Fintech is one of the most prominent growing sectors in Spain’s economy. As the field continues to thrive and grow, Spain’s hundreds of fintech start-ups are quickly making the country one of the European Union’s key fintech hubs.
There are many individual factors behind this sudden increase in Spain’s fintech industry. Of course, the ongoing demand for innovative and secure financial technologies has played a prominent role. The need within Spain is particularly pronounced, with the rapid development of financial institutions and small businesses within the country sparking a need for solutions to new and unexpected problems.
Of course, an increase in both the extent and variety of funding sources has impacted the fintech industry. Success in similar industries abroad has led many Spanish investors to consider investing in fintech start-ups and has opened the gates to more conventional funding sources as well.
One major source of funding is venture capital firms, which have a history of providing funding earlier in business development than other investors. We spoke with David Kezerashvili, the former defense minister of Georgia, about the success he’s seen investing in fintech through his firm Infinity VC and how there are similar trends in Spanish fintech markets.
Speaking on the promise shown by fintech in Spain, Kezerashvili told us, “Fintech ventures have been among Infinity VC’s most successful forays, and we cannot help but notice the ongoing changes in industry and regulations in Spain that are creating a more suitable landscape for fintech start-ups.”
Opening the Doors to Fintech Start-Ups
One of these promising elements is the introduction of fintech sandbox regulations. This type of framework is uncommon in Europe, with only the United Kingdom and the Netherlands implementing the idea ahead of Spain. Essentially, the measure gives more leeway for fintech start-ups to test ideas that might run afoul of complex or outdated financial regulations somehow.
Financial regulations are slow to change and often show complex synergies that lead to unexpected legal outcomes. These outcomes can inhibit fintech ventures, even when it is clear that the original intention of the regulation has no bearing on the activities of the venture. Establishing a sandbox framework reduces this risk for start-ups, giving them the freedom they need to develop innovative solutions that regulations haven’t caught up to yet.
These efforts are carried out by the Spanish Association of Fintech and Insurtech, an organization devoted to establishing a system in which fintech start-ups can flourish. There are, of course, rules and limitations for the framework, and start-ups must submit applications for the program. It’s clear, however, that this is a step in the right direction.
Kezerashvili is no stranger to dealing with regulatory interference, dealing with archaic and poorly structured regulations through his venture capital and real estate investment firms in Eastern Europe. He spoke highly of Spain’s efforts here and told us, “Regulations in innovative industries seem to hinder more often than help. The concerted efforts of Spanish regulators to enable and foster innovation in fintech should be seen as a fine example for many industries across Europe.”
Innovation in Spanish Fintech Start-Ups
Spanish fintech start-ups range widely in their area of development. Many of their efforts are centered on the development of fintech-as-a-service programs. Providing APIs and comprehensive tools for other organizations can make for a more integrated tech space overall. Key areas of focus for fintech-as-a-service include security, payment systems, and data collection and management.
Another prominent trend in Spanish fintech is the shift from a business to customer focus towards business to business development. Many fintech efforts directly address consumer needs, providing them alternatives to established financial services. However, today there is a significant need for innovation from start-ups to help small and medium enterprises compete with larger organizations. Effective B2B tools help these businesses establish the versatility and range they need to succeed.
There is also significant overlap in the fintech and property technology industries in Spain. Here, much of the efforts in real estate technology go into providing effective frameworks for payment management. Fintech provides innovative tools for reducing the administrative workload associated with real estate investments and can serve as an integral part of lending and mortgage systems.
Overall, it’s clear that the Spanish fintech industry is continuing to thrive, diversify, and grow. Fintech start-ups are among the most attractive for investors, and Spain is providing an ideal environment for these ventures.
“The combination of innovative young minds, unprecedented demand, and regulations geared towards fostering innovation have allowed the Spanish fintech industry to flourish, and it appears that it will continue to do so for some time.” – David Kezerashvili