Regulatory Compliance a Major Concern for Swedish Fintech Industry, Report Reveals

The Swedish fintech industry is facing a challenging landscape as companies struggle to raise capital and navigate regulatory hurdles, according to a new report by the Swedish Fintech Association (SweFintech).

Funding and Regulatory Hurdles

Despite a decrease in funding rates, with investments plummeting by 97% year-over-year in Q3 2023, Swedish fintech companies still managed to secure capital at a relatively stable rate. However, regulatory requirements remain a significant burden, with 76% of companies citing them as a major concern.

Challenges in Raising Capital

The report found that the majority of fintech companies are struggling to raise capital, with 59% reporting it had become more difficult in 2023 compared to the previous year. Additionally, only 6% of companies had to pause a funding round due to difficulties securing capital.

Regulatory Compliance Concerns

Regulatory compliance is another area of concern for Swedish fintech companies, with 82% citing anti-money laundering and combating the financing of terrorism (AML/CTF) regulations as having the biggest impact on their businesses. The European Union’s General Data Protection Regulation (GDPR) and information and communications technology security (ICT) legislation also ranked high in terms of regulatory burdens.

Adaptation to Challenges

The report highlights that fintech companies are adapting to these challenging times by pulling back on recruitment efforts, with just over half expanding their workforce in 2023 compared to 65% in the previous year. However, this has led to increased competition for talent, making it easier for fintech businesses to recruit relevant staff.

Initiatives to Support Growth

To address these challenges, SweFintech is proposing a number of initiatives to encourage innovation and support the growth of young ventures. These include:

Increasing access to banking services
Introducing new regulatory guidelines for innovative companies
Providing more funding for research and innovation

Threats to Competitiveness

Unless Sweden takes action to establish a conducive environment for fintech companies to grow and thrive, the country risks falling behind European counterparts. Neighboring countries such as Lithuania and Estonia are rapidly emerging as prominent tech hubs, thanks to supportive measures designed to promote innovation and support young ventures.

Sweden is home to more than 500 fintech companies, including some of Europe’s fastest-growing and highest-valued companies. The country has a 42% market share in the Nordics’ fintech startup ecosystem, ahead of Denmark, Finland, Norway, and Iceland.

Competitiveness Challenges

The report highlights that Sweden’s tech and fintech competitiveness relative to the rest of Europe is diminishing, with reports from TechSverige emphasizing the country’s low growth in the tech sector from 2015 to 2020. It is imperative for Sweden to take action to address these challenges and create a more supportive environment for innovation and competition.