With around a quarter of journeys made by bike and nearly 500 kilometers of dedicated cycle paths, Malmö, Sweden, is one of Europe's most forward thinking cities when it comes to cycling.

It seems fitting then, that it is also home to an innovative company looking to revolutionize the way we think about protecting ourselves when pedaling about town.

Hövding, a company founded by industrial design graduates Terese Alstin and Anna Haupt, has developed an 'invisible' cycle helmet that uses an airbag to protect cyclists involved in collisions or falls.

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"It's a 'collar' that you wear around your neck with an airbag system inside, together with electronics and sensors," Haupt told CNBC.com in a phone interview. When Hövding is switched on, the sensors Haupt mentions monitor a cyclist's movements 200 times per second.

Designed to be aesthetically pleasing as well as protective, Hövding – priced at £299 ($503) – is the product of cutting edge technology, algorithms and painstaking R&D.

Thousands of cycling accidents using crash test dummies and humans were re-enacted and analyzed to ensure that the airbag inside the collar deploys when it should.

"If you ever happen to be in a bicycle accident, the movement in your body will be abnormal and Hövding will register [that]… and take a decision to inflate," Haupt said. "The airbag inflates in one tenth of a second, like a hood, and it protects your head and neck," she added.

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There is also a black box fitted inside Hövding's collar that records ten seconds of data prior to and during an accident, enabling the company to gather crucial information to help product development.

Hövding is also CE certified, which means that it complies with safety requirements set by the European Union.