The Record-Breaking Funding Year in Fintech

Danish fintech has broken every record over the last 12 months. A Danish fintech unicorn is born, foreign investors have set their scope on the Danish financial ecosystem, one fintech raised 2,7 million euro without having launched a ­product yet, and financial incumbents are partnering with and investing in scaleups.

The number of Danish fintech companies has risen from mere handfuls 10 years ago to more than 200 today. Both local and international investments have breathed new life into the Danish fintech sector. Last year was a record one, with Denmark outperforming its Norse neighbors in total capital attracted from both Danish and international investors.

“Fintech in Denmark is doing better than ever,” says Rolf Kjærgaard, Chief Investment Officer of the Danish Growth Fund, Vækstfonden. “The sector has been growing in recent years, and as a result, fintech is experiencing a rise in attention from both the media and investors.”

Click for bigger image. Graphic: Reach Media.

Kjærgaard explains that this increase in attention stems in part from prominent investments like the 350-million-kroner Series-B investment that Danish fintech Pleo secured in May 2019. However, the real reason for the current optimism surrounding fintech lies in the strategic partnerships between old and new.

“Up until a few years ago, the financial sector was far behind on investments in technology, IT infrastructure and user-friendly solutions,” says Kjærgaard. “But the need for digital transformation has paved the way for fruitful relationships between the banks and mortgage credit companies on the one hand and the fintech companies on the other.”

Not long ago, fintech companies were entering the scene seemingly destined to outmatch and replace the old-timers in the finance sector. Meanwhile, banks felt so confident in their capacity to innovate, they did not engage with the new. The situation today is completely different.

“Today we know that a credit card solution alone is not enough for fintech to secure success,” Kjærgaard says. He elaborates:
“You have to be a part of the value chain of financial offerings in its entirety and be in possession of the know-how needed to navigate within the regulatory framework of the finance sector. This is what the banks have to offer. But the banks have also realised that, in terms of user friendliness and usability, they can’t compete with the new fintech companies.”
The result of this, according to Kjærgaard, seems to be a symbiosis between fintech scaleups and financial incumbents. The banks need the innovation of the fintech sector while the fintech sector needs a platform through which it can implement its solutions. This is why we’ve seen Spar Nord invest in a digital piggy bank called Ernit and why we’ve seen Danske Bank invest in a tech solution for home economy, Spiir, and the payroll facilitator Zenegy.
Cases like these lay the groundwork for future investments, not only from Denmark but also from the rest of the world.
“The local willingness to invest that we are witnessing right now will continue,” says Kjærgaard. “More fintech companies will emerge and we will experience more late investment rounds with the potential to attract international capital.”
Local investments aside, is there another reason why the Danish and Scandinavian markets are able to attract investors from around the globe?
“Well, the international investors can see that investments here are paying off,” says Rolf Kjærgaard. “If it were just a single company it wouldn’t raise an eyebrow, but we now have several hundred fintech companies in Denmark alone, of which many have been successful in rolling out their business solutions and securing initial investments. This is something that calls for attention. Denmark has gained a reputation as a country with a dynamic fintech scene and this alone can attract more investments.”