European fintechs need regulatory harmonisation

European fintechs are being hindered by diversity of regulation, according to Benoît Legrand, chief innovation officer at ING Bank and chief executive officer at ING Ventures.

“What makes it more complicated for fintechs to grow at a large scale is that there is no uniformity into this one European market. If you want to raise one company, you go to whatever regulators in different countries, and they all look at things differently. You need to do this for the Italians, and for the French. This adds complexity to the speed at which those companies can evolve,” he said on the side lines of Money 2020 US in Las Vegas last week.

In September, Deutsche Bank CEO Christian Sewing told a conference that Europe needs to do more to attract investment in technology – particularly as the economy has slowed down.

“The German Federal government has announced €3bn of investment into artificial intelligence by 2025. But the Chinese cities of Shanghai and Tianjin are planning AI investments of almost $15bn each. The US tech giants are also investing heavily in this area,” he said. “Europe should not focus primarily on regulating new technology, Europe should drive innovation itself.”

report published in September by London & Partners and Innovate Finance identified the UK as having invested the second largest amount in fintech globally for 2019. The US, UK, and Germany took the top three spaces, with China dropping to fourth place from second last year. The US has invested $9.37bn across 477 deals in 2019, whereas the UK invested $2.29bn across 142 deals.

But Legrand said those figures fail to give a real view of the market.

“Maybe billions are invested by UK based venture capitalists into UK based companies, but Revolut is a UK based company but led by someone else not from the UK, is this a UK company? It is pointless actually. The point is, what is the impact which has been delivered by this equity investment? And that is much more complicated to assess,” he said on the side lines of Money 2020 US in Las Vegas last week.

ING Bank has partnerships with around 200 fintechs, having explored potential relationships with about 2,000, and stopping 60 others because of issues around the size of the company, its maturity, the processes around the partnership taking too long, or fintechs not living up to their sales pitch, according to Legrand.

Through ING Ventures the bank also invests in fintech, often taking a minority stake in companies. Legrand said, “those companies are developing things better and faster as being a bit away from the bank”.

The bank is in the process of testing software building technology in its wholesale front-office system, but it will be another six months before a decision will be made to continue with the project, said Legrand.

“This one is not ready yet. We are testing it on one of our existing IT systems, so we have software in a specific part of the bank which we try to test with this new technology, with the intention to replace it, but we don’t yet as we are still in pilot stage.”

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