Press release, 8 December 2022
Fintech has moved from the fringes of European finance to its core, but performance varies widely. If all countries could match the best in region, the economic benefits would be considerable, reveals a recent report by McKinsey.
Despite the gloom in the macroeconomic environment, European fintechs continue to gain in strength and relevance for customers and the economy. In each of the seven largest European economies, at least one fintech is among the five most valuable banks. Overall, these young financial technology companies have created around 134,000 new jobs in Europe.
Fintech performance in Europe varies
There are major differences in fintech ecosystems between European countries. The UK and Sweden for example are way ahead, while Finland sits in the middle of the pack.
“Even though Finland does well in some metrics, like in the number of fintechs per capita, the country still has a lot of potential going forward”,
Gonzalo García- Muñoz
says Gonzalo García- Muñoz, a partner and Digital practice lead at McKinsey & Company Helsinki office.
In early-stage funding Finland is at the same level as the UK (0,05% of GDP) but has a clear opportunity to improve late-stage funding.
“Catching up with European leaders would offer significant untapped potential. If the lagging and average ecosystems in Europe were to match the leading countries, the number of fintech jobs in Europe, for example, would almost triple to 364,000”, Gonzalo García-Muñoz continues.
Fintechs boost innovation and growth in the financial sector
Fintechs are catalyst for disruptive innovation and growth. They open up new sources of revenue and challenge established offerings and processes. Fintechs, for example, launch new products and services much faster than incumbent banks – with an average time to market of two to six months versus 12 to 18 months for incumbents.
“The rapid surge in the amount of fintechs has been a true blessing for the financial sector. The companies and banks that work with them benefit from their customer centricity. Simultaneously, as competitors, fintechs challenge established players and create pressure for innovation”, continues Gonzalo García-Muñoz.
Catching up only possible if players work together
To strengthen the European fintech ecosystems and foster growth, countries and stakeholders need to collaborate. Six areas in particular are important: harmonizing market structures within the EU, improving access to capital, fostering innovative regulation, becoming a magnet for global talent, enabling fintechs to scale across borders, and increasing customer openness.
“We should seize the fintech opportunity in Finland and not waste it. It is essential for us to invest more in talent development and innovation, as well as ensure there are no obstacles for companies to get funding. Finland has now the chance to set the stage for becoming a true leader in the fintech ecosystem in Europe”, ends Gonzalo García- Muñoz.
Read the full report here.