SWEDEN: An Introduction to FinTech Legal
Introduction/Activity/Trends
Sweden is a recognised pioneer in fintech innovation, hosting one of Europe’s most dynamic ecosystems. Sweden excels in areas such as payment solutions, lending, cryptocurrency and investments, driven by a robust regulatory framework, advanced digital infrastructure and a skilled talent pool.
The fintech sector performs strongly in Sweden when compared internationally, with the country frequently ranked among the top four in Europe for fintech investment and the top ten globally. Contributing to this success are Sweden’s advanced digital infrastructure and the population’s high level of IT literacy. Additionally, early adoption of innovations such as digital banking, electronic identification systems like BankID, and mobile payment solutions has nurtured a thriving fintech ecosystem. This environment continues to attract significant private equity investment and drives innovation in emerging areas like peer-to-peer lending and loan consolidation.
However, growth in the fintech sector has moderated in Sweden since interest rates began to rise in 2022. The tighter capital environment has made it more challenging for new entrants to secure investor funding, while existing players face heightened profitability demands.
After more than two years of stagnant GDP growth in Sweden, several factors are now in place to support a strong economic recovery. This recovery is primarily driven by expansionary fiscal policy and lower interest rates, which are expected to impact the capital environment for the Swedish fintech sector.
In light of these improved economic conditions, the IPO market in Sweden, which has faced a prolonged slowdown in recent years, is beginning to show promising signs of recovery. A number of significant Swedish IPOs have either been completed or are anticipated in both domestic and international regulated markets. With improving financial conditions and a resurgence of investor confidence, there is growing optimism that IPOs will once again become a compelling and viable option for more mature fintech companies seeking to scale and tap into public capital. Notably, major fintech player Klarna is expected to pursue a listing in 2025, while reports suggest that Trustly is making renewed efforts toward an IPO. If these listings prove successful, they could spark increased interest in public offerings among other fintech companies, potentially reigniting the IPO market within the sector.
Developments/New legislation
Recent legislative proposals from the Swedish government targeting taxation and consumer credit aim to address over-indebtedness and enhance consumer protection. These measures, which directly intersect with the fintech sector, are expected to influence market dynamics by introducing stricter regulatory requirements. Such developments align with the broader economic and regulatory shifts impacting the industry, as heightened investor caution and evolving compliance frameworks shape the operating environment for Swedish fintech companies.
Below is a brief overview of some proposed legislation relevant to the fintech sector.
Repeal of the current Certain Consumer Credit-Related Operations Act
There are currently approximately 65 consumer credit institutions in Sweden. Together with the broader consumer credit market, they are now facing an increasingly stringent regulatory environment. In May 2024, the Swedish government issued a memorandum proposing measures to strengthen consumer protections in the credit market and reduce private over-indebtedness. The memorandum includes a proposal to repeal the Certain Consumer Credit-Related Operations Act. Under the proposed rules, consumer credit institutions would be required to obtain authorisation as CRR credit institutions – ie, just like banks or credit market companies, they will be subject to the obligations contained in the EU’s Capital Requirements Regulation. The proposal introduces stricter regulatory requirements for consumer credit providers, significantly increasing compliance obligations and costs, along with requirements to accept deposits from the public in addition to providing credit. These changes would particularly impact loan-mediation institutions, which currently neither accept deposits nor provide credit directly. Requiring consumer credit institutions to become banks or credit market companies would make many existing providers unviable, probably leading to a decline in fintech start-ups within the consumer credit market.
Extension of the scope of the limitation on the possibility to extend the maturity
The Swedish government has proposed a legislative amendment to extend the scope of the restriction on the possibility of extending its maturity to all forms of consumer credit, except mortgage credit. This would mean that the duration of all credit (except mortgage credit) could only be extended once, except in cases where the extension is free of charge to the consumer, or the consumer is given a reasonable instalment plan to repay the debt. The aim of the amendment is to prevent consumers from repeatedly extending the duration of credit, which could result in consumers incurring significant costs and becoming over-indebted. It is also expected that the amendment will lead to creditors becoming more restrictive when granting credit.
Introduction of a special cost cap for arrangement fees
The Swedish government has proposed the introduction of a special cost cap on arrangement fees, which will apply to all consumer credit, except mortgage credit. The proposal means that a consumer will not be obliged to pay an arrangement fee that is higher than 1% of the price base amount that applied when the credit agreement was entered into (eg, SEK573 in 2024). The aim is to counteract the risk that creditors will compensate for a lower interest rate with higher fees, thereby preventing the interest rate cap from having its intended effect.
Reduction and extension of the interest rate cap
The Swedish government has proposed reducing the current interest rate cap, which limits a creditor’s ability to charge credit and penalty interest, from 40 to 20 percentage points above the applicable reference rate. The aim of the reduction is to reduce the supply of the riskiest loans, thereby preventing lending from leading to over-indebtedness. The government expects that the reduction in the interest rate cap will lead to lenders being more restrictive in their lending to consumers with limited financial scope and will provide a stronger incentive to carry out a more thorough credit assessment.
It is also proposed to extend the interest rate cap to all loans regulated under the Consumer Credit Act (CCA), except mortgage loans. The current regulation only covers high-cost credit. The purpose of extending the scope of the interest rate cap is to minimise the risk that creditors will adjust their product offering to avoid being affected by the regulation, thus providing stronger consumer protection.
Abolition of interest deductibility on unsecured loans
The Swedish government has also proposed a legislative amendment which will mean that interest on unsecured loans will no longer be tax deductible, making the consumers’ de facto costs for lending increase. Instead of a general right to deduct interest expenses, interest will only be deductible on loans that meet certain conditions regarding the valuation of collateral and the maximum loan-to-value ratio.
Opening of RIX-INST payments
The Swedish central bank, Riksbanken, has recently expanded its system for instant payments (RIX-INST), previously used solely by Swish (a mobile payment system giant used by approximately 8.6 million people that is jointly owned by six of the largest banks on the Swedish market), in order to support a broader range of instant payments. This move not only enhances the efficiency of domestic transfers but also opens the door for fintech companies to innovate in cross-currency payments, with initial support for euros, Swedish kronor and Danish kroner.