Europe welcomes the Fintech disruption and the following year could bring major opportunities for startups in this field. If the competition between Fintech and banking was initially fierce and the two offered almost complete opposites, now there is more collaboration between Fintech companies and traditional financial institutions and some banks have even started to incorporate Fintech services into their portfolio.
Although Silicon Valley remains the world’s biggest hub for Fintech companies and currently gains the most financing, things could change in the near future as Europe, with the UK in particular, is catching up. According to a CB Insights study, the Fintech sector in the region has plenty of room to grow and investments have been on an ascending path since 2008.
For the past five years, Europe has been leading the way in Fintech innovation and became the home of innovative Fintech startups. In 2013, the industry raised $3 billion globally. In the first quarter of 2017, venture-backed fintech companies in the U.S. raised $1.1 billion, an 8% drop from the previous quarter and down 39% from the same period in 2016, but in Europe, venture-backed fintech companies jumped to $667 million, a 250% increase over the previous quarter and 133% climb from 2016. On the one hand, this increase is due to the rising popularity of online banking services. On the other hand, Europe does have a start-up friendly regulatory environment that encourages entrepreneurs to experiment with innovative Fintech services.
London ? a prominent Fintech hub
There is a high concentration of Fintech companies in Great Britain, notably in London, where $564 million was invested last year. The proximity to the traditional banking sector could be one reason for this: some of Europe’s biggest banks have their main offices in London, which attracts finance and IT experts in the area. But, after the layoffs and budget cuts following the economic crisis, many of them were drawn by the Fintech alternative. In 2016, UK’s Fintech industry employed more than 60,000 and brought more than $8.5 billion to the economy. Another reason behind the growth of European fintech companies in London is the modern legislation, which is adapted to the needs of Fintech companies. According to Early Metrics, a global rating agency for start-ups and small to medium-sized enterprises, London outranks other European capitals in the Fintech sector and initial research doesn’t suggest that Brexit will make London less competitive.
The European Fintech landscape is becoming more diverse
With London leading the way as Europe’s main Fintech hub, other cities, such as Paris, Berlin and Stockholm are catching up. Attracting startups with new regulations that business tax breaks and expedited tech visas, these three capitals also have a talented workforce that startups can choose from. Adding to that, by establishing their headquarters in a European country, startups have access to an entire landscape that welcomes Fintech diversity.
And it’s not just legislation that encourages Fintech to thrive. Contests and investment programs play an important part as well. For example, the Emerging Payment Awards reward innovative Fintech initiatives. Other notable examples include the Card and Payment Awards, which focus on the groundbreaking technologies in financial and banking services.
Visa fast-track program supports European Fintech companies
Credit card giant Visa has launched a $100 million investment program aimed at supporting the European Fintech landscape and encouraging startups to open headquarters in Europe. For this fast-track program, Visa partnered with Contis Group, a UK-based alternative banking, payments and processing platform provider. Visa CEO for Europe, Charlotte Hog, explains:
“These are exciting times for payments in Europe. The introduction of new regulation, combined with dramatic changes in consumer behaviour and rapid technology developments, have transformed Europe into a region where new commerce ideas are born every day. This creates an incredible opportunity for new and existing payment companies to deliver more seamless, simple and secure payments that people demand. At Visa we are open for all players to take advantage of the reach, capabilities and security of our global network to grow their businesses.”
The program enables fast on-boarding for startup businesses in as little as 4 weeks, starting July 2018.
What does the future hold for European Fintech companies?
By facilitating collaboration between states, the Fintech model seems to be built for Europe and this is where the biggest opportunities lie. As new business models emerge, so do fintech business centers, where companies in this sector can build alliances and make strategic decisions. Fintech allows Europe to work towards a unified market, but before this can happen, there is one challenge to overcome: a harmonized regulatory environment. Starting with 2016, when the European Commission assembled the Task Force on Financial Technology, measures have been taken to promote financial technologies. On March 8, 2018, the European Commission published the FinTech action plan: For a more competitive and innovative European financial sector, which aims to take advantage of the latest financial applications of technology and provide a safe, integrated market for consumers, investors and institutions alike. To achieve this, the European Commission will host an EU FinTech Laboratory where European and national authorities will, among others, engage with tech providers in a neutral, non-commercial space, run workshops to improve information-sharing when it comes to cybersecurity and present a best practice guide on regulatory sandboxes based on guidance from European Supervisory Authorities. (source).
