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The fintech sector in Italy is small but has high potential to support the economy

The Italian economy was one of the hardest hit economies in Europe, because of the lockdown caused by the coronavirus pandemic. The most recent report conducted by EY revealed that even though it is still small, the fintech sector in Italy is in full development and could greatly benefit the economy of the country. Financing to fintech startups has grown to a CAGR of over 60% from 2016 to 2019.

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Heterogeneous, small in size, with little capital, but also with high growth potential to support the real economy. This is the picture of the fintech sector in Italy that emerges from the report conducted by EY and Fintech District presented on September 17th, at the first Italian Insurtech Summit.

Innovation in the financial sector is increasingly winning the trust of consumers: although Italians still see traditional operators as the first point of contact – 55% turn first to the bank or traditional insurance company -, the adoption rate of fintech solutions is growing strongly: +51% in 2019 according to the EY FinTech adoption index.

Find out how the fintech sector in Italy could help at the economic revival of Italy and read the latest economic news with the Born2Invest mobile app.

The number of fintech companies in Italy is constantly increasing

The number of fintech solutions is also growing steadily: in 2011, there were 11 fintech companies, rising to 199 in 2015. In 2020 there were 345 companies, mostly concentrated in Lombardy (169), characterized by a strong presence in crowdfunding (71), followed by startups dealing with data analytics, machine learning, and artificial intelligence (35), by those offering smart payments (34) and lending services (30).

The average value of the investments raised by each startup is around $825,000 (€700,000), with 95% reaching a post-money valuation of over $1.18 million (€1 million). In fact, investments are clearly lagging behind other countries: in 2019, Italy attracted only 2% of total capital invested in the fintech sector in Europe, compared to 50% in the UK and 19% in Germany. 

Recently, underlined the analysis, the gap has started to narrow: financing to fintech startups has grown to a CAGR of over 60% from 2016 to 2019, which recorded a record $307.9 million (€261 million).

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The innovation in the fintech sector will benefit the country’s economy

This year “the Italian fintech ecosystem has shown important signs of resilience, also from the point of view of access to new sources of financing: in particular, the main fundraising activities in the first 8 months of 2020 reached $106 million (€90 million).” Although the trend is positive, the numbers continue to show a high concentration of investments in favor of a few startups.

“To create a more mature Italian ecosystem, it is necessary to launch specific investment funds and encourage collaboration between incumbents and startups. This change of approach could boost investor interest and generate more M&A operations,” commented Andrea Ferretti, Markets Financial Services & FinTech Italian Leader at EY. 

Alessandro Longoni, Head of Fintech District said: “The growth line of the Italian fintech market is now traced, but we believe that much can still be done, 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.”

On the other hand, the entire national economic system has to gain from the development of fintech innovation and coexistence with traditional players. Starting from SMEs that, according to the EY-Fintech District analysis, require more and more flexible and efficient services from banks, leveraging the offer of fintech companies, while cybersecurity and cyber insurance will become more and more priority due to the challenges and critical issues related to digital transformation. 

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Among other trends, compliance will continue to play a primary role in financial services, driving regtech and wealthtech, enabled by artificial intelligence, will revolutionize the Wealth & Asset Management industry.

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(Featured image by fototommy via Pixabay)

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First published in Il Sole 24 ORE, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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Anne Kings is a reporter for the financial sector, often tackling Wall Street and shareholders' interests. She also covers the intersection of media and technology, and delves into interesting topics on entertainment. Sometimes she also writes about the cannabis industry, in particular CBD and hemp. She is currently based in New York.