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Denmark’s Fintech Sector Seeks Regulatory Clarity Amid Rapid Growth

Denmark has become a hotbed for fintech innovation, with the sector growing rapidly over the past decade. The country’s entrepreneurial culture and high-tech infrastructure have created an ideal environment for startups to flourish.

A Growing Industry

According to recent figures, the number of new fintech startups in Denmark has increased from 70 in 2015 to 280 in 2021.

Regulatory Challenges

Despite this growth, regulatory compliance remains a significant challenge for fintech companies operating in Denmark. The Danish Financial Supervisory Authority (FSA) and other regulators have implemented stricter rules and regulations, particularly in areas such as:

  • Anti-money laundering (AML) checks
  • Customer know-your-customer (KYC) requirements

Licensing and Registration Requirements

Licensing and registration requirements vary depending on the business model of each fintech company. For example:

  • Companies offering payment services may need to obtain a licence or register with the Danish Payments Act.
  • Those providing banking or financing services may require a licence under the Danish Financial Business Act.

Governance, Internal Control Functions, and Fit-and-Proper Requirements

Governance, internal control functions, and fit-and-proper requirements can also be a roadblock for fintech companies. Uncertainties surrounding these requirements can lead to:

  • Prolonged processing times for application processes
  • Increased costs
  • Adverse commercial consequences

Compliance Risks

Compliance risks are also on the rise, as fintech companies may inadvertently fail to comply with applicable rules and regulations, resulting in:

  • Fines
  • Reputational damage

Call to Action

To stay at the forefront of international developments, the Danish fintech industry requires further regulatory transparency and guidance. This includes:

  • Expanding the FSA’s regulatory sandbox, allowing more fintechs to test their ideas before investing heavily.
  • Avoiding domestic “goldplating” of EU directives.
  • Uniformity in law across borders is also crucial, as fintech businesses are often modelled to scale easily across countries.

Collaboration Key

Finally, collaboration between fintechs, financial institutions, and Big Techs is necessary to maintain an innovative edge in the rapidly evolving financial services market.