The Growth Story of Danish Fintech lead by Fintech Mapping

Fintechs have become an indispensable part of today’s finance industry all around the world. Denmark has seen an astonishing development in Fintech within the past 5 years, in terms of number of new Fintechs, investment volume, job creation and partnership formation. The scene grew by 144% since 2016.

In this article, Business Insights teamed up with Copenhagen Fintech, a startup-driven cluster organization growing the Fintech Hub in Copenhagen. Together we look at the Danish Fintech scene as an example of how well Fintech ecosystems can develop with the right support and contribute to a strong, value-creating financial industry in Denmark and beyond.

Unfavourable outlook and a wake-up call for the Danish finance industry in 2015

In late 2015, tech-led innovations were shifting jobs away from the traditional financial services into Fintech. It looked as if jobs would transition out of Denmark, as few Fintech companies were based in Denmark at the time. Meanwhile, Fintech globally saw exponential growth with proliferating investments.

Observing this trend, a consortium of players in the Danish financial sector investigated Copenhagen’s potential of becoming a strong Nordic Fintech Hub. They concluded that “the emergence of Fintech represents a great growth opportunity and potential for Copenhagen and Denmark” and also found that “innovation and job creation in Fintech were to a high degree driven by startups and young companies”.

Copenhagen Fintech’s active cluster management as a solution

In response, Copenhagen Fintech was established to find an untapped potential. It is aimed at accelerating existing enablers, such as a vibrant Fintech community, active established players, access to risk capital, political support with a friendly regulatory environment, access to talent, and brand as a Fintech Hub.

Consequently, the organization adopted a highly inclusive approach to align the interests of a broad range of stakeholders across the private and public sector, unions, and associations, all of which are also represented on Copenhagen Fintech’s board.

Nevertheless, the organization has always put startups at the heart of its operations and surrounding activities were understood as sustenance to incubation and scaling. Copenhagen Fintech’s ambition has been from the start to create a safe space for creative and open innovation in the financial services sector. A cornerstone of this strategy is the Copenhagen Fintech Lab, a co-working space where early-stage startups focused on tech-driven innovation in the financial services sector receive support embedded in a vibrant community of experts and founders. Here, startups benefit of stage-specific support and mentoring programs as well as access to funding and a large network of industry partners.

Mapping the Fintech ecosystem

To monitor the evolution of the Fintech ecosystem, Copenhagen Fintech began to track new startup entries and leavers in 2017. As a result, the organization was able to create a map of the ‘Danish Fintech Startup Scene’, which is updated and published annually. This map drew more and more attention. Simon Schou, CIO at Copenhagen Fintech acknowledges this fact: “This might be our best kept business secret. New startups came to us to be on the map. It has served as an excellent and easy way to expand our community”.

The map is essentially a visual overview of Danish Fintech startups categorized into 13 different domains such as cryptocurrency, digital banking as well as pension & wealth tech. However, not only the search for new, unknown startups and their monitoring is a challenge. The development of the underlying categories – which should not overlap while capturing the full range of initiatives – also represents a complex endeavor due to the highly dynamic environment.

When comparing these maps over time, the significant growth potential in the startup scene becomes apparent. Between 2016 and 2020, the total number of tracked Fintech startups in Denmark more than doubled from 109 to 266 ventures. The three largest categories in 2020 were business solutions & platforms, payment processing & networks, and data analytics providers, together accounting for almost 40% of all startups. The fastest growing categories are corporate infrastructure and cryptocurrencies.

The big picture on Denmark’s financial sector today

Besides an incredible growth of the Fintech scene itself in Denmark, the country’s entire economy benefits from this trend. Looking at the ecosystem around the Fintech space in Denmark, we can see impressive value-creating developments.

Revisiting the fear of jobs moving away from Denmark in 2015, we can now see the opposite effect meaning that the number of jobs created through Fintech in Denmark grew to approximately 3,000 in 2019 by a stable CAGR of 44% since 2015. Furthermore, Fintech-Corporate Partnerships increased by a CAGR of 86% during the same period. And last but most remarkable, the investment volume in Danish Fintechs from 2015 to 2020 skyrocket with a CAGR of 106% and an investment volume of approximately 3,529 DKKm in 2020.

The future holds a lot more to come for fintech, its impact has altered the financial ecosystem. Not only hubs like Copenhagen Fintech watch the space closely these days, fintech is quickly altering customers’ demands and expectations.