Finland payments: could the Nordics become a fintech hub? 

T

he UK’s exit from the EU brought about a whole host of complications for most sectors, including financial services.

It meant companies started looking at other markets outside of London to head up their operations; however, so far, no clear rival to the city has emerged.

As a result, EU member states are taking advantage of the uncertainty surrounding Brexit, branding themselves as new ‘homes’ for fintech.

The Nordic fintech market is growing and diversifying rapidly. According to research from Mastercard, the Nordics, together with the UK, are in the best position to embrace open banking.

This is largely due to the high level of online banking penetration in the region. For instance, Norway tops the European league with 95% of adults using online banking services, followed by Iceland (94%), Finland (91%) and Denmark (91%).

A sophisticated market such as this paves the way for tech innovation, and makes it a natural environment for fintechs to grow.

Jim Wadsworth, senior vice-president for open banking at Mastercard, says: “By taking advantage of pan-European developments such as PSD2, all European banks are progressing towards a full open banking environment, but it is clear the UK and Nordics are leading the way with high consumer readiness and a number of solutions already live.”

Some of the most successful fintechs to emerge from the region include buy-now-pay-later giant Klarna, music streaming service Spotify, and mobile payments app Vipps.

Finland has an advanced tech ecosystem and in 2020 Finnish start-ups received €951m ($1.12bn) in equity funding, doubling records set in the two previous years.

Of the country’s 210-plus fintechs, payments companies represent the largest proportion, accounting for 39% of all fintechs. In addition, their total revenue in 2020 was €249m, meanwhile they raised €127m, meaning that this category of fintech has raised the most funding to date.

In this region there is a strong focus on building niche, disruptive products - a reason for the significant capital investment.

One of the biggest payments fintechs in Finland is Enfuce, which looks to help other fintechs build tailored solutions.

Speaking to EPI, Enfuce co-founder, chief commercial officer and deputy CEO Denise Johansson discusses the growing fintech landscape.

She says: “Even though we see similar fintechs, I think they are all differentiating themselves in some respects. It’s about finding out what it is they are going to serve, how and who they are going to serve it to, and then finding their own messaging around that. As long as fintechs differentiate and do their homework to understand who they are serving, they will find their own angle in the market.”

Founded in 2016, Enfuce provides payment, open banking, and sustainability services for corporates and other fintech SMEs.

Johansson says: “We build solutions to hit fintechs’ needs and goals, and through that they are able to differentiate themselves. We are in quite a complex industry. When we started Enfuce, we saw that the whole industry needed to change. It needed a push to be modern.”

Enfuce currently serves 10 million end users and has a customer base spanning 16 countries. Its clients include payment solution Pleo and Icelandic neobank Indo.

“Being a fintech and actually having the capabilities to serve any big bank, not only in Finland and the Nordics but Europe and Globally, makes our offering quite unique,” adds Johansson.

Other notable Finnish payment fintechs include Mash - which uses machine learning to deliver payments solutions - and Cloud asset – which has over 250 payment methods in the EU.

B2B Pay was also born out of Finland, offering virtual bank accounts for companies that exports into Europe which collects payments domestically. Its partners include Barclays, techstars and Nordea Start-up Accelerator.

In 2020, Enfuce joined Visa’s Fintech Fast Track programme, which aims to make it easy for fintechs to create innovative solutions.

Johansson says: “Visa has a broad insight into capabilities of other fintechs and what fintechs are missing in the market and how to serve them better globally. So, by joining the programme, we proved our capabilities. That made us stand out within the global Visa organisation.”

Johansson adds that the partnership has brought Enfuce more opportunities to work closer with Visa on different segments, not just fintech.

“Having a global giant backing you and believing in what you do is not only good for us but good for our customers too,” she says.

Following its collaboration with Enfuce, Visa has made further moves into the Nordics with its recent acquisition of Swedish open banking platform Tink for €1.8bn in June.

Innovation policy advisory and research firm Startup Genome has labelled Finland’s capital Helsinki as one of the top global ecosystems.

For 2020, it valued the Helsinki start-up ecosystem at $5.8bn with total early-stage funding of $511m, higher than the global average for emerging ecosystems – not to mention that 23.1% of Helsinki’s population work in the tech industry. As a result, along with Visa, Chinese tech giants such as Tencent and Alipay are financing the country’s emerging fintechs.

In March, Tencent invested €7m in Enfuce as part of the fintech’s Series B funding round. Enfuce plans to use the capital to further its European footprint and enter new markets.

Mobile payments titans Alipay and WeChat Pay have also dipped their toes into the Finnish market. In 2016, the two companies partnered with Finland’s biggest mobile payment service, ePassi. The move was part of Alipay and WeChat Pay’s wider strategy to connect European merchants with Chinese tourists.

Since the initial partnership, ePassi has added Alipay’s QR code payment solution to its offering.

What comes next? Only time will tell, but the moves made by such established payments players into Finland demonstrate the country’s potential as a fintech hub of the future.

And with Finland’s digitally savvy population and sophisticated tech ecosystem, it is difficult to see anything but growth for the fintech sector over the coming years.

“We are from a small country, but it is a country where regulations and the Finnish FSA have a strong position globally,” says Johansson.

“We are proud to be born out of Finland because it means we are well equipped to serve the financial industry.”