As the European Union navigates an era of rapid technological advancement and economic transformation, the role of FinTech companies in this journey is growing from strength to strength. Today’s FinTech innovators have not only revolutionised the financial services landscape, but have also contributed significantly to the EU economy through innovation, investment, facilitating fair competition, and more. Understanding the importance of FinTechs as a pillar of the EU economy is essential to fostering an environment that nurtures this vital sector.

Driving Innovation and Technological Advancement

FinTech companies are at the cutting edge of technological innovation, integrating artificial intelligence (AI), blockchain, and big data to create more consumer-friendly and effective financial services. These technologies have transformed everything from payment processing and lending to wealth management and insurance. Innovations from the FinTech space have not only improved service delivery but also set new standards for the entire financial industry, prompting traditional players to modernise their operations and embrace digital transformation. 

Stimulating Investment and Economic Growth

The FinTech sector has seen a remarkable influx of investment in recent years, attracting the biggest share of all venture-capital investment in Europe over the last five years, worth around US$85 billion. These investments are not only a testament to the sector’s potential but also a critical driver of economic growth.

Investment in FinTech spurs job creation, both directly and indirectly. The sector accounted for over 135,000 jobs in Europe in 2022, with the potential for this to grow to 365,000 in the future. Moreover, FinTech innovations facilitate the growth of small and medium enterprises (SMEs) by providing them with easier access to capital and more efficient financial management tools. 

Beyond job creation and support for fledgling local businesses, the economic value of the fintech market is also significant, and expected to continue to play an increasingly important role in the EU economy. The sector is expected to grow more than fivefold over 2021 figures (5.5x) – to be worth US$190 billion – by 2030. 

Enhancing Fairer Competition and Greater Consumer Choice

The rise of FinTech has introduced a new level of competition in the financial services industry. FinTech companies offer more affordable and accessible financial products. For example, digital banks typically have lower overheads than their traditional counterparts, allowing them to offer lower fees and higher interest rates on savings accounts. Additionally, the convenience and user-friendly nature of FinTech services have made financial management more accessible to a broader audience, including those previously underserved by traditional banks. 

This competition has benefited consumers in a multitude of ways, increasing accessibility and convenience, while driving down costs and improving service quality. Europe’s citizens have clearly embraced the innovations fintechs have brought to the sector, downloading finance apps 1.8 billion times in the year 2023 alone. In the same year, FinTech transactions in Europe’s largest economies amounted to over US$3.8 trillion.

Promoting Financial Inclusion and Awareness

One of the most significant contributions of FinTech is its role in promoting financial inclusion. Up to 400 million Europeans were unbanked or underbanked as of 2022. FinTech solutions, such as mobile banking apps and digital wallets, have made it possible for these individuals to access financial services, often for the first time, even if factors like location, mobility or disability may prove prohibitive. In fact, more than half of Europe’s bank account holders bank on their smartphone or tablet today.

In addition, FinTech platforms often include educational tools and resources that help users understand financial concepts and manage their money more effectively. By empowering individuals with knowledge and tools, FinTech companies are playing a crucial role in improving financial literacy, awareness and wellbeing across the EU.

The Foundations of a Resilient Financial Ecosystem

The agility and adaptability of FinTech companies have proven invaluable in times of economic uncertainty. During the COVID-19 pandemic, FinTech firms quickly adapted to the changing needs of consumers and businesses, providing flexible digital solutions that helped many navigate financial hardships as well as changing everyday realities as the world moved online. This resilience is essential for maintaining economic stability and supporting recovery efforts.

FinTech companies are not just transforming financial services; they are reshaping the EU economy in a multitude of ways. By driving innovation, stimulating investment, enhancing competition, and promoting financial inclusion, FinTechs are laying the foundation for a more dynamic, resilient, and inclusive economic future. It is imperative that policymakers recognize and support the pivotal role of FinTech in achieving these goals. Across all countries in the EU, we have seen the immense potential of this sector. With proportionate regulation that will support European financial innovation and seamless market access, we believe the European Union can create an environment that allows the FinTechs that call Europe home to fully tap into this potential.