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Sweden has grown into one of Europe’s major fintech hotspots, with Stockholm-based payments companies Klarna (valued at $2.25bn) and iZettle ($500bn) leading the way.
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TechEU’s 2015 fintech study placed the Nordic country third behind the UK and Germany for the amount of fintech investment, while the Nordic Web reveals that almost two in every three fintech investments in the Nordics in the past two years were made in Sweden.
But what do Swedish fintech trends look like for 2017? Computer Weekly spoke to both established players and fintech startups in the country to find out.
As the implementation of the EU’s new payment regulation – the revised Payment Services Directive (PSD2) – looms in January 2018, Ewan MacLeod, chief digital officer at Nordea bank, said preparing for it would be a top priority for all organisations in the financial industry, both in Sweden and across Europe.
The goal of the new directive is to level the competitive playing field, make payment services more secure and promote innovation. Key to these plans is the requirement for banks to open up their application programming interfaces (APIs) for qualifying payment service providers to access. In practice, this means it will be easier for third parties to build their services on top of banks’ data.
While banks are concerned with what this means for their business models, Stefan Backlund, head of marketing at Swedish online payment company Trustly, believes one impact of PSD2 already apparent in 2017 is the increased relevance of bank accounts as an easy online payment method.
“As banks and fintech companies prepare for PSD2 to come into force, third-party applications will add more value to the bank account,” said Backlund.
Growth of partnerships
In recent years, fintech startups have shown they are capable of shaking up the way things are done in the financial services sector. For example, in six years, Swedish fintech star iZettle has expanded to 12 countries by making mobile point-of-sale devices accessible to small businesses and said it is getting 1,000 new business users every day.
Meanwhile, both incumbent financial services providers and startup companies are starting to see each other’s strengths as an opportunity, not a threat.
“We think there will be a lot more cooperation between incumbent financial institutions and fintech players,” said MacLeod. “Increasingly, we expect to see quite a few pilot projects launched across the marketplace between banks and fintech startups. Gone are the days of building everything internally.”
Johan Lundberg, CEO of Swedish fintech fund NFT Ventures, believes collaboration will also increase via investments over the next year, including direct investment and collaboration with venture capital firms.
“The banks will become more and more active in investing and taking cases, concepts and companies to the next level,” he said. “We have done co-investments with banks and will continue to do so.”
Demand for personalisation
It is not only regulation and competition that is placing new demands on the financial industry, but customers who increasingly expect personalised and easy-to-use digital services.
“We are seeing that speed beats brand in many cases, so the existing one-size-fits-all approach will come under sustained pressure,” said MacLeod.
David Fock, CPO at Klarna, said personalisation through artificial intelligence (AI) and deep learning would be key trend for Sweden’s fintech sector. For Fock, these are not just buzzwords, but technologies that can make the difference in creating a truly personalised user experience.
“If taken advantage of in the right way, they will transform the static [web] we have today to an internet with endless variations, affecting e-commerce, fintech and all other services dependent on an internet user experience,” he said. “Each individual will have an experience tailored to their needs and preferences, and it will also adapt to them as they pass different stages of the consumer journey.”
Rise of the bot
AI will also play a role in another fintech trend in 2017 – the rise of bots and virtual assistants. Although this trend is not entirely new, technological advances continue to take AI capabilities further.
“We are going to see more organisations using AI-driven bots to solve customer problems – for instance, answering basic customer queries,” said MacLeod. “True cognitive computing is a little bit away from the mainstream, but we are confident we will see a move from primitive bots to virtual assistants.”
One example is Swedish bank SEB, which piloted its software robot Amelia internally with its IT service desk for nine months before rolling it out to customers.
Another example is Swedbank’s Nina, an automated virtual assistant that the bank has been using for a few years and is next planning to expand to its mobile app and Baltic subsidiaries
Martin Kedbäck, channel head of telephony at Swedbank, told Computer Weekly last May: “From an industry perspective, I think assistants will become an overlay to apps. People can’t use as many apps as there are out there, so I see a role where the assistant becomes an integrator [of services].”
The wild card: Brexit
A potentially interesting twist in 2017 has been raised by Trustly’s Backlund. The Stockholm-based company believes last year’s Brexit vote in the UK could translate into good news for Swedish fintech.
“London has long been hailed as the financial capital of Europe, but as the UK prepares to exit the EU, many tech talents and companies will look to relocate,” said Backlund. “Stockholm is an appealing option given its reputation as both an early tech adopter and a ‘unicorn factory’.”
Whether this will become reality, and to what extent, remains to be seen, but what is certain is that 2017 will be a very interesting year for fintech in Sweden.