Lexia Avvocati is an independent law firm with extensive knowledge and experience in fintech, blockchain technology and Decentralized Finance (DeFi) dynamics. The firm supports Italian and foreign clients, such as banks, funds, exchange platforms, wallet providers and digital asset providers, in the launch and management of their operations in Italy and in dealing with the relevant regulatory authorities. Thanks to its multidisciplinary team, Lexia advises in relation to all issues affecting companies operating in the sector, starting from corporate, tax and regulatory issues to the fields of personal data protection, cybersecurity, intellectual property and consumer protection. We talked about it with Angelo Messore, partner at Lexia, and Francesco Dagnino, managing partner and founder.

What do you believe are the most important challenges to date from a legal perspective that the Fintech world is facing?

One of the main challenges for fintech projects is definitely the absence of a clear legal framework. Indeed, it is well known that technology develops faster than the law. But if the law does not provide a transparent environment for innovation, there cannot be a level playing field between innovative projects and market incumbents (or between domestic players and foreign competitors). An example can be seen in the recent EU regulation on crowdfunding, which Italy has not yet implemented. We know of a number of Italian crowdfunding platforms that are waiting for the Italian state to publish implementing regulations in order to become fully operational on a European scale. In these cases, the lack of a well-defined regulatory environment creates a clear competitive disadvantage for fintech companies.

Are there any major new developments in Europe that those operating in the fintech sector need to be aware of?

European institutions are often criticized for their overly conservative approach to regulating fintech entities compared to other countries. Indeed, they try to strike a balance between consumer and investor protection on the one hand and openness to technology and financial innovation on the other hand – a task certainly not easy to accomplish.
In recent years, the EU has taken several steps to stimulate innovation in the financial market, notably through the Fintech Action Plan and the Digital Finance Package. In this context, a key role in shaping the rules for Fintech operators will be played by the recently approved EU regulation on the “pilot regime” for tokenized financial instruments and the EU regulation on cryptocurrency markets. Other initiatives that Fintech operators should keep an eye on include the ongoing review of the EU anti-money laundering framework, the entry into force of the EU regulation on crowdfunding, the proposed legislation to create a legal framework for the use of artificial intelligence, and the current discussion on the regulation of buy-now-pay-later (BNPL) services.

When you work along with an emerging fintech company, what are the most frequent issues you face and how do you support it?

The crucial challenge we meet with our clients is to bridge the gap between the business idea they have and its implementation in accordance with the current regulatory framework. When working on Fintech projects, there are many technical, operational, business, financial, marketing, and legal issues. However, sometimes Fintech companies decide to postpone legal analysis by focusing on the other aspects of their project. In doing so, they underestimate the importance of the legal framework for defining their business model.
As legal advisors, we must first understand the innovative sector in which the client operates and its business model in order to design the best legal solution. Fintech companies operate in a highly regulated environment and must be aware of all the legal complexities of the sector in which they operate, as well as the opportunities that the regulatory framework offers them. We support founders in defining and structuring their business idea taking into account all relevant legal constraints, as well as in approaching regulators to identify the appropriate legal framework for their project.

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Renting is a service designed to help companies innovate and equip themselves with technologies to run their business in a sustainable and flexible way by choosing to “use” instead of “purchase”.

Selfrent has created a new digital rental platform named Difrently to allow individual companies and SMB customers to finalize rental contracts in real time, choosing from a catalogue with thousands of assets.
Difrently stands for a “different way of renting”, an omni-channel digital service for B2B customers based on ecommerce. 

Selfrent relies on 3 strategic pillars to make a complex process simple through an innovative customer Journey from asset search to contract signing: 

• Simple: it’s a straightforward renting experience.

• Affordable: it is a small monthly fee for all desired products.

• Fast: it is possible to subscribe the rental contract in 5 minutes. 

How does it work?
Let’s find it out with Giuliano Gaviraghi, Co-Founder at Selfrent.

WATCH THE FULL INTERVIEW

Cybersecurity specialization is its strength, as well as the skills and expertise that allowed the company  to have a strong presence on both the Italian and International scene since 2008, with offices in Vilnius and Dubai. We are talking about HWG, founded in 2008 in Verona and offering medium and large-sized companies IT security services. 

Their core is the Security Operation Centre and their mission is to protect companies and take charge of the management and prevention of cyber incidents. 

Their motto? “Focus on growing your business, while we secure your critical system”.

Their first distinctive points is the specialization: they are not a generalist partner, but they specialize in cyber security. 

Another key element is the technical-consulting aspect: they want to position themselves as an extension of their clients’ IT security team to take charge of day-to-day activities, but also the development of the strategy, the governance and the processes needed to improve companies’ security. 

They are able to combine technical management and consultative elements in order to maintain the hard core of day-to-day operations –  such as incident management, 24-hour monitoring, and technology configuration and maintenance – but also to offer support from the perspective of governance processes and strategy development. By doing so, they can help all the stakeholders to spread the importance of security in their company, while also making it a key element in risk assessment from a business development perspective. 

What are the most relevant areas of cyber risk in relation to fintech? How is HWG managing to combine strategies and services truly dedicated to the fintech world?

We talked about it with Stefano Brusaferro, sales and marketing director at HWG.

Watch the full interview

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Imagine for a moment that you are the manager of an airline. You are facing stark competition and you would like to strengthen your customer loyalty. If you could offer your customers, say, a debit card, you could award them loyalty points whenever they pay with their card. Then, each time your customers use their card, they would interact with your brand. By analyzing your customers’ spending behavior, you could understand them better and offer them more tailored services.

What about if you could offer your customers an online loan for their flight tickets directly on your website? This way, your customers could finance their journeywithout ever having to interrupt their experience with your app. You could increase the number of flight tickets you sell and directly influence the amount your customers spend. A loan also represents a much closer customer relationship with far more touchpoints than just a single sale.

These are just some of the benefits that Banking-as-a-Service is able to provide. In this article, Solaris – the pan-European leader in Banking as a Service – shares its vision for the industry and defines the main development paths in which major economic sectors might evolve under the impetus of the “banking revolution” brought by integrated and embedded finance.

With the surging number of new banking and fintech business models emerging on the scene, it can be hard to keep them all apart. The term “Banking as a Service”, especially, still has many scratching their heads. But scratch no more! This article will guide you through the jargon jungle of the new banking business models in our complete overview.

There are dozens of ways non-banks can improve their customer experience and boost their revenue by offering their own banking services. However, if you want to offer banking services, effectively every government in the world requires you to own a banking license. And due to the systemic relevance of banks to the functioning of the economy, such a license is difficult to obtain. Acquiring a license imposes not only significant capital requirements, but more importantly compliance with strict regulations on money laundering, banking secrecy and deposit protection, to name a few. This is where Banking as a Service comes in.

Banking as a Service (or BaaS for short) describes a model in which licensed banks integrate their digital banking services directly into the products of other non-bank businesses. This way, a non-bank business, such as an airline, can offer their customers digital banking services such as mobile bank accounts, debit cards, loans and payment services, without needing to acquire a banking license of their own.

The banks’ server communicates via APIs and webhooks with that of the airline, enabling your customer to access banking services directly through your airline’s website or app. Your airline never really touches the customer’s money, it acts simply as an intermediary, meaning it is not burdened by any of the regulatory duties a bank has to fulfill.

Thus, with BaaS, pretty much any business can become a banking provider with nothing but a few lines of code. That’s why BaaS is also often referred to as white-label banking, since the banking services are delivered through the branded product of the non-bank. Next toSolaris, other providers in Europe’s growing BaaS landscape include ClearBank, RailsBank and Starling Bank. Across the pond, established banking giants are also launching BaaS projects next to their existing offering, such as BBVA in the US.

Is Banking as a Service the same as open banking?

Not really. The two models often get confused, as open banking also involves banks connecting to non-banks via API. However, the models serve entirely different purposes. In BaaS models, non-bank businesses integrate complete banking services into their own products. In open banking models on the other hand, non-bank businesses merely use the bank’s data for their products. In the industry, these non-bank businesses are called third party service providers (TPPs).

Let’s look at an example. Financial management apps are prominent TPPs that benefit from open banking. They aggregate information from all of your different bank accounts into one application, enabling you to better oversee your finances. This can help you achieve savings goals or improve your spending habits. In order to aggregate the information, the app needs to draw transactional data from all of your bank accounts. It does this via an API integration to the banks’ systems.

Often, this API integration will be provided by yet another party. They are generally categorized as API banking platforms, and can be considered as the middle men connecting the banks with TPPs like the financial management app. They provide the actual API layer that sits on top of the bank’s system that enables the flow of data between the bank and the TPPs. Prominent examples in the German market include players like Finleap connect, Ndigit and Fintecsystems.

The key thing to remember though, is that different to BaaS providers, the TPPs are not able to perform banking services (such as lending or taking deposits), as they don’t hold full banking licences themselves. They are simply repurposing account information from your existing bank accounts to provide insights or trigger transactions.

And what about platform banking? Where does that fit in?

Platform banking is a different story altogether. This refers to banks that integrate services from other fintechs to augment their existing offering. So, for example, a bank might integrate a robo-advisor into their app to enable their customers to access investment products from the same account from which they do their day-to-day banking. Platform banking can thus be described as the inverse of Banking as a Service. In the platform banking model, the bank owns the customer and integrates services from fintechs. In the BaaS model, the customer is owned by the fintech/non-bank and integrates services from the bank.

Banks often use the platform banking approach as a defensive strategy to prevent losing their customers to savvier fintechs. By integrating the fintechs’ services into their platform, they can at least keep their customers in their ecosystem, even if it means handing over the lion share of the revenue to the fintech.

And there we have it. We hope Solaris could shed some light into the potpourri of technical terminology and business models in the evolving banking and fintech world. Still, this is just a snapshot of a slice in time. The banking landscape is in continuous flux with new innovators constantly stepping on the scene. So, watch this space to stay up to date on industry developments.

This content is provided by our Corporate Member Solaris

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Investment regulations are constantly evolving, generating innovation and new solutions for investors. We talked about it with Giovanni Carotenuto from Carotenuto Studio Legale, an independent law firm with an international vocation.

On 15th March 2022, the Decree of the Minister of Economy and Finance no. 19 of 13th January 2022 (the “Decree”) was published in the Official Gazette, which amending the Ministerial Decree no. 30 of 5th March 2015 in order to redefine the conditions for participation in Italian alternative investment funds (“AIFs”) by retail clients, holding medium/large assets. The Decree will come into force on 30 March 2022.

What is an undertaking in a collective investment scheme and which are its main features?                             

Pursuant to Article 1, paragraph 1, sub-paragraph k), of the Legislative Decree no. 58 of 24th February 1998 (the Consolidated Law on Finance; “CFA”) an undertaking in a collective investment scheme (“UCI”) is a “body set up to provide the service of collective asset management, whose capital is obtained from multiple investors through the issue and offer of units or shares, managed upstream in the investors’ interests and independently by the same, and also invested in financial instruments, credit, including credit backed, in favour of subjects other than consumers, by the UCI’s capital, equity or other fixed or non-fixed assets, on the basis of a predetermined investment policy”.

In brief short, UCI’s purpose is to allow investments of sums of money in through financial instruments (e.g., the UCI’s units) of sums of money collected from professional and retail investors on the basis of a predetermined policy, which includes a description of the level of risk related to such investments.

UCIs can take the form either of mutual funds or investment companies (namely, investment companies with a variable capital (i.e., SICAVs) or investment companies with a fixed capital (i.e., SICAFs)). The investment in the latter amounting amounts  to becoming a shareholder of the company in question.

On the contrary, a mutual fund requires the appointment of an asset management company whose assets are distinct and separated from those of the mutual fund managed. As a result, investors receive a fund’s units in exchange for the capital invested therein.

As part of the wider family of mutual funds, AIFs are specialised alternative funds, professionally managed with the aim of achieving absolute performance, independent of market trends.

Which are the main novelties introduced by the Decree?

As a general remark consideration, the Decree has changed the thresholds for making investments in AIFs. Indeed, beforehand, only the following subjects were entitled to purchase in AIFs’ units:

1. professional investors (i.e. clients who possess the necessary experience and expertise to make their own informed investment decisions and properly assess the risks they take, such as banks, investment firms, other authorised or regulated financial institutions, insurance companies, collective investment schemes and related management companies, pension funds and management companies, large companies that have at least two of the following requirements: their total balance sheet is equal at least to  € 20,000.000; a their net turnover is equal at least to € 40,000.000 and owns funds of at least € 2,000.000);
2. retail investors who invest a total amount of not less than € 500,000.00;
3. asset management company’s Board members and employees without any entry threshold.

From the entry into force of the Decree, AIFs can be subscribed by:

1. retail investors who, within the ambit of an investment advisory service, purchase AIFs’ units for an initial amount not lower than € 100,000.00, provided however that the total amount of such investment does not exceed 10% of their financial portfolio and takes into account that the initial minimum subscription cannot be split.
2. individual portfolio managers purchasing AIF’s units on behalf of retail clients for an initial amount not lower than € 100,000.00.

As a result, which opportunities for investemnt in AIFs are now available for retail clients?

AIFs are investment funds characterised by: the absence of a link to a particular benchmark, the presence of a fairly high potential return and, consequently, a medium-high risk profile. Moreover, AIFs have a low correlation with the various equity and bond markets.

As a consequence of the entry into force of the Decree, retail investors with medium/large assets are hence being offered the possibility of gaining returns on their investments even when the market trend is in a negative phase, yet bearing at the same time the related risks.

In light of the foregoing, access to these forms of alternative investments to a wider category of potential investors in medium/long term illiquid assets and unlisted companies, may result in increasing portfolios diversification, achieving appreciable returns, and at the same time, providing alternative sources of financing Italian unlisted companies (particularly, SMEs) and fostering Italy’s economic recovery.

The Decree has also established that intermediaries purchasing AIFs’ units on behalf of retail clients and those advising the latter to subscribe to such units must know the financial instruments purchased or recommended, as well as assess their compatibility with their (actual or potential) clients’ best interest. In addition, the latter must provide the above intermediaries with accurate information on concerning their financial portfolio and other investments in AIFs.

How will these novelties impact on an innovative and agile reality such as the Fintechs in our community?

In this scenario, Fintech companies may benefit from the opening of retail investments, particularly in the venture capital and private equity sectors. Given the constant need for higher investments in the real economy, the novelties introduced by the Decree represent a potential boost in the alternative funds’ market, increasing, in turn, the ability to raise capital for the development of start-ups/SME’s with greater development potentials, amongst which we find Fintech companies.

Vertical banking means offering a highly personalized banking experience to a very specific kind of customer. Where the usual approach is to enrich an existing banking product with technology, vertical banking does the opposite. The goal is to create a product that meets the unique needs of a well-defined audience.

Is building apps for the mass market and seeking growth at all costs still the key to success? Or is vertical banking – i.e. building a high-quality, but very focused product – the key?

If neo-banks are aiming to build customer loyalty and retention, they need to focus on creating innovative financial products that improve their customers’ lives through tailor-made solutions that traditional players are unable to offer.

Enrico Morandi, founder of MIND:IN, spoke about the power of neuromarketing to the
Fintech District community during a lively and populated mentorship session. We asked him
to share his knowledge and experience also in an interview dedicated to the fintech sector.
Enjoy reading it!

Neuromarketing: can you give us a definition to convince us that it is not a marketing
invention?

Neuromarketing is a discipline that makes it possible to measure the effectiveness of
measuring communication and marketing possible through the direct measurement of
emotions and basic processes linked to purchasing decisions.
It stems from the convergence of the most recent neuroscientific and brain image research,
traditional marketing and consumer psychology, and therefore operates on a solid basis.

What advantages does this discipline offer? What tools/opportunities does it offer?

It aims to assess what happens in people’s brains in response to marketing stimuli related to
products, brands or advertising. In fact, the techniques on which neuromarketing research is
based make it possible to verify with greater precision the variation of the emotional
condition determined by marketing stimuli thanks to the analysis of psychophysiological
indicators correlated with emotional states, assuming that this can help companies to
determine a greater involvement of their target audience.

How can it be exploited by an innovative startup?

It can be the basis of any marketing and communication choice. The design of a website can
integrate user experience processes with neuromarketing measurements. Images and texts
are undoubtedly more effective when verified with these techniques. Not to mention the
entire Customer Experience, which becomes more relevant in terms of channels and modes
of engagement. It is precisely an innovative startup that should forget the usual marketing
methods and start from its customers and design and reason around them – or rather, their
brains.

What are the first steps in approaching neuromarketing?

There are many courses and books. To get a general idea of the techniques and
specificities, one book above all needs mentioning: “Neuromarketing, communication and
consumer behaviour” by Vincenzo Russo.

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Lots of articles and guides for learning to be a leader, in life and at work appear. There is probably no one way, no one answer for everyone. In order to get what we need for those who are leading a startup in a global context like the current one, we interviewed Judith Eberl, Managing Director of JuPantaRhei, who in the coming weeks will hold a mentorship session on the same topic, reserved to the fintech of our community.

What are the essential soft skills to lead a business?

Leading a business is tightly connected to leading yourself and leading people. As a business leader you need to have a vision, think strategically, evaluate risks and drive performance. But you cannot grow the business if you are not able to manage yourself and that starts with self-awareness which means having a deep understanding of your own feelings and emotions, of your own weaknesses and strengths and of your own values and capabilities. But a business leader needs also be able to lead people, to motivate them to work towards the organisation’s vision and to grow and develop them.

Three things a leader should never do

1. Leaders often times say very quickly when something does not go the right way. But when it comes to expressing recognition and gratitude, they forget to do so. Leaders should never forget to give praise, also publicly, to someone that has made a contribution to achieving a certain goal. If a leader does not show gratitude, people feel forgotten, ignored, pushed to the side, and they resent it.
2. A leader should remember that emotions are contagious, so are negative emotions. When someone gets angry, he/she is usually out of control. That’s when a leader should not make destroying or cutting remarks or act in a negative way. Behaving like this, people will start avoiding the leader and are less willing to support and work alongside.
3. Leaders should not jump to conclusions too quickly. We often judge others or grade what they say very quickly, even when they try to help us. When leaders want to impose their standards, people get hesitant and defensive. A leader should therefore be open and seek for different perspectives and diversity in their teams. A leader should actively listen, trying to understand the perspectives of others and be open to different approaches.

How can you foster the growth of your team: examples/practical actions?

When approaching our teams, we have to remember that each team member comes with his/her own background, experience, capabilities, skills and competencies. Furthermore, each individual is driven by different motivational factors. A good leader has to address each team member, having clarity whether the person has the necessary competencies and the motivation to perform the specific task/activity and adapt its leadership style.
When we have team members that have the necessary skills and a high motivation, leaders should focus on coaching them. Coaching really aims at unlocking a person’s potential to maximise their own performance. It is helping them to find their way to reach the objective, based on their natural talent and strengths. Coaching is a two-way-communication, based on trust and mutual respect and the role of the leader coach is to create the right context for each individual to grow and succeed. Listening and questioning are some of the key elements of coaching.

What techniques can help to better identify strengths and areas of development for those leading a business?

Self-awareness is the starting point and it means being conscious of the effect that our feelings and emotions have on ourselves and on others. We cannot change our emotions, but we can decide how to go about them. But it is also crucial for a leader to understand how others see them. This is where open and continuous feedback comes in. In organisations where there is a feedback culture, direct communication and open conversations are happening on an on-going basis. Business leaders should seek for feedback being open-minded, curious, self-reflective, willing to change and adapt.

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Knowledge, Experience and Networking are the three pillars on which the “Fintech Nights” are based. The first edition of this new format launched by the Fintech District on 7th May was dedicated to artificial intelligence, a theme which is intensely connected with the development of the fintech sector but not only.

Since this is an exclusive initiative, reserved for our partners and those who bought tickets for the entrance, we will not retell everything but will let you peek at a few moments of Fintech Nights #1 through the keyhole. The evening began with an overview of how this technology is impacting many sectors, including the health sector with consequences that up to today we can only guess, which excite and, at the same time, frighten us.

Alessandro Longoni talked about it and remembering the ups and downs actually recorded in the history of artificial intelligence from 1952 when IBM unveiled its first commercially available scientific computer until 2016 when Google DeepMind’s ALPHAGO defeated Lee Sedol on a game of GO. Compared to previous years, the situation today is different. AI can continue to flourish. Indeed, it can do better thanks to the cheap processing power that allows you to process more data, thanks to the growing role of technologists in the development of AI and also to the large investments big tech are doing on it.

Let us take a look at who in practice develops and uses artificial intelligence. In Europe today there are 2,830 companies declaring to be AI Startups. With Antonio la Mura we have gone through the ranking of the countries with the highest number of AI startups: after the USA we find China and Israel. The first European country is the UK and Italy is in 19th position (Source: Artificial Intelligence – A strategy for European startups | Roland Berger, 2018).

In Europe, however, there is no lack of initiatives to support AI, France and Germany are among the most active countries and the European Commission is also working to promote the spread of AI. Thanks to the collaborations that Fintech District has established with international innovation hubs, at the first of our Fintech Nights we were able to tell about the startups in other countries offering interesting AI-based businesses including Feedzai (by Portugal Fintech), Lingua Custodia (by LHoFT), Yields (by B-Hive), 2021Tec.AI (by Copenhagen Fintech) and e-bot ( by Techquartier).

In the Fintech District community there are many startups that use AI. Our community manager Stefania Barbato has identified the 3 emerging trends investigating among the 111 startups – Robo-advisors, Alternative data and Cybersecurity – and has explained them through concrete examples, respectively Moneyfarm, FinScience and Talos.

Obviously, the following wave of AI and automation will transform financial services over the next few years. Mico Curatolo explained that companies using AI to improve business processes will reap clear competitive benefits. There are hundreds of opportunities that could be enabled by the deployment and development of AI in financial institutions.

So, how can I get hold of them and not be left behind? ING, CITI and AXA have done so in three different sectors by opening up and focusing on applied innovation, with excellent results. This can also happen in Italy with our support and it is not only a promise because we have the evidence: the Data Driven Competition.

The evening continued with the evocative and inspirational intervention of Samsung. Antonio Bosio (Product & Solutions Director for Samsung) excited the audience with a video showing how artificial intelligence can be a key factor for digital inclusion. Then he told about its impact on three different areas: languages, services and devices

Raffaele de Lucia (Manager of Watson and Cloud Acceleration Team IBM) introduced “IBM Watson, between false myths and great potential”. As the volume of data, digital transformation, and the pace of technological change accelerates, the ability of organizations and professionals to keep up and capitalize on the opportunities is becoming more challenging” he explained. “AI provides an opportunity to help professionals close this gap and harness the full potential of data by creating new tools to improve their work and outcome”. The use of Al is increasing but there are some difficult challenges concerning regulatory constraints and lack of technological skills to face.

Alessandro Vitale, Member of the Board of Coordination of the Task Force for AI in the PA and CEO of Conversate, explained his point of view. Vitale argues that 2019 is the year for large companies and banks to invest in AI in order to have a clear advantage over competitors in the coming years. AI offers new services and new ways of interacting with customers and initiates a structural change for banks. Those who use it can have many advantages but must face two non-trivial challenges, one organizational one, for setting up the collaboration man-algorithm, and one of the processes, because AI requires rapidity

The evening ended with 5 startups from the community talking about how they actually use AI and how they aim to use it with future partners. We invite you to discover them on our community page and leave them to speak. In the following video pills, they share with us their thoughts on the future of AI

Swascan

Axyon AI

Wavenure

Modefinance

Cardo AI

After so many words, here is a roundup of images of the evening.

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