EY Archives - Fintech District

Italian Fintech has a high growth potential and also has all the cards needed to support the country’s economy. This as was noted during the pandemic crisis, despite the small size of this ecosystem and the fact that the capital invested is still minimal compared to other countries, including neighboring ones such as France and Germany, not to mention the UK and the United States. This is the picture taken by the two teams of Fintech District and EY who collected together in the report “The Italian Wave” the fruits of a deep research that saw them personally involve the Italian fintechs in investigating the characteristics of the projects.

If you are interested in browsing the report, download it for free HERE

First of all, it should be noted that the number of fintech is constantly growing: in 2011 there were 11, reaching 199 in 2015, in 2020 there are now 345, many of which are based in Lombardy (169). As for the type, the most numerous are those dealing with crowdfunding (71), followed by those dealing with data analytics, machine learning and artificial intelligence (35), and those offering smart payments (34) and lending services (30).

And So how do Italians face this wave of innovation in the financial field? They are slowly beginning to trust these companies even if they still see traditional operators as their first point of contact. The scenario is evolving. On the one hand, 55% are turning first to the bank or traditional insurance company, on the other hand there is a strong growth rate of adoption of fintech solutions: +51% in 2019 according to the EY FinTech adoption index.

The investment situation is also evolving. The average value of those collected by each startup is about 700 thousand euros, with 95% reaching a post-money valuation higher than 1 million euros. It cannot be denied that compared to other countries we are lagging far behind. In 2019 Italy attracted only 2% of the total capital invested in fintech in Europe, compared to 50% in the UK and 19% in Germany. Some progress has been made in recent years when the gap started to narrow since financing to fintech startups has grown to a CAGR of over 60% from 2016 to 2019, with a record of 261 million euro. What about 2020? For now it is proving to be a positive year, with the Italian fintech ecosystem able to show important signs of resilience, also from the point of view of accessing new sources of financing: in particular, the main fundraising activities in the first 8 months of 2020 reached the figure of 90 million euros. These are positive numbers but one problem remains:there is a high concentration of investments in favor of only a few startups.

The report shows the need to launch specific investment funds and encourage collaboration between incumbents and startups and “do something more” by working mainly on three lines: tax breaks dedicated to corporate venture capital to make investment in innovation an opportunity, a greater ability of our entrepreneurs to think on a large scale beyond national borders, and a concrete commitment to talent and training.

A greater development of the fintech sector would bring benefits not only to the sector itself but to the entire national economic ecosystem, starting from SMEs that need more flexible and efficient services. In the meantime, cybersecurity will become a priority due to the challenges and critical issues related to the digital transformation together with reghtech, thanks to its compliance, and with Wealthtech, thanks to the progress made by artificial intelligence.

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