Welcome to our market overview series, a concise analysis of global economic markets, with a focus on the world of alternative lending. Through these overviews, we aim to unearth investment opportunities, and spotlight the challenges that mold each unique economic landscape.
In this Market Overview, we explore the Swedish market, renowned for its strong economy, technological innovation, and world-famous ABBA hits.
An economic powerhouse: Sweden’s thriving market
Sweden has a diverse and highly competitive economy. In 2022, Sweden was ranked as the fourth most competitive country in the world.1 A key feature of the Swedish economy is its openness and liberal approach to trade and doing business. Sweden has traditionally been an export-oriented nation, with the export of goods totaling €14 billion as of April 2023, a 3.9% increase as compared to the same period in April 2022.2
Sweden absorbed the COVID-19 shock relatively well, thanks to high domestic savings, a sound government balance sheet, and a strong banking sector. From the onset of the infection, the Swedish government and the Riksdag (the national parliament of Sweden), implemented economic measures valued at over €34 billion. These measures and less stringent restrictions than its European peers further supported the economy. During this turbulent period, non-essential businesses were allowed to remain open. As a result, the 2.8% real GDP contraction Sweden saw in 2022 was the smallest in the EU.3
Pioneering a new era with fintech
Sweden, renowned for its highly digitized and financially inclusive environment, has been witnessing significant growth in the fintech sector. According to data from the World Bank, over 99% of the population had bank accounts as of 2021. This makes Sweden a ripe market for fintech innovation and alternative lending.4
In this landscape, the digital investment market is also on an upward trajectory. The digital investment market in Sweden is projected to reach a total transaction value of €762 million in 2023, with an expected revenue growth of 32% in 2024.5
Among the major players in the Swedish fintech space, Klarna stands out as one of the country’s largest alternative lending giants, with 150 million active users worldwide. Klarna provides online financial services such as payments for online storefronts, financial services, and post-purchase payments. In 2022 alone, the company handled €71 billion in online sales.6
Sweden’s alternative lending landscape
Sweden’s alternative lending space is evolving, as new lending options emerge for individuals and businesses, providing fresh avenues for investment and financing. This emerging market provides various investment avenues outside traditional banking systems, including peer-to-peer lending, crowdfunding, and most notably, investments in loans.
Swedish household borrowing consists of around 80% mortgages and 20% consumer credit. Even though consumer credit only constitutes a small portion of households’ total credit, the interest rate and amortization payments for these credits amount to more than half of the households’ total debt service payments.7
Consumer credit has become increasingly common in the past decade.9 The volume of new credits has increased by more than 1000% and the number of new credits by over 4000%. In 2008, new lending of amounts under SEK 10 000 (c.a. €989) through lines of credit and credit cards, and purchases on invoice amounted to approximately SEK 4 billion (c.a. €396 million), compared with close to SEK 50 billion (c.a. €4.9 billion) in 2019. This trend coincides with an increase in e-commerce and online shopping, which are often paid for using invoices or with lines of credit and credit cards.9
New lending of unsecured loans and object financing loans that are under SEK 50 000 (c.a. €4 941) has increased by around 23% since 2008. Over the same period, loans of between SEK 50 000 (c.a. €4 941) and 250,000 (c.a. €24 726) have increased by around 94%. The lending volume of new unsecured loans in excess of SEK 250 000 (c.a. €24 726) was almost five times larger in 2018 than it was ten years earlier. The increase has been particularly pronounced in the past five years, when the average annual rate of growth has been just below 20%. This is linked to a strong economy and low interest rates. At the same time, house prices have risen rapidly over this period. Since Finansinspektionen (Swedish Financial Supervisory Authority) introduced a mortgage cap in 2010, households have only been able to take out mortgages of up to 85% of the value of their home, which has also led to higher demand for this type of loan.10
A rapidly emerging loan portfolio
With an increasing number of individuals and businesses looking for alternative sources of funding, the alternative lending market in Sweden has the potential to become a key contributor to the country’s economy.
If you’re interested in finding out more about how you can invest with Mintos, explore our leading lending companies.
1 “IMD Business School for Management and Leadership Courses” (IMD business school for management and leadership courses, September 29, 2022) <https://www.imd.org/centers/wcc/world-competitiveness-center/rankings/world-competitiveness-ranking> (Accessed June 2023)
2 “Foreign Trade – Exports and Imports of Goods” (Statistiska Centralbyrån) <https://www.scb.se/en/finding-statistics/statistics-by-subject-area/trade-in-goods-and-services/foreign-trade/foreign-trade—exports-and-imports-of-goods/>
3 “Economic Measures on Account of the Pandemic 2020–2021” (Regeringskansliet, September 20, 2021) <https://www.government.se/articles/2021/09/economic-measures-on-account-of-the-pandemic-20202021/>
4 “World Bank Open Data” (World Bank Open Data) <https://data.worldbank.org> (Accessed June 2023)
5 “FinTech – Sweden | Statista Market Forecast” (Statista) <https://www.statista.com/outlook/dmo/fintech/sweden>
6 “Klarna Reports Fourth Quarter Results and 2022 Annual Report” (Klarna Reports Fourth Quarter Results and 2022 Annual Report) <https://www.klarna.com/international/press/klarna-reports-fourth-quarter-results-and-2022-annual-report/>
7 “The Swedish banking market 2021” (Nordic Credit Rating) <https://nordiccreditrating.com/uploads/2021-02/NCR_-_The_Swedish_banking_market_2021.pdf>
8 “Swedish Consumer Credit” (Finansinspektionen) <https://www.fi.se/contentassets/43a41c2a3077468b875858c3e7d300e0/svenska-konsumtionslan-2020-eng.pdf>