In an increasingly digital world, where fintech firms are seen as pioneers of borderless innovation, geography might seem like an outdated concern. But a recent study by Olegs Cernisevs, Doctor of Science and CTO of Blackcatcard argues otherwise. Fintech companies, despite their reliance on digital platforms, are still deeply influenced by their physical location, which shapes everything from their operational efficiency to their exposure to risks.

While the digital transformation of financial services has reduced some dependencies on geography, physical infrastructure remains essential. Data centres, offices, and local subsidiaries play crucial roles in fintech operations. The geographical position of these assets, however, can introduce significant challenges, especially in regions prone to environmental risks like floods, earthquakes, and extreme weather.

The study, published in Geographies, examines how environmental risks stemming from geographic location affect fintech operations. Using a statistical model, the researchers found that environmental risks, such as air pollution, flooding, and water scarcity, significantly impact two critical areas: human safety risks and operational risks.

Human safety risks arise when employees work in areas with natural disasters or pollution, potentially threatening their health and safety. Operational risks, on the other hand, refer to disruptions caused by environmental factors - such as damaged infrastructure or power outages – that can derail the functioning of fintech companies.

Interestingly, other risks like governance, compliance, or ICT-related issues were less directly influenced by geography, suggesting that environmental challenges primarily target the physical and human elements of fintech operations.

But geography isn’t just about risks; it can also be a strategic advantage. For example, locating in financial hubs like Frankfurt, Singapore, or London provides fintech firms access to thriving ecosystems of investors, talent, and regulatory support. These hubs often have favorable licensing frameworks, allowing companies to expand faster while staying compliant with local laws.

Regions with robust technological infrastructure and government incentives – like tax breaks or grants – offer additional advantages. For fintech companies, these factors can offset the risks associated with environmental challenges, making location a strategic choice rather than a liability.

Malta serves as a shining example of how geography and innovation can work hand in hand. The Maltese government has made it a priority to establish the country as a global leader in the innovative economy, with strong backing from the Malta Financial Services Authority (MFSA). Together, they’ve cultivated a thriving fintech sector, attracting both startups and established tech companies.

This proactive approach has created an ecosystem that not only supports technology-driven businesses but also draws highly skilled professionals. As a result, Malta has built a robust talent pool that continues to fuel its growth as a tech hub. Adding to its appeal is Malta’s warm climate, which often makes it a more attractive destination for talent compared to similar tech-friendly nations in colder northern regions. The combination of a supportive business environment and desirable living conditions makes Malta a hotspot for the fintech industry.

As fintech firms continue to expand globally, their ability to navigate the challenges of geographic risks will play a crucial role in their success. While digital tools can mitigate some issues, the physical world remains a significant factor that cannot be ignored.

Whether it’s adapting to local environmental conditions, or finding new ways to protect employees and assets, fintech companies must view geography not as a limitation but as an opportunity. With the right strategies, a firm’s geographical position can be more than just an address – it can become a cornerstone of its resilience and growth.