Following the launch of Stripe Connect in the Nordics, UK and Ireland earlier this month, which helps startups scale internationally faster, we sat down for a Q&A with the head of growth for Stripe Nordics, Sebastian Fuchs. Co-founder of SUP46, one of Europe’s most prominent startup hubs, and before that setting up an incubator at the Royal Institute of Technology, we talked about his move to Stripe, fintech in the Nordics and payments trends in the region.
The Nordics have produced companies that transformed the way we listen to music, communicate, play games and pay for goods to name but a few. Despite the small population (just under 27 million), strong tech talent, digitally savvy customers and a mature tech infrastructure (such as smartphone penetration, computer ownership and good broadband) makes this a powerful test bed for new technologies and means it is home to one of the world’s most exciting startup communities.
The region’s digital maturity is especially advantageous when it comes to fintech companies, with some of Europe’s most high-profile financial tech companies like Klarna, iZettle and Tradeshift built out of the region. The transition of financial services for businesses and consumers depends, in great part, on early adopters of new online services that are happy sharing details and spending online. The powerful trend away from using cash in the region therefore makes this a good market for companies that rely on or provide payments services online to test the water and build up customer bases.
This advanced digital ecosystem, combined with high average income, also makes this an attractive market for international players like San Francisco-headquartered Stripe, which helps digital businesses accept payments online came out of a year-long beta in the Nordics last June. The firm’s customers in the region include indie design marketplace Tictail, Hesburger (the ‘McDonalds of Finland’, which launched a pre-order app) and Cancerfonden, a non-profit cancer research organisation in Sweden using Stripe to accept donations online.
So what exactly is it that makes the Nordics a good test bed for emerging technology? Stripe Nordics head of growth, Sebastian Fuchs, explains:
“People are very comfortable with technology, for a start. They’re very responsive and adapt quickly to trying new things. As an entrepreneur you can easily test things because although it’s not a giant market, the results can give you a good indication of how things will work as you launch globally. The region is like a real-world sandbox for whatever you want to build.”
Attitudes to payments in the Nordics are especially advanced, as anyone that’s been there can attest, with Stockholm in particular often hailed as an example of what a cashless society can look like.
“People tend to be digitally orientated and that affects how they tend to handle money,” says Fuchs. “They are reluctant to use cash and you see it everywhere. If someone says they don’t take credit cards it’s like, “What?! What century are you from?” There definitely a consumer behaviour that’s leaning away from cash.”
Indeed, Sweden in particular is moving so quickly away from cash that earlier this year Sveriges Riksbank – the central bank of Sweden – warned the move is happening “too rapidly” and parts of society are at risk of getting left behind. It’s called on parliament to introduce a legal requirement that guarantees banks’ cash handling services remain in existence. While the central bank broadly welcomes the move toward digital, the central bank warns that remote parts of the country and certain demographics could get locked out of the financial system altogether at the current pace of change.
Still, it’s good news for online businesses like marketplaces and platform models that rely on customers being comfortable with spending online and on mobile.
“A strong blocker to online businesses has been consumer reluctance to enter their credit card info online,” says Fuchs. “The more mature the consumer segment is when it comes to buying things online, the easier it gets for entrepreneurs to reach a larger market. In the Nordics people are really open and they understand now it’s safe to add your information credit and especially people are not that comfortable using cash – you see a strong trend of reluctance to carry money – because: why should you?”
What is it that has made people so digitally-savvy in the region compared to others? Fuchs says there are a number of factors that help to explain how such a small population can drive so much innovation. In Sweden the main things include a policy introduced in 1998 where politicians subsidised home computers. All of a sudden families could afford to have a computer at home so of course kids started playing computer games and started programming and making things on computers.
“Ten years later that triggered a new generation of digitally-native kids and when they started building companies they knew exactly how they wanted to everything to work,” says Fuchs. “Higher education is also free in Sweden and the average knowledge in skills like engineering is pretty high. The weather also sucks, which could be another reason.”
Infrastructure is another key factor, with the region home to telecom giants Nokia and ericsson which built out cellphone networks and paved the way for mobile technology. “That in itself created a new wave of consumer behaviour and then a couple of years later we got broadband connection – strongly pushed for by the politicians, but also by entrepreneurs demanding faster and more secure broadband connections so consumers can have a good experience,” says Fuchs.
A report earlier this year claimed smartphones are now “nearly ubiquitous” with more than nine in 10 internet users in each of Denmark, Finland, Norway and Sweden now owning a smartphone. Nor is ownership limited to younger people, with eight in 10 respondents in every age group surveyed saying they own one.
Tell us about the early days of SUP46 and the Nordic startup scene?
SUP46 stands for Startup People of Sweden, plus our country dial code, which is (++46). It’s is an initiative we took to help developers and startups in Sweden and the Nordics to help them and give them better opportunities for success. Traditionally the startup and developer scene was fragmented and clustered all over Stockholm and Sweden and it was the same in the other Nordic countries. We looked at Y-Combinator and Silicon Valley behaviour and you could clearly see, just like here in the UK, that bringing people together, working on problems together, innovating together is the right way to innovate and build new online companies.
There were already a lot of cool companies in Sweden and the Nordics. It has strong entrepreneurs and engineers: the culture was there so we wanted to bring everyone together.
There are a couple of really strong and inspiring individuals and companies that make younger entrepreneurs say: “If they can do, it I can do it”. There are so many great stories of great Nordic entrepreneurs with the likes of Skype, Spotify, Klarna, Supercell plus there are so many more exciting companies coming out of the region. We call it the ‘Bjorn Borg effect’ – similar to the generation of young tennis players who wanted to play tennis because they looked up to him. You now see the same effect with entrepreneurs.
Why did you move to Stripe?
I always enjoyed working with entrepreneurs building exciting technology and working closely with developers: that is the common denominator. I did that at SUP46 – helping lots of startups and entrepreneurs get going and build companies online. That is what I am doing at stripe as well. I can still enjoy the adventures of the entrepreneurs and be part of their journey, empowering them and enabling their online businesses – for example with Stripe Connect.
Stripe UK head of growth James Allgrove at Stripe Connect launch, London
Are you seeing patterns around how people are using the product in the Nordics?
There’s a strong appetite for Connect product because there is a strong trend towards platform businesses and marketplaces. That is also a result of strong early adopter behaviour.
Advances in paytech is seen as key drivers in new marketplace models like Uber in the US and sharing economy companies in the UK – is it similar in the Nordics?
Yes definitely. Marketplaces and platform can mean so many different things. On one hand you have the main burger chain in Finland, Hesburger, which has a fully mobile native way for them to add new restaurants to the hundreds of restaurants they already have in their app. Then there’s e-commerce platforms like Tictail which enable a lot of businesses online and there are also crowdsourcing startups like Kickstarter which uses Stripe. There’s a Kickstarter project called Kung Fury, an English-language Swedish martial arts film, which is another example of the kind of things you can do with Stripe.
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