As we continue to navigate the age of digital disruption, Europe’s financial landscape has found itself at an intriguing crossroads - and it’s not the traditional banking sector that is leading the charge. Rather, it’s the FinTech sector, where innovative business models and technology intersect to bring innovation in financial services. This sector has evolved from a challenger to a champion and is progressively drawing in more venture capital in Europe than any other sector.
From 2017 to 2019, a fifth of all European venture capital found its way into FinTech, outsizing Asia and the US as a percentage of total allocation. The trend solidified in 2020, as European FinTechs raised €10.4bn by mid-year, surpassing the entire previous year’s total. This upward trajectory continued into 2021 and 2022, with European FinTech funding reaching €23.7bn and €20.5bn, respectively.
This infusion of capital has served as a springboard for numerous European FinTech firms, with 31 achieving ‘unicorn’ status, and many commentators believe that the sector is still on an upward trajectory with a lot of room for growth in Europe across funding, employment and valuation metrics.
Against this backdrop and an increasingly aligned European Financial Services regulatory construct, Malta is recalibrating its focus on FinTech. The new MFSAC strategy for financial services sees the country shifting towards value proposition for FinTech underscored by innovation, access, and the scalability of digital financial services, moving beyond regulatory and tax levers.
The focus on what FinTech brings to local consumers and businesses alike is important for a number of reasons. Fintech promotes competition, challenging traditional financial institutions and offering alternative, often more efficient, solutions. This increased competition can lead to better services and products, more choice and lower costs for consumers.
Furthermore, FinTech’s innovative tools can help fight financial crime by improving detection and prevention methods. Algorithms and machine learning can identify suspicious patterns faster and more accurately than traditional methods. FinTech also plays a vital role in supporting financial inclusion, as it does in Malta today for both business and consumers, and in doing so, helps ensure economic growth and equality.
Malta envisions itself as a pilot site for testing and scaling innovative financial services. This ambition goes hand in hand with nurturing a vibrant start-up ecosystem wherein FinTech can thrive. The benchmarks for success are shifting - from the number of foreign companies attracted and licensed, to the tangible impacts on financial services for citizens and businesses, Malta’s role in shaping the next-generation European digital finance and payments infrastructure, and the global success of innovations pioneered on our shores.
This involves aligning various stakeholders – government, regulators, incumbents, start-ups, and service providers – around a shared vision. Attention will be on ecosystem development, improving regulations, enhancing the technical infrastructure, and effective promotion once the foundational elements are in place.
Europe’s FinTech sector is not just growing; it’s catalysing change. In this dynamic context, Malta is seeking to carve out a space for itself. The path forward involves navigating the evolving landscape with a focus on innovation and scalability. The journey is just beginning, and Malta is poised to learn, adapt and contribute to the broader FinTech narrative.
Ronald Attard will be leading a panel, entitled 'Emerging Trends in FinTech: The opportunities for Malta' at the Malta Institute of Accountants Biennial Conference.