Europe ups its fintech game
Financial technology, or fintech, doesn’t currently account for a large slice of the financial services sector, but it’s already disrupting the industry much as Airbnb has shaken up tourism or Netflix has entertainment. Digital solutions for insurance, trading, lending and payments are making inroads into territory previously reserved for traditional institutions.
As the founder and CEO of a fintech start-up, I’ve seen first hand how this technology not only makes financial services more transparent but also gives people greater control over their money. So it’s no surprise that it’s gaining traction.
EU trails China and the U.S.
Figures for 2015 provided by think tank Bruegel indicate that the $102 billion-strong Chinese market dominates global fintech. Valued at $36 billion, the U.S. ranks second, while the EU market is worth $6 billion and expanding more sluggishly. As the world scrambles to shape the future of this promising sector, can the EU compete in fintech? Over 80% of the European market is located in UK, which leaves the EU in 2019. Some UK businesses may relocate to the continent after Brexit, but clearly there’s a need to address curbs on EU growth.
New industry, new rules
At my company NAGA, we pride ourselves on our innovative spirit — this is what drove the creation of our revolutionary blockchain-based universe for trading, investing and education. I firmly believe that for ensuring fintech’s to thrive on the continent, the EU must apply equally disruptive thinking to the sector’s two biggest stumbling blocks: legislation and funding. Because fintech is still in its infancy, current legislation and regulation neither consider the nature of our business nor encourage its growth.
EU plans to foster fintech
The European Commission made a move in the right direction this March by adopting a fintech action plan to “enhance supervisory convergence toward technological innovation and prepare the EU financial sector to better embrace the opportunities brought by new technologies.”
The action plan is part of the European Commission’s vision for a capital markets union and true single market for consumer financial services. For most European fintech companies, whose operations are limited to their domestic markets, a single market and regulatory framework would eliminate administrative friction when expanding across national borders.
A turnaround has also been achieved in funding. After trailing the U.S. for years in this regard, EU businesses received financing worth $880 billion in 2017. Investment in the U.S. fell sharply over the same period. Invest Europe research attributes this to the overvaluation of American fintechs by an average of 46 times their turnover and their failure to provide a higher return on investment than EU counterparts.
By contrast, European start-ups offer significant added value and more promising growth perspectives. NAGA is a testimony to this. Listed on the Frankfurt Stock Exchange in July 2017, the company recorded the fastest German IPO in the last 15 years. I’m confident we can continue to be industry pioneers, forging a bright future for European fintech’s.