Financial modeling and Fintech regulation in Europe


The success of Fintech start-ups relies on two main factors: customer confidence and regulatory adoption. No surprise, I agree. But let’s see what it really means!

On one hand, Fintech can survive only if its technology inspires confidence and trust to customers and authorities. On the other hand, the industry, like any other financial industry, can be sustainable only if the regulators work on a streamlined legislation.

I believe that regulation should not be a barrier. If you are thinking to enter the Fintech market (yes, it is still possible!), I suggest that you start focusing on the actual market demand, then you target where it is better to scale your business and finally you analyze the regulatory framework of the country.

Obviously London is a major city to consider for many reasons that you probably already know: leading financial center, easy access to capital, advanced infrastructures for talented people, and a truly diverse environment. I believe the latters, the diversity of the city and its talent pool coming from everywhere will greatly maintain London as a leading Fintech hub, Brexit or not.

A good illustration of that is the “Sandbox” created by the FCA (Financial Conduct Authority) dedicated to early-stage Fintech start-ups. The idea behind this initiative is to have a ‘safe space’ and flexible regulatory framework in which businesses can test innovative products and services, business models and delivery mechanisms without being asked to comply with all the regulatory standards.

This approach has at least two effects on a short term perspective. Putting traditional banks in a situation where they have to accelerate their digital transformation. Putting other European regulators in an uncomfortable position where they need to react and take this case seriously (i.e. ‘Autorité des Marchés Financiers’ – AMF in France). As a result, we clearly assist to an unprecedented race between European regulators whose mission is now to make their country the new capital of Fintech in Europe.

But the fact that fintech hubs are competing against each other is a good thing for the European ecosystem. It is indeed the guarantee to make this nascent and innovative industry grow over time.

Given the actual positive state of Fintech regulation in Europe, I strongly recommand that you start focusing on the market demand, rather than the regulatory framework. Remember that the success of fintech is based at least on four attributes: Talent, Capital, Policy, and Demand.

Interestingly, some countries have created ‘special forces’ like in the Netherlands with the ‘Ministry of startups’ or Luxembourg with “Luxinnovation“. Other countries like Abu Dhabi are also planning to set-up such initiatives.


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