data.”

Customer experience drives loyalty In the good old days, managers of local banks knew everybody in their commu-

nity and what they needed. Banks should give their customers the same experience today – using data.

“Traditionally, customer loyalty has been high in the financial sector, but since it has become easy to change banks, customers are more willing to switch providers to get the best experience,” Carlstedt claims.

A key step in becoming the desired provider is to look at data more broadly.

“Today, banks’ departments often work in silos, not sharing data. A client in one department can be targeted with an onboarding campaign from another department. Banks have to get a 360-degree view of their customers and use it to create additional value,” Carlstedt says.

Coming years are pivotal The pace of the digital transformation hasn’t been particularly high yet, according to Heindorff, but it will soon accelerate violently.

“Banks are facing big challenges. If you think Bank Norwegian has reached its peak, you’re wrong – I am confident, their growth continues in the coming years. If traditional banks don’t act now, it will hurt them in the long run,” he predicts.

He also argues that with data, analytics and automation advancing so fast it’s only a matter of time before we see banks with only a handful of employees. ”If the traditional banks continue their business as usual they will start losing opportunities and customers. Some will make it, others will take cuts – and some have to really wake up, if they still want to be in business,” Heindorff concludes.

Sponsored by

...

Jacob Carlstedt, Sr. Global Business Consultant, Experian

...

Services and solutions for Bank Norwegian provided by Experian: • • • • • •

Business consulting Credit Data for decisions in Denmark and Norway - positive and negative data Power Curve Strategy Manager Analytics – Full IFRS 9 framework (all models, ECL) Estimation and macroeconomics impact Analytics outsourcing – 3 year near and offshoring program

Winning in the customer era – Key Findings

73%

of business leaders believe that traditional business models will disappear in the next five years due to the digital revolution.

81%

believe better customer insights will be a top business priority in the coming years.

73%

believe enhanced analytics capabilities is a top business priority.

43%

In the Nordics, believe new competitors are the biggest inhibitor to success.

71%

Also in the Nordics, see existing customers as the single biggest driver for business growth.

Source: Forrester Research Report made in cooperation with Experian based on a study with 380 C-level and functional leaders at brick-and-mortar organization in Europe, the Middle East and Africa. 48 % being from the financial services industry.

48 Sponsored content

Tags: corporate innovation, established players, startups

Technology and customer expectations are moving fast. In order to be one step ahead, more and more banks are investing in startups or creating startup-like environments inside their own organisations.

Banks are learning from startups for future survival Journalist: Klaus Thodsen

B

eing a bank with happy customers is more than just a question of profit and loss for the individual. It is also very much a question of banking products and services, and giving the customers what they didn't even know they needed. Doing business with a bank can be a complicated process for many people, and that’s why the little tools to make it all run a bit smoother are in high demand.

“We pay a great deal of attention to relevant services within personal finances, and we try to always be aware how technology can help both the bank and the customer,” says Ole Madsen, Senior

Vice President for Communication & Business Development at Danish bank Spar Nord.

Investing in the future These days customer behaviour is very different compared to just a few years ago. We are used to interacting with our bank via mobile phones. The best solution is very often the most convenient solution for us, and the market now sees a growing number of services aimed at making banking both easier and more accessible for the customer.

“We always have to be aware of what our customers need. Even if they haven't

realised this themselves. As an example, we have developed Sunday, a home-buying platform where users can search for available homes based on their financial situation and can even get pre-approved for a mortgage. Customers save time and, at the same time, the process reduces manual work within the bank. It's efficiency in its purest form,” says Simon Haldrup, Head of MobileLife, an innovation department of Danske Bank, located separately from the parent company.

While banks have closed one branch after another over the last few years, traditional communication with customers has also become a thing of the past. The

Sponsored content 49 trying to be on the technological forefront,” Madsen says.

Technological development has been speeding up dramatically over recent years. Today, most of our day-today banking can be done from our own living room. Piles of paper, snail-mail and slow administration is a thing of the past at most institutions, and fast and efficient work processes have become a condition for the banks of tomorrow. ”Traditional tasks such as customer meetings and a human touch on a given case will continue to be an important element within the banking industry. I don't think that part is going to change.

But there is no doubt that every step of the process before and after the meeting, such as calculations, signing, approvals, etc, should be made as easy and efficient as possible,” Haldrup says. mode of contact has moved from personal to digital: via mobile phones, laptops or tablets. To innovate in the financial sector, it’s necessary to think like a startup − something that Spar Nord and other similar banks have realised.

“At Spar Nord we are very keen on partnerships with startups in the eco-system around our own business. We like to open up our platform for independent and talented entrepreneurs who think in a different way, and bring new ideas to the table. An in-house department is no guarantee for success, so this is our way of looking for quality,” Madsen says.

Even though there are differences in how Danish banks invest in digital solutions, the need for a new approach is something that the entire sector is very much aware of. If you ask Simon Haldrup and Ole Madsen, there are some very good reasons for this.

“The future doesn't wait for anyone, and

...

Ole Madsen, Senior Vice President, Communication & Business Development, Spar Nord

if you want to be a part of it, you have to adjust to it. Customer expectations are constantly changing, and if you don't try to always be one step ahead, you will be left behind,” Haldrup says.

Challenging loyalty Mobile services and products are regarded as essential for keeping customers and attracting new ones. Both Madsen and Haldrup believe that technological advances will challenge customer loyalty. The future will be much more a question of loyalty towards the best services and products, than of the individual affiliation to a bank, they say.

“It's an ongoing struggle for the future. The next great idea, the next product on the market is aimed at the next generation, and we are always on the lookout for entrepreneurs with great new ideas. As a small bank this is the way for us to compete − by always

...

Simon Haldrup, director of MobileLife, Danske Bank

Separate the startup from the mothership It is agreed by both Danske Bank and Spar Nord, that understanding the customer, as well as your own strengths and weaknesses, are among the key attributes of a successful startup − whether it is an integrated part of the company, or an autonomous subsidiary, loosely connected to the parent company. At the same time, both see it as vital to know exactly which segment of the bank’s customers are targeted with their products.

“Gathering insights, generating ideas and, most importantly, challenging status quo is vital and a large part of our work in MobileLife. Even the most excellent idea will lead to nothing if there isn't a great focus on the practical work as well − which is also a part of making a new product,” Haldrup says. In just a few years, MobileLife has gone from one product and four employees to four products and over a hundred employees.

Even if the startup is a part of the parent company, it is important to keep the two apart and provide enough space for both of them to do what they are good at, according to Madsen.

“It is essential for a startup to look at the parent company from the outside because this is how it can find the potential for improvements. It has to look at the company through the eyes of the customers in order to realize what their needs are and constantly improve the services to meet those needs. For us, that is the meaning of being successful in our startup investment,” Madsen concludes.

Sponsored by

Without “ great content,

you can't break through to the customers ...

Michael Plimsoll, Industry Marketing Director, Adobe

Tags: customer experience, artificial intelligence, data analytics, regulation

Better Customer Experience?

It's All About Data

Don’t look at regulation as a barrier. It can actually help you focus and leverage existing data according to Adobe.

“I

t is necessary to address your customers in a personal and relevant way in order to stand out,” says Michael Plimsoll, Industry Marketing Director at Adobe.

Given his current work at Adobe, where he advises clients of adopting a data-driven marketing strategy, and his previous work with data analytics, he knows the value customer data can bring in different scenarios.

Content + data-driven insights “Bring together all the information you know about the customer whether it is CRM-data, behavioural data or social

data so you can use clever algorithms with AI and machine learning to predict what the next best action or message should be,” says the experienced digital marketer with a passion for data analytics.

He adds that when the needs of the customer are identified, including context, location, device and other temporal and behavioural variables, then you can send out a message tailored to the needs of that specific customer.

“Without great content, you can't break through to the customers. Without data-driven insights you can't target, you can't measure or get the results

you need. Content and data working together creates the great experience they need.”

AI and machine learning – when?

All this about AI and machine learning sounds fantastic, but how far is the financial sector in applying these technologies?

Well, the potential of the technologies is acknowledged, but the actual, widespread implementation is still a few years off. According to a report titled “2017 Trends in Financial Services and Insurance: Customer is Priority,” only 4 percent of financial service com-

Sponsored by

panies see “using artificial intelligence/ bots to drive campaigns and experiences” as the most exciting opportunity for 2017. However, a full 33 percent see it as the most exciting opportunity for 2020. Fintechs, like Moneyfarm, are already leveraging this new capability to great effect and it will not be long before the traditional mainstream players follow suit.

Management of data is crucial This doesn't mean, however, that personalised experiences are off the table.

According to the report, which was written by Econsultancy in association with Adobe, the top priority in 2017 for financial companies is targeting and personalisation. As Plimsoll points out, 2017 is all about building a foundation of data that complies with regulations and meets customer experience demands.

“We have to identify where the data is, bring it together and put it into the right format so we can anticipate, predict and deliver what the customers want almost before they ask for it. We need to do all these things whilst considering and respecting their privacy,” he explains.

And what about regulation?

Regulations, such as the EU General Data Protection Regulations (GDPR) which will come into effect in May, 2018, are aimed at protecting individuals' privacy and can be perceived as inhibition on innovation – though they don’t necessarily have to be. GDPR is stressing the importance of data management, which will accelerate the work of identifying data and make sure it is available to the right people at the right time, thereby enhancing the establishment of a data infrastructure necessary for data-driven insights.

Similarly, with the Payment Service Directive 2 (PSD2) to be implemented

by January, 2018, financial institutions can feel almost besieged by regulatory frameworks. Plimsoll acknowledges the compliance burden, but believes that this regulation can also be used in innovative ways.

“The financial service industry is under massive pressure and subjects such as privacy and security make it a highly regulated industry. The regulation, however, is helping to drive change. PSD2 with open API's will

drive more competition, but also make banks leverage their data better. In many ways, it will speed up progress,” Plimsoll predicts.

Incumbents, startups and innovation Plimsoll mentions financial institutions such as RBS and Aviva which have digital startup labs in order to set innovation free so they are not constrained by traditional barriers.

“We will see more rapid innovation and leverage of data with PSD2 as well as more fintech partnerships aimed at more and better use of data,” he says.

Establishing small, agile labs more or less shielded from the mother company is one thing, turning the mother organisation itself around is quite another. Many financial institutions with legacy systems and technology stacks face challenges, which is reflected in the fact that only 64 percent of financial organisations claim to have “access and control over customer and marketing application data” – significantly lower than the average of 75 percent across other sectors.

Better usage of data Financial organisations are well aware that improved data analytics will be a crucial component of better customer experience, but they also admit that their capabilities lag behind their ambitions. A full 99 percent of respondents consider “improving data analysis capabilities” to be a key element in better understanding customer experience requirements, and more than half of respondents plan to increase their marketing analytics budget over the next year.

Financial organisations are already data rich and have smart, data savvy people who have put the data to good use in instances such as fraud detection. We will see the same happen in data-driven marketing and engagement with existing customers.

“How do we get the right quote?

How do we predict what the right account is? We must look at the individual customers and make the right product or service available to them. Forget about the product, and focus on the customer. Once you’ve got a sufficient data infrastructure in place, you can begin to focus on delivering data-driven customer experience that will differentiate you from your competitors,” Plimsoll concludes.

Which three digital-related areas are the top priorities for your organisation in 2017?

Targeting and personalisation

33%

Customer journey management

31%

Content marketing

25%

Social media engagement

23%

Multichannel campaign management

21%

Brand building / viral marketing

20%

Marketing automation

19%

Mobile app engagement

18%

Conversion rate optimisation

18%

Mobile optimisation

14%

Video content

13%

Search engine marketing

13%

Joining up online and offline data

11%

Customer scoring and predictive marketing

10%

Programmatic buying / optimisation

7%

Social media analytics

5%

Real-time marketing

5%

None of the above

2%

52 Sponsored content

Tags: insurtech, sharing economy, insurance

A new branch of fintech startups is quickly attracting attention and money.

The branch is called insurtech and, as the name implies, the startups are disrupting the insurance business through business models from the sharing economy.

Trend: Social business models disrupt the insurance business Journalist: Simone Okkels

I

t is not just banks and the financial sector that gets disrupted by fintech.

Since the emergence of the term in the 21st century, fintech has grown to become one of the hottest sectors to invest and to start a company in. Fintech has expanded into several sub-industries: wealthtech (investing), proptech (property), regtech (regulatory) and insurtech (insurance), among others. Denmark has startups in all of the above categories. The last one, insurtech, is very hot right now, according to Thomas Krogh Jensen, CEO of Copenhagen Fintech, the umbrella organization for the fintech sector in Copenhagen.

“Globally, there's a lot going on in this area, especially in the UK and US where investments are massive. Insurtech is rising rapidly everywhere, but Denmark is just catching on,” Krogh Jensen says.

To get an advantage in insurtech, Copenhagen Fintech entered into a new partnership this spring with TIA Technology, a Danish insurance software solutions provider that works in 30 countries.

“Insurtech is definitely a big part of the future of fintech. There's a lot of experimenting going on and insurtech opens up to a whole set of new business models,” Krogh Jensen says.

A social business model that saves you money goBundl is one of the insurtech companies residing at Copenhagen Fintech Lab, the first coworking space in the Nordics dedicated to fintech. The idea behind goBundl is simple: The policyholders form small groups with people whom they trust and share their insurance with

...

goBundl team

each other. If only a few claims are made by the members of the group, everybody gets a bonus. However, if the claims exceed a certain amount, the group won’t get any money back. It is a social business model, inspired by the sharing economy.

“At its core, insurance is sharing economy. It only works because a lot of people put a lot of money into one pool,”says Jakob Vang Glud, co-founder and CEO of goBundl.

Because most people lose money by buying insurance, goBundl wants to give you some of that money back. According

to penge.dk, an online financial magazine, insurance fraud makes up almost 10 percent of all action for damages. In addition to that, policyholders have lost the initial sense of community when it comes to insurance, Vang Glud says. goBundl uses data to improve the services provided to the policyholders and to turn the tables in a business that has looked the same for many years.

“We want to make insurance more transparent and reduce the number of insurance fraud cases. We give the policyholders a yearly bonus which traditionally would be earmarked for fraud. If you know the other people in the group, if it consists of your friends, family or coworkers, it's harder to commit insurance fraud,” he says and adds that if someone knows that the extra numbers they put on the bill gets taken from their mother they usually think twice. And if one chooses to commit fraud, the money they get will be taken from the yearly bonus that they would get a piece of anyway.

“It makes a difference. You are accountable to people you have actively chosen to bundle up with,” Vang Glud concludes.

...

Examples of Danish insurtech startups according to Copenhagen Fintech spring 2017 • • •

goBundl Gigga Next

Sponsored by

- now part of

Tags: financial planning tools, automation, digital assistants

Being holistic about finances Financial planning gives a feeling of security in daily life, and, according to the experts, 360-degree planning tools will make this both easier and more convenient in the future.

...

Jesper Essendrop, CEO, Schantz

“W

hether planning our pension or getting a loan to buy a house, we all need a full estimate of our economy - incomes, mortgages, pensions, assets, etc. For most people getting a complete overview of their finances and total wealth may be challenging, however, financial planning tools can be of great help,” says Jesper Essendrop, CEO of Schantz, a Danish fintech company which has just become part of Keylane a European market leader in insurance and pension software.

With the assistance of financial planning tools, banks and pension providers can easily work out an analysis of the customer’s current and future financial situation. The tools provide a holistic overview and are able to accurately simulate the impact of various financial actions in the short and long term and thereby improve customer experience radically.

How to plan across financial institutions “By using advanced financial planning tools, banks and pension providers can give their customers a true 360-degree financial overview. At the end, it is up

to the customer to decide how detailed the overview must be, in this respect the planning tools are essential in making the right decisions,” Essendrop says.

Most financial institutions aren’t able to give the customer the same holistic overview of their finances as a planning tool can, because they fail to look at the customer's entire financial situation which often spreads over several financial institutions.

“The risk a customer faces today is that a bank may end up giving inadequate advice, because it doesn’t take into account assets the customer might have in other financial institutions. By assessing all the financial aspects, the financial institutions are better equipped to advise and present a financial strategy to the customer,” Essendrop says, and goes on to point out that financial planning software is easy to use. Even with limited information such as a customer’s income, address and number of children it is possible to provide an accurate financial plan.

Save time and money Technology doesn’t only present new possibilities for customers to gain great-

er insight and control over their financial situation. It also speeds up the long bureaucratic processes they have to deal with when interacting with a bank or pension provider.

“We're interested in developing cognitive solutions that improve the interaction between banks and customers e.g. by machine learning technology. If the customer can get a full overview of his/ her economy by using a smart app or web solution, there's no need for an hour-long meeting with a banker. I imagine most of us would rather skip those meetings anyway,” Essendrop adds with a smile.

There are practically endless possibilities for applying the constantly growing technological advances to personal banking.

“Currently we are working on designing a digital assistant that will ensure financial institutions to always be one step ahead of their customers by intelligent monitoring of their customers’ finances to help them make proactive choices.

This will make everything – banking, pensions, mortgages and all the rest – so much easier, so much quicker,” Essendrop concludes.

54 Sponsored content

Crowdfunding: A success and failure Alternative financing is taking off in Denmark Tags: crowdfunding, peer-to-peer marketplaces, investments, financing

More and more companies are avoiding banks and seeking alternative financing like crowdfunding. Peer-to-peer lending is becoming especially popular among companies in need of smaller loans.

Journalist: Elías Lundström

W

hen the financial crisis hit back in 2008, banks were reluctant to lend money to companies. Although the trend has somewhat reverted by now, smaller companies are still facing the same resistance from banks as they did during the peak of the crisis, according to an analysis from 2016 by state fund Vækstfonden.

This situation has given birth to a new range of alternative financing models also known as crowdfunding, where it is large groups of people and not banks that put the money on the table. In Denmark, crowdfunding has been growing more than exponentially for the last couple of years. In 2016 alone, Danish companies and individuals raised around 120 million kroner through crowdfunding, which is a substantial increase compared to the 50 million kroner the year before.

“There has been an impressive growth in the crowdfunding market.

Overall, we follow the international trend,” says Frederik Ploug Søgaard, chairman of Danish Crowdfunding Association.

There are numerous success stories in the Danish crowdfunding industry.

E-bike producer MATE recently took home over 30 million kroner through the international crowdfunding platform Indiegogo. It represents a part of the 25 percent of Danish companies that are seeking financing and using alternative funding sources such as crowdfunding.

Crowdlending moves the most money The most successful branch of crowd-

funding in Denmark is crowdlending. In short, it is an alternative way of financing loans, through which a group of individuals lend money to either companies or other individuals and get a return on the interest rates.

In 2015, Danish startup Ageras used crowdlending to finance two loans totalling several million kroner through the Flex Funding platform. They are part of an increasing number of companies that choose crowdlending over bank loans. In 2016, Danish companies and individuals borrowed 60 million kroner through crowdlending platforms, which is 133 percent higher than the figures of the previous year according to Danish Crowdfunding Association.

“Crowdlending is the most popular choice at the moment,”says Henrik Vad, founder and CEO of Flex Funding.

It is the small companies that are especially eager to borrow money through crowdfunding platforms.

“The banks have been crushed by capital requirements after the financial crisis. Therefore, they are primarily focusing on companies with the best ratings and lowest risk, which means that the market is open for other possibilities,”adds Vad. Each month, his platform facilitates five million kroner worth of loans to companies. Their investors get an average 7,4 percent return on investment, according to the CEO. Obstacles to crowdfunding growth Although crowdfunding growth is promising, its fate has yet to be de-

...

Henrik Vad, founder & CEO, Flex Funding

cided. Crowdfunding platforms in Denmark are still struggling to turn a profit.

“The future of equity and reward crowdfunding in Denmark is questionable,” says Søgaard, adding that it’s still to be seen, whether their business model will work in a market as small as Denmark.

The same can be said about crowdlending. Despite being one of the biggest Danish platforms, Flex Funding’s numbers are still red – though CEO Vad is optimistic and expects the company to turn a profit next year.

Part of his plan is to expand internationally using the technology in other European markets. If the size of the Danish market is, indeed, in the way of growth, offering Danish platforms outside the borders could be a way forward.

Sponsored content 55

...

Frederik Ploug

Søgaard, chairman, Danish Crowdfunding Association

A grim start for equity crowdfunding

...

4 types of crowdfunding •

REWARD The most well-known type of crowdfunding, through which people put money into a campaign and get a reward. New gadgets and other products at concept stage fit this category well, as the campaign usually pays for the development of the product.

Popular, international rewardbased platforms are Kickstarter and Indiegogo. Booomerang is the first Danish platform of this type of crowdfunding.

•

LENDING Instead of applying for a loan from a bank, companies and individuals use peer-to-peer lending to get an alternative loan from a large network of small investors. This type of crowdfunding moves the largest amount of money each year worldwide and in Denmark.

Popular Danish platforms include Lendino and Flex Funding.

•

EQUITY A large group of typically small investors may pay an unlisted company money in return for equity. This type of crowdfunding is an alternative way for companies to get risk capital instead of asking business angels and venture capital funds to provide it for them. It is gaining momentum in the US and UK but is lagging in Denmark.

CrowdInvest is the only active equity platform in Denmark.

•

DONATION With this type of crowdfunding there is no reward. Instead, people may choose it to support a cause, person or company that they believe in. BetterNow is an example of a Danish donation platform.

There’s a surprising lack of qualified companies seeking equity crowdfunding. Investors are waiting impatiently, with nowhere to put their money, says CEO of the only Danish equity platform on the market.

Journalist: Elías Lundström

I

t’s quite normal to hear companies complaining about the lack of capital. So when the opposite is the case, it makes you curious.

A relatively new type of alternative financing called equity crowdfunding is having a rough start in Denmark.

Instead of investing on the stock exchange, investors of equity crowdfunding platforms are encouraged to put their money in unlisted companies and get shares in return. Globally, this type of financing is starting to gain traction, having accounted for seven percent of all money raised by crowdfunding in 2016.

In Denmark, however, not a krone has been devoted to that purpose. Surprisingly, money is not the issue. There is simply nowhere to invest it.

“We have a lot of interested investors, but almost no qualified companies to in-

...

Søren Stenderup, cofounder and CEO of Danish equity crowdfunding platform CrowdInvest.

56 Sponsored content

...

Danish e-bike MATE took home over 30 million kroner in a crowdfunding campaign on Indiegogo.

Danish companies not used to equity capital CrowdInvest was founded in October, 2016. After six months, 1000 potential investors have signed up to the platform, according to Stenderup. Only 1 out of 100 interested companies passed the test and qualified for an equity crowdfunding round. Lacking budgets, business models and structure in general were among the disqualifying factors, he says.

“It’s strange that it’s so hard to find eligible companies. You’d think that people would jump at this opportunity,” says Stenderup and adds, “Danish people and companies are mostly used to loan capital. It’s in their DNA to rather borrow money than get shareholders. So they have to get used to this new market.”And what about that one company which managed to qualify for equity crowdfunding? It never managed to get fully signed by investors. They didn’t consider it attractive enough, says Stenderup.

Poor investment culture There are several guesses as to why equity crowdfunding meets so much resistance, when other types of crowdfunding are thriving.

In order for a company to issue shares to the public legally, it has to be in the form of a private limited company (A/S). This means depositing half a million kroner in the company, which is

Crowdfunding growth in Denmark

2,5x

140 120 100 Million DKK

vest in,” says Søren Stenderup, cofounder and CEO of Danish equity crowdfunding platform CrowdInvest.

80

2,5x

60 40 20 2009

2010

Donation

Reward

2011 Lending

2012

2013

2014

2015

2016

Extrapolation*

Crowdfunding has grown at an over-exponential rate since 2014 in Denmark. Danish companies and individuals together raised about 120 million kroner in crowdfunding last year. Source: Danish Crowdfunding Association.

a hassle according to chairman of Danish Crowdfunding Association, Frederik Ploug Søgaard.

“Most firms seeking equity crowdfunding have the form of a limited liability company (ApS) and for them to come up with 500.000 kroner can be a big mouthful,” he says. In his opinion, companies could use the money from the crowdfunding investments to establish a private limited company.

Stenderup agrees that this is a theoretical possibility, but it doesn’t work in practice. He is convinced that companies shouldn’t seek equity crowdfunding, if

the founders are unable to invest 500.000 kroner themselves.

“There is something wrong with that from a risk perspective. If you don’t want to be personally liable for this amount, you shouldn’t ask other people to invest in your company,” he says.

Both agree, however, that framework conditions can be improved nationally. In both the UK and Sweden, investors get a tax deduction when they put their money in unlisted companies. Implementing a similar policy in Denmark would make equity crowdfunding more attractive to investors, they say.

...

Sponsored by

Festina Finance

...

Mikael Braagaard, CEO at Festina Finance

...

A fintech company originating in Denmark with offices in several European cities. Established in 2007, the company develops cutting-edge advisory solutions for personal financial management.

Casper Gjerris, CIO & COO at Lån & Spar Bank

Tags: financial advice, banking, pension, automation, wealth management

Engaging customers with a user-friendly system and the right data A variety of data sources and an intuitive user interface is helping financial advisors communicate clearly with their customers.

I

n 2013, Lån & Spar Bank was drawing up plans about the future customer experience for its clients.

“We decided that all data about a customer's financial situation should be available in an easily accessible form when meeting with that customer. Our vision was that it should be easy to play around with different financial scenarios together with the customer,” explains Casper Gjerris, CIO & COO at Lån & Spar Bank.

Gjerris and his staff thought they had to build a new advisory system on their own, but a demonstration of the Advisor system from Festina Finance in 2014 changed their minds.

“We realised immediately that there was a very good match between our requirements and their system,” Gjerris says.

From Wealth Management to Financial Advice The only challenge was that the system was not directly targeting banking.

“The Advisor system is based on several iterations from the founder Morten Schantz' more than 25 years' experience in developing advisory sys-

tems for the insurance and pension industry,” explains Mikael Braagaard, CEO at Festina Finance.

Despite this, Lån & Spar Bank found the features of the system very compelling, so a cooperation between Festina Finance and the bank began.

User-friendly interface and smart data collection One of the most attractive features of Advisor is the high number of publicly available data feeds. Pension systems, the Danish Tax Authorities and other data sources feed financial data into Advisor after the customers have given their consent. This data is topped up with data from other sources (e.g. Statistics Denmark), which give Advisor a very powerful data foundation for creating different kind of “what if” scenarios.

“The customer and the financial advisor do not have to enter a lot of information. They get instant feedback on how different financial scenarios would play out for a household. What happens if they buy an apartment in Copenhagen? What if they want a bigger car?”

Gjerris explains.

One of the visual feedbacks of the sys-

tem is a speedometer that veers between green, yellow and red to indicate how financially stretched a household would be in different situations.

“Quick and easy simulation means the customer can be engaged in a dialogue.

Both our customers and employees are happy with the system,” Gjerris says.

Denmark, Nordics, England..?

Today, Lån & Spar Bank’s IT-hosting and -services company, SDC, is offering the solution to more than 120 Nordic banks. Besides SDC, Festina Finance has also signed a partnership with Edlund for pension companies.

In England, Festina Finance is cooperating with the Building Societies Association.

“We have to ask the customer to enter a bit more information as we can't automatically retrieve as much information from public data sources as we can in Denmark. We do, however, plan to interface with Land Registry, Experian and other sources,” Braagaard says.

Festina Finance are currently implementing Advisor together with a large building society and is in dialogue with several other companies in the UK.

58 Sponsored content

Tags: startups, competition, entrepreneurship, corporations

It only takes 54 hours to launch a fintech startup 80 would-be entrepreneurs gathered at Startup Weekend in Copenhagen to solve issues ranging from young people’s debt to expensive pension plans in just a weekend. The big financial companies were watching the competition closely for new ideas.

Journalist: Elías Lundström

Sponsored content 59

F

or many people, debt is a touchy subject rarely spoken about. Nevertheless, over 50.000 young Danish people are listed in the credit registry RKI as bad payers.

So, if these people won’t take financial advice from humans, why not use a non-human bot instead?

That was the idea the winning team came up with at Startup Weekend in Copenhagen this spring. During a hectic weekend, they competed with about 80 aspiring entrepreneurs in making the most promising financial technology startup.

Some were building a digital piggy bank for young people trying to save money for their travels. Others wanted to use machine learning to create an artificially intelligent trading analyst to advise traders on the stock market.

What they all had in common was the goal to launch a fintech startup in just 54 hours.

“It was very hectic, especially because we changed ideas in the middle of the process,” said Nichlas Kvist Jørgensen from the winning team that created a bot called Payoff to help young people better handle their finances.

“In the beginning, some of the ideas from the contestants were somewhat detached from reality, like building a bank or pension company. During the weekend, however, they have matured to be less revolutionary and more realisable,” added Thomas Krogh, CEO of the association Copenhagen Fintech and one of the judges at Startup Weekend.

Winners focus on challenge, not technology It is nothing new that the financial sector is being attacked from all sides by startups wanting to get a slice of the pie that

...

In just 54 hours, three aspiring entrepreneurs launched the startup Payoff and won the Startup Weekend competition this spring.

Photo: Startup Weekend

banks used to own. With more competition, however, the bar has been raised significantly for newcomers.

This is one of the reasons that aspiring fintech entrepreneurs are showing up at competitions like Startup Weekend.

“It’s the perfect platform to test your entrepreneurial skills no matter the educational background you have,” said Jernej Dekleva, one of the lead organizers of Startup Weekend Copenhagen.

Startup Weekend is a global phenomenon, founded in Colorado, USA, in 2007. Since then, it has expanded to 135 countries, including Denmark. The goal of every event is the same: to help teams build a startup in 54 hours.

In order to get there, teams are encouraged to find a solution for a substantial problem and work out a sound business model. By the end of the weekend they are expected to create an early prototype, a so-called “minimum viable product” (MVP). Though it is not a requirement per se, for any team to have a chance to win, it has to work fast, efficiently, and with an outstanding degree of coordination.

“Payoff won this year because they address a real problem. There are a lot of young people who take out payday loans and struggle to pay them back,” explained Krogh.

Increasing interest from corporations Even before the 54 hours came to an end, several companies had showed in-

terest in the idea Payoff was working on.

The attention Payoff received is a perfect example of the increasing trend of larger corporations seeking collaboration with startups at ever-earlier stages in order to learn about the best ideas and meet the most talented teams before their competitors do. This spring, financial companies such as Nets, Nordea and SEB Venture Capital partnered up with the event to get closer to the entrepreneurial minds of the participants.

“It’s a way for the corporations to get new, early-stage ideas,” says Dekleva, adding that the financial sector is especially active in scouting for startups at the moment. “Fintech is suddenly a hot topic due to several factors. With the new EU regulation coming up next year to free bank data, the banks will need to adjust.”

...

Startup Weekend •

Global entrepreneurship event where participants form teams and build a startup in 54 hours.

•

Each event has a new theme.

Fintech remains the most popular in Denmark.

•

Payoff won the competition this spring. The startup is based on a computer bot that is being developed to help young people get rid of their debt. The bot gives tailored advice to users in regular language.

60 Sponsored content Danish sugar beet farmers used a novel encryption technique on a large scale some years ago for the first time in history. Today, the technology shows potential to revolutionise data sharing in a financial sector, where privacy is becoming an increasing concern

Tags: data sharing, encryption, privacy, trust

New encryption method revolutionises data sharing in the financial industry Danish scientists are pioneering research into an encryption method that might change the way financial organizations collaborate, share data and safeguard privacy in the future.

Journalist: ElĂ­as LundstrĂśm

Sponsored content 61

I

n January, 2008, 1229 Danish sugar beet farmers gathered at a rather unconventional auction. They were bidding for each other’s contracts to sell sugar beets to the sugar company Danisco in what was the first nationwide exchange of these contracts. But it was not only that. The auction was also the very first large-scale application in the world of a special encryption method called Secure Multiparty Computation (MPC).

The method has been hailed by scientists since the 1980s. They have recognised its potential to allow people who don’t trust each other to work together.

And seeing how the encryption method can change the way people collaborate and share data, it would also ease privacy concerns substantially.

Yet, all of this was only a theoretical possibility at the time.

“Back then, people said that it would never work in practice, because it was too slow,” says Ivan Damgård, cryptography professor at Aarhus University.

Fast forward to 2008, and you’ll find Damgård among the pioneering researchers behind the technology supporting the sugar beet auction. It was an event that showed how wrong assumptions had been just 20 years earlier.

Removing the third party To understand why Danish sugar farmers needed modern encryption technology so badly (and why the business of finance does too), it’s necessary to take a closer look at the sugar industry.

In Denmark, there are thousands of sugar beet farmers but only one processing company: Danisco. Each farmer has a contract with Danisco that specifies selling rights for a certain amount of beets. These contracts were up until recently traded bilaterally between farmers, but when the EU reduced support for sugar beet production, it was necessary to organise a nationwide auction to re-allocate contracts to the most cost-effective farmers.

And thus came the dilemma: Farmers wanted to keep their bids for these contracts secret, because they could reveal sensitive information about how much money they had and how many tons of beets they produced. However, in order to calculate the market clearing price at the auction, Danisco had to have access to the bids.

It was at this point that Damgård and

his colleagues came into the picture. By using MPC, they managed to both keep farmers’ bids private and calculate the price at the auction. A feat that only a few years earlier had seemed impossible.

With normal encryption you’d have to decrypt the bids in order to calculate the price and thereby potentially reveal confidential information. The novelty of MPC is that it allows a system to make pre-defined calculations on the encrypted data and only get the result of the calculations in clear text.

In other words, none of the encrypted data is revealed in the process. This not only makes it easier to collaborate when there is little trust between people who need to draw conclusions from shared data. It also removes the need for a trusted third party to do the calculations, according to Damgård.

Securing trust in credit ratings It’s been a long time coming, but MPC is now being commercialised by several companies.

They hope to bring new ways of collaborating on shared datasets without breaking confidentiality − especially in the financial sector. Here, data is being shared across platforms like never before while privacy concerns are rising.

Damgård and his colleagues give some examples that are currently being tested: One is to automate credit ratings by using MPC to conceal confidential data from both banks and individuals while doing the calculations. Another is to allow companies to benchmark themselves against their competitors − for example on how much money they spend on employees − without actually giving away that information to any third party.

A little over ten years ago this would have been practically impossible. Doing the calculations simply took too long, according to Damgård. Today, you can compare the speed of MPC systems with that of a laptop from around the year 2000, he says.

Damgård himself has created a prototype recently that is able to analyse the credit rating of a bank customer by comparing it to a database of 2500 users. Response time is only a few seconds.

“The method is now realistically applicable, as long as the amount of data to be handled is not exceptionally large,”concludes Damgård.

The method “ is now

realistically applicable, as long as the amount of data to be handled is not exceptionally large. ...

Ivan Damgård, cryptography professor, Aarhus University

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Ivan Damgård, cryptography professor, Aarhus University

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Tags: payments, card fraud, artificial intelligence, automation

Artificial intelligence is the new weapon against card fraud Nets prevented an additional 150 million kroner of fraud last year.

While criminals get increasingly sophisticated, Nets is now using artificial intelligence on a massive scale to prevent card fraud.

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ever before has our payment card information been stored in so many different places as today. From the digital newspaper subscription to the online store, where you bought a pair of sneakers, card information is often stored in databases, with a risk of getting compromised.

In other words, criminals have an unprecedented amount of opportunity to steal card information and trade it on the black market among other things.

For just two and a half years, monthly fraud attempts have tripled in Denmark from about 4,000 cards in 2014 to 12,000 cards in the summer of 2016.

"Criminals have become more aggressive and have been especially good at not just stealing card information, but also misusing them afterwards," says Kaspar Kock Kristensen, Senior Vice President for Fraud & Dispute Services at Nets.

Previously, criminal activity was mainly limited to misusing card information by manually buying expensive goods − such as TVs or software − in online stores and then reselling those products. Today, however, the techniques are much more sophisticated, according to Kristensen.

Using robot software, the criminals are now buying goods and services automatically in many different online stores at the same time. This way each store only sees a few transactions, which

doesn’t look suspicious. Across several stores, however, the card may be used for 30 purchases a second.

“The technologies behind card fraud have become more advanced and that compels us to get even better at preventing the fraud from happening,” Kristensen says.

For the last couple of years, Nets has been working hard to do just that by rolling out its latest weapon against card fraud: artificial intelligence. The efforts are paying off, it seems.

Automating fraud prevention Detecting card fraud before it happens can be rather complex. There are, of course, the most obvious cases, when a card is being used at a physical store in Brazil and then five minutes later in China – something a regular shopper would never be able to do.

Analysts at Nets make logical rules to block payments that fit these kinds of usage patterns. Yet, the challenge grows when criminals find new and clever ways to implement their fraud schemes using automated software. Nets have already developed over 700 different logical rules that block fraudulent behaviour – but they are getting increasingly complex to maintain and finetune.

“We have to adapt our systems to detect new patterns of fraud at an ever faster pace. This all points towards using artificial intelligence in combination with

...

Kaspar Kock Kristensen, Senior Vice President, Fraud & Dispute Services at Nets

huge amounts of data if we are to catch up with them,” Kristensen says.

As one of the leading anti-fraud services providers in the Nordics, Nets is handling payments from over 19 million cards. This gives them a unique insight into the behaviour and patterns that explains not only how criminals abuse the system but also the way each of us buy things.

Payment data is now being used in a neural network, which is a way of artificial intelligence, to detect patterns in a complex system. It understands the unique payment behaviour of each cardholder and triggers an alarm when some-

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Our goal is to make sure “ that legal users are unaffected

...

Kaspar Kock Kristensen, Senior Vice President for Fraud & Dispute Services at Nets.

thing falls outside of normal spending patterns.

Combined with the logical rules, the neural network allows Nets to detect a larger number of fraudulent payments even before they happen.

“The system works in real time and allows us to immediately reject a payment that looks suspicious,” Kristensen says.

Since the implementation of fraud prevention with neural network capabilities, fraud attempts have already started to lessen. Monthly fraud attempts went down again from 12,000 cards last summer to 8,000 cards in the first quarter of 2017, according to Nets.

“We prevented an additional 150 million kroner worth of card fraud in 2016 compared to 2014 in Denmark alone,” Kristensen says.

The white noise challenge Detecting and stopping criminals is not the only difficult task fraud prevention faces. It is also supposed to avoid block-

ing payments that look suspicious but really are genuine cardholder payments − a concept known as white noise.

Perhaps you normally use your debit card to pay for groceries and other small purchases, but what about the moment you decide to buy an expensive holiday online for the first time? The neural network might consider it an anomaly, block the payment and ultimately block the card.

Because of scenarios like this, Nets still uses human agents to decide if a payment card should be cancelled.

“Our goal is to make sure that legal users are unaffected,” Kristensen says while explaining that achieving this gets easier with more data: “Our agent performance is already three times as good as when we started, because we now have a more detailed insight into how they perform and which rules work and which don’t.”

In the end, businesses, banks and consumers all end up saving money, when fraud prevention improves on a large scale.

When a card gets misused, the merchant covers the bill in 80-90 % of the cases, while the bank covers the rest.

Additionally, banks and me rchants have administration and dispute handling expenses for each fraud case.

This highlights the issue of online payments, where around 80 percent of fraud cases happen, according to Nets.

On the Web, security can be scarce and payments are often authorised by their users simply typing in the card number.

This is gradually changing as more online stores implement the 3D Secure standard, requiring consumers to type in a pin sent to their mobiles before paying.

“Regular consumers shouldn’t be too worried about fraud, since it only happens in about 0.05 percent of the cases,” Kristensen says. “However, I still believe, that criminals will continuously force us to keep improving our technology to be able to prevent fraud in the years to come.”

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Tags: bitcoin, blockchain, startups, banks, money laundering, compliance

Chainalysis, a Danish startup, is pioneering efforts to make bitcoins compliant with regulations.

Making bitcoins attractive for banks

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Michael Grønager, cofounder & CEO, Chainalysis

Journalist: Dan Mygind

C

onsidering that modern banking has its roots in the Renaissance and that the world's oldest existing bank, Monte dei Paschi di Siena, was established in 1472, six years is an infinitesimal time in the history of banking.

In the world of virtual blockchain-based currencies such as bitcoin, however, six years equals centuries’ worth of development.

For Michael Grønager, CEO and co-founder of Chainalysis, it was the beginning of a new era when, in 2011, he joined a crowd of delegates interested in bitcoin at the world's first bitcoin conference in New York.

Now, six years later, he and his company is spearheading efforts to make bitcoins palatable for banks.

Professional compliance in the bitcoin ecosystem For outsiders, bitcoin still has a bad reputation and is being associated with criminals. Bitcoin was a popular currency on Silk Road, an online black market, which the FBI shut down in 2013. As a result, the US authorities started to regulate bitcoin-related activities, with special focus on combating money laundering.

Financial Crimes Enforcement Network (FinCEN) drafted guidelines in 2013 that

made it clear that parties dealing with “decentralized virtual currencies” qualify as Money Services Businesses (MSBs) under US law. MSBs must register with the federal government, collect information about their customers, and take steps to combat money laundering committed by their customers.

Michael Grønager got interested in this work.

“I realised that compliance in the bitcoin ecosystem had to be professionalised,” he says.

In 2014, that realisation led to founding Chainalysis with two other bitcoin-enthusiasts in order to ensure financial transparency in the bitcoin world.

Transparency and transaction tracking Chainalysis offers solutions to analyse patterns in bitcoin transactions in order to find indicators of money laundering, human trafficking and other criminal behaviour. Those solutions got the attention of Barclays, one of the world's biggest banks. Barclays’ compliance division started a cooperation with Chainalysis in 2015 so the bank could form partnerships with bitcoin-based companies.

In 2016, Barclays entered a partnership

with Circle, which, at the time, facilitated buying and selling bitcoins on its platform.

“We had to ensure that the bitcoins were not used for money laundering purposes,” Grønager says.

One of the solutions Chainalysis is offering to identify money laundering is Activity Monitoring Reports.

“We are monitoring transactions and help banks comply with regulations. If some of the transactions deviate from the expected patterns, our tool will generate alerts,” Grønager explains.

The cooperation with Barclays has since led to working with other financial institutions. In February, Bank of Montreal partnered with Chainalysis in order to identify bitcoin transactions used for financing human trafficking.

The latest addition to Chainalysis' client list of financial institutions is Nets, a Danish electronic payment provider, which offers services to more than 240 financial institutions in the Nordic region.

Six years after Grønager's attendance at the world's first bitcoin conference and 545 years after the world's oldest bank was established, it seems that bitcoins are getting traction in the banking sector.

Sponsored content 65 Tags: automation, artificial intelligence, jobs destruction, CSR

Robots don’t kill jobs, corporations do The adoption of fintech is predicted to destroy a huge number of jobs in finance, but mass layoffs are bound to backfire, warns Kent Petersen, chairman of Finansforbundet, the Financial Services Union in Denmark.

Journalist: Mathias Caspersen

O

ver the next decade, more than a third of all banking jobs in Europe will disappear as new fintech services are adopted.

This prediction was published in the recent Digital Disruption report from US-based Citigroup, one of the largest financial corporations of the world.

It’s just one of a series of reports predicting how technologies such as robotics and automation will destroy jobs in the financial sector. Similar reports anticipate even bigger numbers of job losses.

Are workers in the Danish financial sector in fact dinosaurs waiting for an inevitable meteor to exterminate their livelihood?

Not necessarily, according to Kent Petersen.

He argues that Danish financial institutions would be wise to think twice before replacing a bulk of their staff with robots.

“If we want a well-functioning industry in 10 or 20 years, we’ll need skilled people. All reports show this – that the biggest barrier for future growth is lack of qualified people. Thus, companies are digging their own graves when laying off people to save money in the short term,” Petersen says.

The bigger picture He by no means suggests that financial institutions should avoid adopting new technologies.

They are essential, he says, for companies to compete in a global economy where numerous startups are gaining ground with more effective administrations and business models.

He does, however, urge companies to see the bigger picture.

“Everyone has to realize we’re in this together. No Danish corporation is big enough to handle this development alone. The new technologies will have massive implications on our industry and society as a whole. There’s a huge potential here but also a huge risk. It’s up to us to make sure that the potential works in our favour and not against us,” Petersen explains.

He calls for corporations to enhance the qualifications of employees instead of laying them off.

But does he really want financial corporations to invest in their staff even if this would put their immediate competitiveness under pressure?

“In the bigger picture it makes sense.

Companies like to talk about CSR but this right here is one of the biggest opportunities to show some social responsibility. The new technologies will reshape our society in a big way in the following years, and the corporations will be a key factor in deciding whether they will make us weaker or stronger,” Petersen says.

“We have to solve this in unison, so everyone needs to see themselves as part of a whole. The corporations, the public sector, the professional organisations and the universities – we all have to sit down together and work out sustainable solutions; we need to develop new partnerships and new ways to handle this challenge,” Petersen adds.

He disregards the notion that human labour will simply be redundant in future financial businesses.

“A few years ago everyone thought online shops would destroy all retail jobs. As it turns out, a lot of companies are opening up flagship stores and showrooms to showcase their products, because people still want to talk to other people. We, humans, want the human contact and counselling. So I don’t believe that classic financial skill sets will suddenly go out of fashion,” Petersen concludes.

66 Sponsored content

Tags: talent attraction, love, Denmark as a brand, culture

For love and fintech: Why Omar Shaikh moved to Copenhagen What makes financial talent move from one of the most vibrant fintech hubs in the world to the city of Copenhagen? Omar Shaikh, CEO of Cocoa Invest, took the plunge − a decision he never regretted.

He did it out of several reasons. One was love.

Journalist: Simone Okkels

Sponsored content 67

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ike almost all good stories, this one began with love. When Omar Shaikh moved to Denmark two years ago, Cupid played a big part in his decision. He moved from the metropolis of London to Copenhagen because of his two loves.

“It started with a girl. A lovely Danish girl. We had been together in London for many, many years and I’ve been coming to Denmark visiting for the best part of ten years. My girlfriend is from Nordjylland,” he says, pronouncing the name of the northern Danish region with a slight accent: “So I’ve seen the country – from Copenhagen to the rural parts. I had a strong connection to the country which made the decision much easier. But we wouldn’t have moved here if it hadn’t been for the commercial element.”

For love and money Shaikh is the CEO of Cocoa Invest, a fintech investing company. His second love.

“I came here for personal reasons but also very much to establish my business here. I saw a good opportunity and this was where I wanted to build my business, where I wanted to live, and have children. I saw a quality of life here much different from London," he says.

He had been working in the banking world of London for many years. In the fast lane.

“Copenhagen is smaller. And in this sense smaller is more beautiful! If you're doing something different here, such as we are, it can be quite visible. I wanted to come to a place where I could attract the best talent. We are a financial company and this industry has had a bad reputation since the financial crisis. Consumers are very cynical about banks and financial institutions in general. We're building our business in Denmark because Danes are very hard to impress: if we can be successful here, other markets will hopefully be easier to conquer,” Shaikh says laughing, adding that in the world’s eyes Denmark stands for quality.

“

I came here for personal reasons but also very much to establish my business here ...

Omar Shaikh, CEO, Cocoa Invest

“Denmark is not very good at promoting itself but that can be changed – that “Made in Denmark” logo can be transferred as a sign of quality again and that is what we are hoping to do.”

“Where better to be regulated than in one of the least corrupt countries?”

Regulation is one of the areas where fintech startups differ from other kinds of startups. Cocoa Invest wants to create diversified investments for the masses. It is currently working on its application for the Financial Supervisory Authority, so the company is still not regulated. But once it is, Shaikh sees that official authorisation as a great opportunity: “In a struggling industry, where better to be regulated than in one of the least corrupt countries in the world? It is so important that the consumers trust the financial solutions. We are dealing with people's money and they need to trust us. It is hard getting regulated here, but when we are regulated we can easily get our solution out cross-border,” Shaikh explains.

When he talks about Denmark, it is clear that there are actually three love stories at play. Having seen and experienced Denmark all the way from Tornby Strand in the North West to the capital of Copenhagen in the South East, Shaikh really feels like he has found the place to be – both personally and as a fintech startup: “Danes have a real connection with their past and their culture but, at the

same time, they are not afraid to look forward, which is what fintech is about as well,” he says.

Denmark opens up to other markets in the EU During our interview, he tells me several times how lucky he feels to be in Denmark. In his opinion, Copenhagen has all it takes to become one of the fintech centres of the world. In addition, he's already seeing a talent drain out of London as a result of Brexit.

“The argument of London’s dominance is already having a profound effect on the city’s financial services. There's a lot of nervousness and it is difficult to hire. It's very expensive to have a business located in London: both the costs of offices and the wages are extremely high.

In Copenhagen you can have a fantastic office and the cost of living is lower while the quality is higher. The arguments for London are diminishing,” Shaikh says and adds: “At Cocoa Invest we are very low cost and very liquid but, unlike some banks, we don't lock anyone in. We have to do a good job otherwise we won't be in business very long. We need a lot of customers, so we'll have to be bigger than Denmark – we must be cross-border. We'll always be headquartered here, in Copenhagen, and from here we can spread out over Europe. That's a good advantage to have!”

...

Facts •

Cocoa Invest is a independent online saving and investing company based in Copenhagen.

Omar Shaikh founded Cocoa together with Lars Buur in 2013.

•

Omar Shaikh is also on the board of the association Copenhagen Fintech

68 Sponsored content

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Tags: talent attraction, coding, Copenhagen as a brand, recruitment

Copenhagen is the best city for talent − so why are we still short of gifted techies?

Copenhagen was elected best city in the world for attracting, keeping and developing talent in the business world earlier this year.

But Danish companies still struggle to recruit enough − and the right − talent. According to Copenhagen Capacity, we need to be better at branding Denmark as a whole.

Journalist: Simone Okkels

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o city is better than Copenhagen to attract, keep, and develop new talent in the business world thanks to a high quality of life, good physical and information infrastructure, and strong international links. That was one of the conclusions of the The Global Talent Competitiveness Index report released in January.

But while Copenhagen is ranked first, Denmark as a whole fell three ranks from 5th to 8th place on the global index.

Apart from high taxes, one of the reasons is that Denmark is lacking employees with technical competencies and vocational education.

Danes lack an interest in hardcore coding According to Copenhagen Capacity, an organisation that assists foreign businesses, investors, and talent in identifying, releasing and capitalising on business opportunities in Greater Copenhagen, Danish companies are still struggling to recruit talent especially within engineering and IT. But if we are so good at attracting, keeping and developing talent, where do we go wrong?

“We hear from companies and universities alike that not enough Danes are interested in hardcore coding and generally have little interest in what happens on the back end [of software engineering]. In this field we need three times as many talents as we've got,” says Nikolaj

Lubanski, Director at Copenhagen Capacity Talent Department and adds, “Another challenge is the dropout rate [at universities]. There is a discrepancy between demand and supply. Even if we get to double the intake we'd still be lacking around 19,000 experts in 2030, according to the projections.”

By adding coding as a subject in school curriculums for lower-grade students, we’d be able to create interest earlier on and achieve better results, Lubanski claims.

“We need a long-term solution. We have to tell people, the ones with the right competencies, that Denmark is an attractive place for tech talent to live,” he says and adds: “The task is twofold: We have to get the word out to the world about the qualities of the Danish tech industry as well as our willingness to focus on innovation, and we have to explain that in Denmark they'll also have the possibility to get a real work-life balance. It's a city with a green profile, good conditions for families with young children and a vibrant leisure life.”

Recruitment campaigns are working In collaboration with Danish business life, Copenhagen Capacity carries out international recruitment campaigns targeted at attracting foreign talent to open positions in Denmark. It is not just startups that need talent, however. Big companies – Maersk, NCC, Novo Nor-

disk, etc. − have also discovered that if they can't hire people with a keen eye for AI, Big Data and such, they'll lose their competitive position.

But what about all the Danish jobs going to foreigners? Lubanski is not worried about that at all. Firstly, because the job positions are open and there are simply not enough local talent to occupy them. Secondly, because one international employee living in Denmark for 5,5 years contributes 720.000 kroner net in taxes.

“Foreign talent ensures that tech companies will continue to operate and grow in Denmark,” Lubanski concludes.

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Nikolaj Lubanski, Director of Talent, Copenhagen Capacity

70 Sponsored content

It’s not a question “ of money, but of how fast you can get started.

...

Tags: startups, rebels, regulation, financial license

Junaid Ahmad, CEO and founder, Brickshare

New fintech business models are challenging regulation originally made for traditional financial companies. Several fintech startups accuse the Financial Supervisory Authority of slowing down innovation with extremely long casework time.

Fintech entrepreneurs struggle in the regulatory wilderness Journalist: Elías Lundström

A

few months ago, Junaid Ahmad launched his new property investment platform called Brickshare. The crowdfunding platform is among the first in the Nordics to allow individuals to invest from 1,000 kroner in rental properties − something he calls a "boring but also stable asset with good returns even compared to the stock market."

While Brickshare is officially registered in Sweden, where it’s also liable to pay taxes, the company led by Ahmad is still located in Denmark. There’s a simple story behind this peculiar arrangement: In Sweden, Brickshare was able to get regulated by the local FSA and be up and running in a month − even during Christmas holidays. By contrast, the Danish FSA would have needed 12-18 months to review his case, Ahmad says.

“There’s no doubt that we would have gone out of business waiting this long," he says and adds: "It’s not a question of money, but of how fast you can get started.”

Square pegs in round holes The problem of long casework time is not limited to Brickshare. Several

other Danish fintech startups, such as banking app Lunar Way and crowdlending platform Lendino, have struggled with year-long waiting times at the FSA. Apparently, the problem arises when a new fintech business model, which doesn’t fit into existing categories in the legislation, is presented.

Take Lendino for example. The company allows investors to lend money to other companies through a crowdfunding platform. Does that make Lendino a bank? Or perhaps some kind of a stock exchange?

These questions are important to be answered first in order to apply for the correct financial license at the FSA. “It was quite confusing when we contacted the FSA because no one had sought this type of license before,” says Andreas Christensen, CMO and partner of Lendino.

In total, Lendino had to wait a year to get a clarification and license as a payment services provider.

“We didn’t expect it to take this long. It’s time we could have spent on important things such as sales and marketing,” Christensen adds.

A positive mindset Not all startups think that waiting only has disadvantages. Lunar Way, which can best be described as a digital bank for millennials, spent one year and over one million kroner paying for lawyers while waiting for a decision from the FSA of how to be regulated, according to its founder and CEO, Ken Villum Klausen.

Unlike leaders of other startups, however, he doesn’t see the process in a strictly bad light.

“We were frustrated about the waiting, but during the process we also grew markedly wiser about the regulation and how the FSA works,” Klausen says.

Fortunately, the administration seems to be open to providing some assistance for the growing number of startups: the Danish FSA has recently got five million kroner from the government earmarked for a so-called “Fintech lab” inside the authority.

Hopefully, future startups will be able to navigate through the regulatory wilderness more easily and with less expense than the pioneering companies.

We are the Danish Employers’ Association for the Financial Sector We have more than 25 years of experience We are ready to take care of your interests

Amaliegade 7 1256 København K 33 91 47 00 fa@fanet.dk www.fanet.dk

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Tags: pension, automation, it development, startup

Small startup makes core system for pension giant Nes Technology, a startup with a team consisting of only 15 people, got the assignment to make and implement a large IT system for private pension provider Skandia – a system Skandia’s business must rely on for many years to come.

W

ith a core system dating from 1998, Skandia’s decision to get a new one wasn’t surprising.

The surprise was their pick of provider: a small startup, called Nes Technology, which had never previously implemented a complete core system for anyone.

“The new system will improve things for our customers, partners and ourselves. It brings down our costs while adding convenience and simplicity for our customers. Nes Technology’s system was to a higher degree designed with user experience in mind than their competitors’,” says Pelle Wahlström, CEO of Skandia Denmark.

The new system will give users access to more self-service with a modern look and feel. New technology and architecture make the system more flexible and it automates processes, which Skandia expects will give them a competitive advantage.

New player in a conservative industry A core system is the digital foundation of a pension provider. The system keeps track of all the funds entering the system: who they belong to and how they are invested. At the same time, the system must keep up with new regulation, which is a constantly changing factor in pension management.

“It’s hard to get permission to make a core system – especially in pensions, because it’s so complex. There are many factors to keep track of, and we have a huge responsibility for the performance – there can easily be 100 billion kroner

to manage in a system like this,” says Alfred Joensen, founder and CEO of Nes Technology.

The core system has been in development since 2007, when Joensen founded the company. He thinks the long process to obtain their first enterprise customer for a full implementation is largely due to the fact that the industry picks its IT providers conservatively. Nes Technology is a new player with a team of 15 people, and when they compete with companies that have hundreds of employees and a multitude of systems implemented, the industry usually picks what seems safe.

“Things take time in fintech, but if you have a small team which understands what the challenge is about, you can make great solutions. A project like this doesn’t lie, and proving yourself is everything in a conservative industry,” Joensen says.

An IT project on time and budget After a longer due diligence than normal, Skandia ended up feeling safe with Nes Technology as their new core system provider.

“Nes Technology is a different provider with an approach and edge dissimilar to traditional providers. What they offer and the way they run projects is better aligned with how we see the world in the future,” Wahlström says.

“They are a small, dedicated and highly technical team, which constantly listens to our needs. I have to say that they work in a smart and modern way. We are on time and budget, and the parts we’ve tested so far look very promising,” he adds.

The project is running until 2018, but already the CEO has great expectations for the new system.

“The automation will make us more effective and user experience will also be improved: the interface is more modern and customers will be able to do so much more directly in the app. When it’s fully implemented I expect to see a great return on investment,” Wahlström concludes.

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Alfred Joensen, founder and CEO of Nes Technology.

4 GOOD

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