How Do Fintech Firms Establish Themselves on The Financial Market? : A Qualitative Study of Swedish Fintech Firms

Abstract: Over the last decade, the growth of new Fintech firms has increased significantly. However, when Fintech firms enter the financial market they are met by several obstacles, including the barriers erected by incumbent banks, difficulties obtaining financing and the challenge of gaining the trust of the market. This thesis aims to describe how Swedish Fintech firms work together with, or against, the incumbent banks, how they raise capital and what kind of challenges they experience when raising capital and how they work to gain the trust of potential investors, partners and customers. In this thesis it was found that Swedish Fintech firms do not close their doors to cooperation with the incumbent banks, as in exchange for helping the banks with their technology they can get access to banks' customer base and help with regards to costs. The Fintech firms did however think cooperation was less likely to happen if the incumbent banks did not open their mindset and make their processes more effective. Developing the banks’ technology is something the Fintech firms recognize that they can help with. When it comes to gaining the trust of the market, Fintech firms strive to deliver good customer experience, show earlier accomplishments and build legitimacy. The biggest challenge that Fintech firms encounter is the lack of having a known brand on the market and trying to build a name for themselves from scratch. It was found that most of the firms raise capital through private equity even if many of the interviewed firms raise capital as well through indebtedness. Challenges these firms encounter when it comes to raising capital is to mediate their true potential and vision to the investors and to find investors that can help the firm in more ways than just with monetary support. At the same time it was discovered that a few firms did not have any problem finding investors because of their already good network and experience.