Financial Crime World

Compliance Issues Hamper Sweden’s Fintech Sector Amid Economic Uncertainties

Investors are taking a more cautious approach to funding fintech companies in Sweden, citing economic uncertainties and soaring inflation. Despite this, fintech entrepreneurs remain optimistic about the sector’s prospects, according to a new report by the Swedish Fintech Association (SweFintech).

Challenges in Securing Funding

The 2023 Fintech Report: From Growth to Profitability highlights the challenges faced by Swedish fintech companies in securing funding in 2022. The report found that only 47% of the 57 companies polled managed to raise venture capital (VC) last year, down 5 percentage points from 2021’s 52%. A significant 56% of respondents noted increased cautiousness among investors.

  • Only 47% of fintech companies raised venture capital in 2022
  • 5 percentage point decrease from 2021
  • 56% of respondents reported increased caution from investors

Economic Landscape and Recruitment Trends

The challenging economic landscape is also reflected in recruitment trends, with 16% of respondents indicating that they had to downsize their workforce in pursuit of better financial performances and improved profitability. While 91% of respondents intended to expand their teams last year, only 65% were able to do so.

  • 16% of fintech companies downsized their workforce
  • 91% of respondents planned to expand their teams, but only 65% were able to

Regulatory Burden

In addition to funding challenges, the report highlights regulatory complexity as a major issue for fintech companies in Sweden. Respondents cited anti-money laundering and terrorist financing (AML/CF) regulations, European Union General Data Protection Regulation (GDPR), and IT and Information Security (ICT) regulations as being among the most burdensome.

  • Regulatory complexity is a major challenge for fintech companies
  • AML/CF, GDPR, and ICT regulations are among the most burdensome

Recommendations

The report recommends increasing dialogue between supervisory bodies and the fintech industry to better understand innovations taking place in the market. It also suggests providing fintech companies with better access to guidance on regulatory compliance and introducing a regulatory sandbox to boost innovation.

  • Increase dialogue between supervisory bodies and the fintech industry
  • Provide better access to guidance on regulatory compliance
  • Introduce a regulatory sandbox to boost innovation

EU’s Digital Payment Ambitions

The European Commission has proposed rules to ensure that citizens holding a bank account in the European Economic Area can make instant payments in euro. The proposal aims to make instant payments more affordable, universally available, secure, and processed without hindrance across the EU.

  • EU proposes new rules for instant payments
  • Aimed at making instant payments more affordable, universal, and secure

Sweden’s Fintech Landscape Remains Promising

Despite the challenges, Swedish fintech companies remain optimistic about their growth prospects for this year. A whopping 88% of respondents believe that their business will see increased growth in 2023, with 81% expecting to expand their workforce.

  • 88% of fintech companies expect increased growth in 2023
  • 81% expect to expand their workforce

Sweden’s Fintech Ecosystem

Sweden is home to one of the largest and most advanced fintech ecosystems, with 332 fintech companies operating in the country last year. The country is also home to some of the world’s biggest and most successful fintech ventures, including buy-now- pay-later specialist Klarna, which is valued at a reported US$6.7 billion.

  • Sweden has one of the largest and most advanced fintech ecosystems
  • 332 fintech companies operate in the country
  • Home to successful fintech ventures like Klarna