FINLAND: An Introduction to Finland

Finland: FinTech Legal  

Market overview 

Finland has provided a good place for FinTech for a long time. Finland pioneered online banking in the 1990s and is currently the world leader in the use of electronic payments. The technological expertise, easily approachable institutions and strong compliance culture all make Finland attractive for FinTech companies.

The Finnish FinTech market has been growing rapidly, and we expect it to continue growing over the next few years. Currently financial software is most strongly represented in terms of the number of FinTech companies, while payments has the second biggest number of companies represented. Also crowdfunding platforms and many B2B services have been particularly strong during the past years and financing services have succeeded in many aspects. In recent months, Finland has witnessed new initiatives such as new Finnish neobanks being born and Finnish FinTech companies acquiring their foreign competitors.

FinTech has matured to become a great opportunity also for banks and other existing financial institutions. Market participants have found new ways to collaborate with smaller FinTech companies, and cooperation between finance and technology industries has become the new normal. The value of cooperation is generally widely valued and has long roots in the industry sector in Finland.

From Open Banking to Open Finance 

In terms of legal developments, PSD2 has affected the Finnish FinTech market for a few years now. However, there are still questions on the interpretation of the Payment Services (PSD2) Directive and related regulation on both national and EU level. The relationship between PSD2 and the general data protection regulation GDPR also requires continuous interpretation.

The business potential of PSD2 has yet to be fully utilised, but we already see many "beyond PSD2" services in Finland. At the same time, market participants are looking forward to Open Finance, as the European Commission aims to enable even wider use of data in the financial sector and other areas of society. As part of the Digital Finance Strategy, the Commission has announced its intention to adopt an Open Finance regulatory framework by mid-2022.

Sustainability as a driver for FinTech 

Sustainability is also something that FinTech companies have started to prepare for in Finland. Since 2018, the Commission has been developing a comprehensive policy agenda on sustainable finance, comprising the Action Plan on Financing Sustainable Growth and the development of a renewed Sustainable Finance Strategy. The Sustainable Finance Strategy introduces a broad set of new and enhanced regulations that will define the ESG reporting requirements of financial institutions and large companies.

When financial institutions are faced with ESG compliance requirements, they will make corresponding requirements for their customers. ESG compliance will therefore become an integral part of corporate banking and it will be both a compliance requirement and a business opportunity also for many fintech companies. In terms of future success, FinTech companies typically have an advantage as their businesses are often built around digital processes.

Other key developments 

Most of the legal trends are related to sharing and protecting data also in Finland. Keeping up with data privacy is a challenge for companies in the FinTech sector. At the same time, most companies struggle to get value from the data they have access to. For example cloud computing is a technology trend that has had a major impact on the way analytics are carried out.

Consolidation in the payments industry has been a wider European trend for a few years now and that trend is expected to continue. In addition, digitalisation is expected to continue to play a key role in strategic work of financial institutions.

Finally, Anti Money Laundering (AML) legislation will be amended nationally in Finland at the same time when new game-changing EU regulations, including the creation of a new EU authority and the regulation on AML/Anti Terrorist Finance containing directly applicable rules, are being prepared. These national amendments are based mainly on the recommendations by Financial Action Task Force on Money Laundering (FATF) and will clarify e.g. the definition of a client.

Authors:

Hanna-Mari Manninen
Partner, Dittmar & Indrenius

Kristian Karlsson
Partner, Dittmar & Indrenius