Interview with Thomas Krogh Jensen, CEO of Copenhagen Fintech

28 Nov Interview with Thomas Krogh Jensen, CEO of Copenhagen Fintech

BF: Could you give us an overview of Copenhagen’s and Denmark’s fintech sector?

Thomas Krogh Jensen: In terms of investment, the global fintech market has seen massive growth and many substantial financial technology companies have achieved a lot of success. We are still seeing growth in the number of fintech companies in the market and currently count between 350 and 400 financial technology companies defined as startups in Denmark. Nordic and Danish companies excel in financial technology for SMEs and sustainability segments. The region is made up of wealthy countries, we have many strong fintech players and are seeing a lot of activity in capital markets, investment and wealth management solutions. Recently, for example, Danish global fintech company SimCorp was bought by Deutsche Börse.

Denmark’s backbone is its small and medium-sized enterprises, which make up 98% of all its companies. There are a lot of fintech companies working to support these SMEs with their digital transformation. Even though many are being serviced by the established banks, they have not yet been fully digitalized and we see some huge opportunities for financial technology companies to work with SMEs on helping them with their digital transformation, providing them with financial products and services that the established sector has not been able to. SMEs and fintech go very well together.

The fundamental drivers of innovation in financial technology in the region is heightened access to public data and open banking, some of which is mandated by European Union regulation. Our digital infrastructure is very well established in terms of our national identity schemes as an example, which is built in a public-private partnership between the public sector and financial industry. One other thing that is quite unique on a global scale is the high usage of cloud accounting systems by our SMEs. Third parties including fintech companies can tap into all these sources of data. In general, we see a lot of innovation when it comes to financial technology and financial services targeted specifically toward SMEs.

BF: Recently, Danish startup Dealflow secured $700,000 in pre-seed funding to target global invoicing and finance innovation. Copenhagen Fintech’s lab has hosted and supported over 180 startups to date. What specific programs or initiatives does Copenhagen Fintech offer to empower and assist fintech startups in their early stages?

Thomas Krogh Jensen: Copenhagen Fintech was incubated in 2016 by major industry players in Denmark and the Nordic region. Our main stakeholders are the Danish Bankers Association, Insurance and Pension Denmark, the Confederation of Danish Industries and the Financial Services Union. In an international context, it’s interesting that a union is collaborating with a banking association to support an industry that is in some ways disrupting the market.

Copenhagen Fintech supports the ecosystem in Denmark and the Nordic region with programs in various stages, some of them begin even before they are a formal company. We work on supporting talent, validating good ideas and getting companies started. We support these entities through the various stages of early development and growing them to scale once they are on the market. We work with companies at all different stages across all sub-sectors of fintech.

One of the early companies we supported that was also a resident at Copenhagen Fintech is Chainalysis. Its co-founder is a Dane, Michael Gronager. Today, it has around 800 employees and is now headquartered in New York — it took the journey from Denmark to the US. Chainalysis is helping governments, financial regulators and intelligence agencies create transparency and insights into the blockchain economy.

Other companies that also have a Dane in their founder team include Pleo, challenger bank Lunar, Tradeshift and Public.com. The latter company is a social investment platform with millions of customers in the US. They are all unicorns now and still growing — we’ve seen quite a number of companies coming out of Denmark despite our relatively small size; we punch above our weight when it comes to fintech.

On a macro level, we measure our success in terms of new companies being formed and employment in the fintech industry. We have various specific key performance indicators that include the number of companies, size of investments, number of investments and employment. All of them are increasing at the moment.

BF: Copenhagen fintech Goodwings recently secured $1.5 million to transform green travel for businesses. What is your take on fostering and supporting startups that are directly involved in sustainable practices and what steps are currently being taken by Copenhagen Fintech in this area?

Thomas Krogh Jensen: The Nordic countries, especially Denmark, rank extremely highly in most sustainability rankings. There’s a very high awareness in our society in general around sustainability. At the end of the day, green and sustainable transformation can only happen if we figure out how to channel money into the right projects and companies, which is very much a data play. We see a lot of Danish companies working on building ESG profiles for companies of all sizes, from SMEs to large enterprises. Goodwings is another example. It tries to help travelers travel more sustainably. There’s a range of other companies that are helping consumers or businesses make more sustainable choices and run more sustainable businesses. The market is very large.

Since about 2017-2018, we have run various events to promote sustainability as an integral part of our programs. We’ve also carried out research projects into how financial technology and sustainability go hand in hand. On the research side, in events and in our programs, we have embedded sustainability as an integral part of our offering for startups and corporates.

BF: A couple of months ago, Microsoft partnered with Copenhagen Fintech to develop startups in Denmark. Can you tell us more about this notable collaboration?

Thomas Krogh Jensen: When we formed Copenhagen Fintech, we realized that, because of the relatively small size of Denmark, we can never be the biggest fintech hub. However, it’s not necessarily about being the biggest — we decided we could be one of the most connected. We wanted to create a network of partners that our companies can scale through and co-create with.

Of course, the local financial ecosystem is important to tap into and we’ve already done that. The next thing for us is to do is form global partnerships with global players. These can be financial institutions or tech players that have an interest in the technology that is being developed here. In artificial intelligence, which is massively transforming the financial sector, it’s very interesting for our companies to work closely with global technology players such as Microsoft to get access to knowledge and their technology platforms, and to get validated by a global technology player that can hopefully create partnerships to support them scaling globally. We now have a partnerships with Microsoft and also Citibank, which is one of the largest banks headquartered in the US. They give global access and reach to the smaller Nordic ecosystem.

BF: How does Copenhagen Fintech navigate regulatory hurdles and challenges, enabling a smoother path for fintech companies in Denmark to grow and thrive?

Thomas Krogh Jensen: Much of what happens in Denmark is decided on an EU level. We work with the industry organizations here — such as the Danish Bankers Association, the Financial Services Union, and Insurance and Pension Denmark — along with companies to give input on potential new regulations. We also give input in areas such as talent, attraction and education. In addition, we are a part of the Danish Central Bank’s Payments Council and part of the fintech lab at the Danish financial regulators, which helps us give input on regulation creation and to channel fintech companies into their sandbox. They have created a sandbox for early stage companies to test their technologies, solutions and services.

BF: Is there anything else that you would like to add?

Thomas Krogh Jensen: The normal journey for a Danish tech company — not only in fintech, but in general — is to validate a product or offering in the Nordic region and then typically to jump to the UK and then to the US. Companies use the local market to validate products and services, but the market is too small to be interesting. Some Danish founders are now in the US; they chose to live there and build their companies there. It is an interesting exchange of innovation between a smaller country in a very innovative region and big markets like the US. Nordic technology and innovation are often infused into the US.

BF: What are Copenhagen Fintech’s main priorities for 2024?

Thomas Krogh Jensen: Sustainability is a key focus for us. It’s integrated into everything that happens here. Secondly, the biggest single investor in AI technology is financial services. Everyone is talking about how AI is going to change not only financial services but society in general. For us, application of AI and the ethical issues that arise from that will probably be a huge issue moving forward. There will be interesting discussions ahead between Denmark, Nordic countries and the US about this, as well as potentially an exchange of innovation.