The negative impact of persistent and prevailing geopolitical uncertainty on the global economic outlook is hard to escape. Against this backdrop many industries are struggling to attract capital and there is a significant knock-on effect for both investor and consumer confidence. Yet, despite the challenging environment, the prospects for FinTech remain compelling as the sector […]
The negative impact of persistent and prevailing geopolitical uncertainty on the global economic outlook is hard to escape. Against this backdrop many industries are struggling to attract capital and there is a significant knock-on effect for both investor and consumer confidence.
Yet, despite the challenging environment, the prospects for FinTech remain compelling as the sector continues to grow. In fact, projections indicate it is expected to become a $1.5 trillion industry by 2030, more than tripling its share of global financial services revenue since 2023.
In 2024 European FinTech investment rose by 10%. This is a clear indication of the optimism and opportunity for the continent when it comes to capitalising on the positive outlook for the sector. As companies weigh up where best to invest and innovate during these uncertain times, there is a particularly exciting opportunity for smaller international financial centres to attract a greater share of funding, based on some of the distinct advantages they can offer over some of their larger counterparts.
There are some common ingredients that are fundamental to the establishment of a thriving FinTech ecosystem that remain pretty much the same the world over. Whether you’re looking at San Francisco or Stockholm, robust regulation, competitive licensing costs and timelines, international connectivity and the presence of an existing talent pool are undoubtedly important.
Nonetheless, as Singapore has demonstrated in cementing its position as a leading FinTech hub in Asia, there are certain benefits that smaller jurisdictions can capitalise on in this space; benefits that we have been quick to harness in Malta to drive the recent increase in the number of licensees in the sector.
Chief among these is the speed at which the authorities can move when it comes to regulating the sector, as well as its various sub-sectors such as RegTech and InsurTech, to ensure that regulation does not lag behind innovation. The ability to be highly nimble and responsive is essential in developing and maintaining the necessary supporting structures and ecosystems for what are highly dynamic and fast changing industries.
For example, the Malta Financial Services Authority (MFSA) marked itself out as an early adopter in the regulation of digital assets through the introduction of the Virtual Financial Assets (VFA) Framework back in 2018, well ahead of the EU’s Markets in Crypto-Assets Regulation (MiCA) regulations which came into force earlier this year. Meanwhile, when it comes to InsurTech, Malta has been able to leverage synergies with Protected Cell Companies (PCC), introduced into Malta’s legal framework in 2004 and refined in 2010, to enable a unique offering that supports industry innovation and technological advancement.
Innovators and operators active in smaller financial centres can also benefit from the fact that the authorities are often more accessible, with higher levels of direct engagement and dialogue between regulators and industry players commonplace.
This means that industry feedback is more effectively communicated and supports a mutual understanding of the precise challenges, requirements and expectations of both parties. At the same time, more mature and newer entrants to the sector work in close proximity with one another, opening up additional opportunities for collaboration and knowledge sharing that may otherwise go untapped.
Supporting fintech innovation
Related to this is the strong commitment from smaller markets to support innovation across the entire FinTech ecosystem, recognising that start-ups are just as important for the sector as established businesses through initiatives such as Start-up Residence Programmes for founders, core employees and their families.
This attention to detail is also seen with smaller countries across Europe bidding to host events that are specifically designed for start-ups, treating them with the same degree of prominence as corporate summits.
For example, Malta hosted the EU-Startups Summit in May this year, bringing together over 2,000 entrepreneurs, and investors from across the region. Malta’s Prime Minister Robert Abela officially opened the Summit, highlighting the country’s growing role as a gateway for startups looking to scale in Europe. A position that is supported by the Malta Venture Capital Scheme launched in 2023 – a €10m venture capital fund for investment in start-ups, with a strong focus on tech.
To capitalise on these advantages, it is essential to nurture a highly skilled talent pool that supports the sector, cultivating the necessary expertise and investing in development, for example through investments in FinTech and digital technology education and training, with government working alongside educational institutions such as universities to offer dedicated and specialised courses. The presence of practitioners from leading global audit and legal firms to provide support is equally essential.
As the sector continues to grow and mature, smaller jurisdictions offer compelling advantages for firms looking to navigate uncertain times. The value of locating in a highly agile and accessible environment that prizes innovation and welcomes new technologies, including those that can strengthen regulatory compliance and, at the same, time make it more efficient and less burdensome, has never been so important.
