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Expert opinion

A promising future for the fintech ecosystem in Spain

Friday 31 May 2019 | 08:36 AM CET

Spain currently has one of the largest fintech ecosystems in the world, at least in terms of the number of startups per capita, ahead of countries such as France or Germany

To this day, Spain has 330 fintech companies to which more than 200 insurtech companies are added. In this scenario, the big problem and at the same time the most ambitious challenge for the sector in Spain in the coming years is the size, which greatly depends on investment since the majority of startups in our country are still very small.

Surely, as more capital lifts the entities, the more possibilities they have to grow and turn into unicorns. In this environment, another challenge is to generate more investment vehicles since only half of the companies have managed to complete to date an investment round. But there is still a long way to go. In fact, there are foreign funds that are already seeking an opportunity to invest in our country.

In any case, the Spanish fintech ecosystem has grown tremendously in just three years, when there were barely more than fifty companies. Today, the sector generates 5,000 direct jobs, which is expected to double in 2020. Meanwhile, insurtech has already surpassed 3,000 direct jobs, to which in just a year more than 1,500 will be added. They are technical, digital and high value jobs. Taking into account the problem of structural employment in Spain which, at present, and despite the fall in recent years, remains around 15%, we have a great opportunity to develop such jobs in the future and improve the decreasing labour market.

The world of innovative companies in Spain is very complex, that is why we selected this country for our association - the Spanish Association of Fintech and Insurtech (AEFI). Furthermore, we have established a division of up to 12 verticals to segment companies according to their activity: crowdfunding, currencies, cryptocurrencies and blockchain, aggregators… It is 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 not so developed and where the term fintech includes all companies in the sector, without discriminating by business type.

One of the improvements experienced in recent years has been the relationship between the fintech universe and its entities. In fact, until recently, they were seen as a competitor and therefore, as a threat. Now, the scenario has changed. This is because companies now have a much more collaborative vision where they want to work together and are willing to invest. In the case of collaborations between startups, this is a much more common practice. More than 70% already do so, but we also see that companies are considering mergers in order to increase volume and expand to other countries and markets such as Latin America, since until recently, the expansion was limited only to a few countries in Europe.

Another major challenge the sector faces when achieving optimal development in the coming years relates to the regulatory environment. The role of the regulator has increased, although political instability in recent times (in barely a year, Spain will have had three different governments) has slowed down the changes. However, at AEFI we have been working for more than two years with the regulator and supervisor for the approval of the Sandbox, within the law of digital transformation of the financial sector. It is a controlled space in which innovative ideas can develop, under the supervision of the legislator, which will have to be completed following the example of countries such as the UK, Australia and Singapore. In this sense, significant process has already been made following the recent approval by the cabinet of the draft bill that includes the creation of the Spanish Sandbox and which, despite political instability, has the support of the main political parties. This will undoubtedly speed up the development of innovative ideas in the finance and insurance sector. In addition, we have managed to make it an open and ambitious Sandbox where products that already exist and other that do not, and even startups can go hand in hand with other large entities.

The growth of the financial sector must be based on collaborative innovation. Therefore, it is pressing that we continue to work together in order to promote initiatives favouring innovation and that the 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 in accelerating the growth of this type of companies. Spain is on the right track and the progress it has made in just a few years had been very important, but we must continue to work to ensure that Spain is at the forefront of financial innovation worldwide.

About Rodrigo García de la Cruz

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.

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