The need for liquidity on the part of companies, especially SMEs, during the pandemic period, has resulted in the development of the Italian fintech sector. But there is also a growing demand for protection insurance policies (insurtech), in addition to digital payments. Moreover, the crowdfunding sector in the different areas of equity, real estate, and donations is also doing well.
In Italy, however, the fintech sector continues to suffer from structural problems. The data were disseminated by the consulting firm PwcItalia with the collaboration of Leanus in an update to the third edition of the Fintech 2020 report: an analysis released last April that covered, this year, 364 companies.
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The money management sector registered a huge increase
The growth in turnover in the segment recorded in 2019 was significant: + 32% in the fintech segment and + 23% in the techfin segment. The crisis has triggered timely responses in the lending area (digital lending, trade receivables, supply chain finance, among others). The money management sector, digital asset management, grows in triple digits, with an increase of +118%.
If the financial statements show a good balance of assets, however, critical points are found in the economic balance: the growth in turnover, according to PwC, has not been accompanied by adequate operating margins. The financial point of view is also clear: the liquidity/revenue ratio and trade receivables are good, but the ratio between operating cash flow and revenues is insufficient.
That’s not all. In comparison with almost 60% of the companies that show a low (43%) or medium (15%) risk, more than a third of Italian fintech companies showed a high risk in 2020: a data that could lead to a higher mortality among the most fragile companies.
Investments in the fintech sector go to already established companies
On the investment front, underlined PwC, in Italy, the fintech sector has always been in a weak position compared to the international context. Companies in the early stages of development (concentration of investments on the most resilient companies and reduction of deals) are penalized.
A problem that does not concern, of course, the scale up of the sector: like Satispay, which a few days ago closed a $110 million (€93 million) C series round.
Specialization, adaptability and user experience at the level of the best competitors are the strengths, at national level, of a sector on which the coronavirus crisis has not had a significant impact. “But in order for fintech companies to continue to play a positive role as drivers and facilitators of financial innovation, we need collaboration, regulations and funds” underlined Rodolfo Pesati, Partner, Financial Services Consulting Leader of PwC Italia.
Europe is expected to face the challenge of the future: a complex game to play in balance between different and, apparently, contradictory instances. To support the sector, and make it competitive against global giants, Brussels will have to abandon the purely regulatory approach. Although far-sighted and necessary to avoid the Far West found in other sectors of the digital (whose cost is inevitably paid after years), the time is ripe for the governing bodies of the European Union to undertake a growth-oriented activity.
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First published in Smartmoney, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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