2021, the year to lead the European fintech ecosystem

After we discovered what makes Bulgaria the well-hidden fintech gem of South-eastern Europe and some key fintech trends in Romania, we continue our Fintech Series – ‘From helping European local communities to building supper apps’- and delve into the Spanish fintech ecosystem.

More than a year after the irruption of COVID-19, which has changed so many things in our lives, we can conclude that the fintech sector is taking advantage of this new scenario to accelerate the momentum of innovation in its different business verticals in Spain. In this context, companies in the fintech ecosystem have acquired greater specific weight, demonstrating agility in the provision of different services, making it possible to obtain financing and make investments from home or digitise payments to reduce cash and travel in payments. 

As of today, Spain currently has one of the largest fintech ecosystems in the world, at least in terms of number of startups per capita, ahead of other European countries, with around 500 fintechs, with Spain's own entrepreneurial spirit being one of the keys to its success. A prosperity that is also reinforced by the paradigm shift in terms of the needs of financial users, as well as the innovation developed by national companies and new emerging trends such as cryptocurrencies, which have been one of the great disruptions in the financial industry. Although it is still too early to make an in-depth analysis, it is clear that all industry players see cryptocurrencies as an element that must be well analysed and take an interest in both the development of the technology they bring and the new regulatory frameworks that may appear.

If we talk about challenges, the most ambitious for the Spanish fintech ecosystem in the coming years is the size, which depends largely on investment, since most startups in our country are still very small compared to our English, German, or French neighbours. Another challenge is to generate more investment vehicles, as only half of the companies have managed to complete an investment round to date. Spain is the fourth country in terms of investment volume in fintech, but there is still a long way to go. In fact, there are foreign funds that are already looking for an opportunity to invest in our country. In this regard, investors see innovation, hard work, dedication, and experience in Spanish companies. Most fintech companies are founded by entrepreneurs who spent an average of 10 years in the financial industry, who know it and know how to develop a successful company. In addition, the mortality rate of fintechs is very low, only 5%, due to the fact that Spain is a very demanding country when it comes to creating a company in the financial industry. Once it has gone to market, it is because it is at a mature point of knowledge of the ecosystem.

On the other hand, we must also not forget to continue boosting the regulatory environment. The ecosystem has worked hard in recent years, as demonstrated by the approval and implementation of the Financial Sandbox, which has positioned Spain as a benchmark in the field of financial innovation on the continent, as it has a powerful testing ground for innovation in the field of finance and insurance, which is configured as the main focus of attraction for national and international talent. Throughout this year, we will begin to reap the fruits of this Sandbox, which must accompany the true digital transformation of the entire financial system, opening the door to investment in startups and the ease of financing for fintech projects, so that the historical distance between innovation and regulation becomes less and less, increasing competitiveness and encouraging the attraction of international talent. The Spanish Sandbox is not a pioneer, but it is one of the most ambitious, prepared, and competitive in Continental Europe and open internationally, which allows us to aspire to become a reference for the European Union and Latin America, as the UK is for the Anglo-Saxon world.

Likewise, in the current context, the funds of the Recovery, Transformation and Resilience plan are also another major focus of interest for the ecosystem.  The NextGen EU will make available sufficient resources to finance specific projects, boosting digital and ecological transitions, and will reinforce cohesion as a fundamental value on which the community project is based. In that sense, they must take into account startups with a clear technological component, with the aim of becoming a reference to strengthen our business fabric and help diversify the weight of the different productive sectors, one of the needs that the economic crisis resulting from the health crisis has demonstrated. 

The world of innovative companies in Spain is very complex, being that one of the keys why we selected this country for our association, the Spanish Association of Fintech and Insurtech (AEFI) which has up to 12 verticals to segment the companies according to their activity: crowdfunding, currencies, cryptocurrencies and blockchain, aggregators, etc. A significant difference that shows the robustness of the sector in Spain, compared to other territories such as Latin America, with an environment of innovative companies that is not as developed and where the term fintech encompasses all companies in the sector, without discriminating by type of business.

The growth of the financial sector must be based on collaborative innovation. Therefore, it is urgent that we continue working together to promote initiatives that favour innovation and that talent and good ideas do not leave Spain. The importance of competition, stability, and regulation in the financial sector, as well as technological disruption, are some of the key factors to accelerate the growth of these types of companies. Spain is on the right track and the progress it has made in just a few years has been very significant, but we must continue working to ensure that Spain is at the forefront of financial innovation and leads the European Fintech ecosystem.

Rodrigo García de la Cruz. President of AEFI (Spanish Association of Fintech and Insurtech)

Rodrigo García de la Cruz is President of the Fintech & Insurtech Spanish Association and CEO of Finnovating. He is an Industrial Engineer in Electronics and Robotics and has a degree in Business Administration. In addition, Garcia de la Cruz has more than 20 years of experience in the financial sector and in international technology companies. He is recognised in the TOP 17 influencers in the world of FinTech and TOP 35 in InsurTech.