The current state of fintech in Norway

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Fintech has in a few years grown from a narrow area of interest to become one of the hottest topics in Norway. With an already digital and cost-efficient banking sector, all the prerequisites are in place to succeed in establishing and scaling the next generation of digital banking services. Norway is repeatedly ranked as having the leading digital infrastructure and internet and smartphone penetration is close to 100%. Consumers are early adopters of digital services, and the society is characterized by high levels of trust. A widespread use of digital identity solutions provides easy access to secure and user-friendly digital services. With a tradition to collaborate where it is possible and compete where it is necessary the stage is set for the next wave of fintech from Norway.

However, the competitive landscape have changed, and the incumbent banks are no longer the only ones dictating how the face of digital banks should be. Fintech startups have entered the playing field, challenged the banks way of work, and raised the stakes for competition. While some fintechs such as Klarna have established themselves as actual challengers to the incumbent banks’ sovereignty over financial services, most fintechs are experiencing limited consumer adoption. As a result, a majority of the fintechs are collaborating with incumbent banks in order to leverage best of breed in the competition for the hearts and wallets of the banking customers.

Whether the customers are looking to lend, spend or save the common denominator is trust. While the underlying products may remain the same for a while, customer interaction will change. Distribution must be contextually relevant and driven by “jobs to be done” rather than product-centric, and traditional segmentation should be replaced with personalized dialogues.

According to a survey by Kantar TNS, banks still enjoy a significant trust advantage over potential challengers from both the tech industry as well as adjacent industries. Even though Facebook is much more than a social network, the general perception is still closely connected to a social media company. Even though this is good news for the banking industry, the potential threat from challengers should not be easily dismissed. Facebook is frequently used by 3,4 million Norwegians and has already obtained a pan-European payment license. Only time will tell how they aim to utilize this.

trust

With Facebook pay already operative in the US an obvious play is to launch this service across Europe as well, and the jury is out whether Facebook will be satisfied to provide a simple P2P payment service to create stickiness to their messenger platform or whether they are aiming to become something bigger. Facebook is already in a unique position to disintermediate retail banks as the most powerful digital ecosystem out there for consumers. The key to Facebooks powerful position is the ability to evolve alongside changing user behavior, and so far, Facebook is excelling at this.

Payments

PSD2 is by definition in effect as of January 2018, but the technical implementation is delayed and the due date for opening up for TPPS through standardized APIs is estimated to be September 2019. However, neither the financial services industry, affected industries or fintechs is sitting idle by in the payments space. Danske Bank has announced that they will pursue a preemptive strike and launch their account aggregator services through screen scraping across the Nordics already in 2018, and we should expect to see other banks also pursuing various strategies to prepare for PSD2.

Vipps has evolved from a simple P2P payment service to become the banking industry’s joint line of defense against challengers from the tech industry. A well-known brand alongside a merger with the domestic payment scheme BankAxept as well as digital identity solution BankID gives a dominating position in the Norwegian market. In addition to this, Vipps aims to launch in another European country within the year. Read more at vipps.no

Payr is not discouraged by Vipps dominance in the Norwegian market and has already raised capital and is aiming to raise more to get in on the fight for the customers’ attention. Read more at payr.no

Meawallet was acquired by Swedish fintech company Seamless and is delivering HCE and tokenization services for NFC payments and mobile wallets.  Read more at meawallet.com

Auka is in Norway best known as mCASH, but after SpareBank 1 acquired the Norwegian rights of the technology, Auka is aiming to deliver turnkey payment solutions to banks across Europe. Read more at auka.io

Aera payment and identification is a joint venture by the biggest retailers in Norway providing a unified payment and identification platform for retailers. Read more at aera.id

These are just some of the players originating out of Norway, but the payment space inhabits several others providing specialized solutions such as Zeipt, a provider of digital receipts and Zwipe, a provider of biometric readers for credit cards just to name a few.

Lending

Norway has for a long time been one of the last the white spots on the map when it comes to crowdlending and is a laggard from a Nordic perspective. Several players are now set to bring alternative ending to the Norwegian market.

Monner is aiming to provide affordable loans for SMEs through crowdlending and has raised capital from SpareBank 1 SR-Bank. The team has a strong track record from banking and digital services and has developed a proprietary platform for loan origination and administration. Read more at monner.no

Funding Partner is another company aiming to fill the funding gap for SMEs through crowdlending and has developed their own credit scoring model in order calculate risk. Funding Partner has participated in DNB NXT accelerator. Read more at fundingpartner.no

Kameo has already been present in the Swedish market for a while, but entered Norway in 2017, offering crowdlending for property investments. Read more at kameo.no

Aparto is also targeting real estate investments and gives investors the opportunity to invest a fraction of rental apartments. Read more at aparto.no

Perx is aiming at the consumer lending market with their crowdlending platform, promising to deliver unsecured loans at half the cost as the established players. Read more at perx.no

In addition to the crowdlending platforms, there are several reward-based crowdfunding platforms in the market such as bidra.no, funde.no and Spleis by SpareBank 1 just no name a few.

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Source: KPMG/University of Cambridge

However, one of the reasons that Norway is falling behind our Nordic Peers are due to regulatory constraints, primarily limitations on the investor side where investments made though a crowdlending platform may be considered licensable lending. For further reading, he financial supervisory authority of Norway has provided this handy guide to crowdlending in Norway. ICT Norway and Selmer has also made a fintech regulatory guide, which introduces financial regulations in Norway in a user friendly way.

Loan origination at the incumbent banks is also highly digitized, and collaboration between the banks and the public sector provides banks the necessary data for fully digital no-touch mortgage processes.

Savings and investments

This is where things start getting interesting. With an aging population and increased awareness towards long-term savings, both banks and fintechs are promising to make savings easy to understand and less boring. With advancements in machine learning and opportunities created by new regulations, the stage is set to deliver the best savings and investment service.

Min Sparing from Sbanken gives an overview of more than 400 mutual funds, stocks and savings accounts through an open platform. Building the leading robo-advisory service based on a turnkey robo-investment platform by Quantfolio Sbanken is set to democratize wealth creation. Download the app and get started here.

Spare from DNB aims to be the one-stop solution for all your savings and aim to make savings both easy and understandable. Read more at dnb.no

Spiff is a household name in the Norwegian fintech space. Aiming to make savings fun and accessible, Spiff has partnered with Nordea and BN Bank. Read more at spiff.no

Dreams originate from Sweden, but has entered the Norwegian market through a strategic investment by Storebrand. Similar to previous entries, Dreams is based on behavioral psychology to encourage people to save more. Read more at getdreams.com

Kron is a subsidiary of wealth manager, Formuesforvaltning. Based on a digital platform, Kron aims to offer investment advice to the affluent segment. Read more at kron.no

Quantfolio has developed a turnkey robo-investment solution based on quantitative analysis for banks and wealth managers looking to provide robo-advisory services. In addition to this, Quantfolio delivers Macro AI analytics to asset managers, family offices and private investors as a service. Read more at quantfol.io/

Fronteer Solutions has developed the quantitative investment fund Harvest.online. read more at fronteeersolutions.com

Huddlestock promise to giver ordinary investors access to the same tools and strategies as hedge funds through their platform. Read more at www.huddlestock.com

Looking outside of Norway, robo-advice has already had a significant impact on the wealth management industry. Several wealth managers have already launched a robo-advice option; others have an option in development or are reviewing strategic alternatives. It will accelerate the fee compression in the industry, together with other trends such as passive investing. Wealth management firms need to keep a close eye on operating costs and on ways to automate transactions and processes that are currently performed manually.

On a more positive note, robo-advice will also give wealth managers access to a large new market of millennials who are interested in accumulating wealth, but have had only limited options in terms of investment management. As these individuals mature and build assets  they represent a significant growth opportunity for banks and wealth managers.

Open Banking

With PSD2 in effect (at least in theory), a majority of Norwegian banks are lining up to open up their platforms in due time before the regulatory standards require them to do so, forever changing the digital banking landscape as we know it. Sbanken is the first one to open up, and through our developer portal hundreds of developers/customers are now developing their own online banking solutions based on the banks APIs.

The rest of the banks are also on the verge of opening up and provided some insight in their plans for open APIs at Oslo Startup Day: PSD2 earlier this year.

For further reading on open banking, I have compiled this short guide.

As a result, the Norwegian fintech ecosystem is really shaping up. Access to capital is plentiful with VCs like Alliance Venture, Northzone, and Investinor with a track record in investing in (and exiting) fintech. Banks like SpareBank 1 SR-Bank and DNB are establishing investment funds on 250 MNOK each to invest in the next generation of digital banking services. Banks like Sbanken has made strategic investments in turnkey fintech solutions. For aspiring fintech entrepreneurs, accelerator programs like The Factory and DNB NXT give a flying start in establishing a company, and access to open APIs gives fintech access to relevant bank data. Support organizations like IKT Norge and Finans Norge are working towards establishing a regulatory sandbox, thus lowering the threshold to get started. In addition to this, key players in the industry have established a fintech cluster, Finance Innovation in order to launch new initiatives in research, education, innovation infrastructure, and internationalization. Summarized, the prerequisites for fintech in Norway has never been better.

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