Written by Alessandro E. Hatami
As a native Italian that has lived in London for over two decades, it is always fascinating to compare how the country actually is to how it is perceived internationally. This is most striking in my area of expertise Digital transformation of finance or FinTech.
From the outside, Italy’s FinTech footprint is often perceived as smallish and not innovative. This is supported by the low profile of Italian banks in the global FinTech ecosystem, the fact that Italian Fintech investment lags behind countries with smaller economies such as Spain, Sweden, The Netherlands and Switzerland and most importantly the lack of Italian FinTech Unicorns.
A few weeks ago, I was delighted to be invited to Chair the first Milan FinTech Summit by the organisers Fintech District and Business International-Fiera Milano Media. I thought I would be a great way to find out more about the state of Italian FinTech directly from some of its most important movers and shakers.
Prior to the Summit, my perception was that Italy is punching below its weight in FinTech because of issues relating to four main areas: Regulation, Venture Capital, Competition, Demand and Talent. In chairing the summit I realised all four areas are being addressed by the regulators, politicians, big corporates, investors, academics and most importantly the public. This is what I found out.
REGULATION
The MFS invited several representatives from the main Italian Financial Regulator: Banca d’Italia. Both Alessandra Perrazzelli and Paola Giucca reiterated the regulators’ support for innovation. They mentioned the new Bank of Italy Milano Hub created to accelerate the digital evolution of the Italian financial services industry. The Hub aims to do this by helping FinTechs understand the regulatory requirements for their business and by enabling the regulator to understand and appreciate the regulatory needs and concerns of the innovators first hand.
This recent change in mindset of the regulator was reiterated by several of the other panelists and especially by the two of the most influential financial services associations in Italy Giovanni Sabatini of ABI – the Italian Banking Association – and Andrea Crovetto of ItaliaFintech – the association of Italian FinTechs. Both confirmed that the regulators – long the source of frustration for innovators – have now become great advocates and supporters of the digital transformation and evolution of Italian financial services.
CAPITAL
Several of the panelists reiterated that the Italian angel and venture capital market does not match the size of the Italian economy. This seems to be changing with a real push from corporate Venture funds. According to Anna Gervasoni from the AIFI – the association of Italian VC and private equity investors – and Paolo Gesess of VC United Ventures interest in FinTech is growing at all levels but the most striking transformation of the last few years Italy has come from corporate investors. The Corporate Venture Capital investors are playing an increasingly large role supporting the growth of new firms – often in collaboration with VCs. The CEO of the Borsa Italiana owner of the Milan Stock Exchange Raffaele Jerusalmi said that he is looking forward to the listing of the first Italian FinTech unicorn.
COMPETITION
Italy had long been a market characterised by peaceful co-existence of banks. The recent financial crises have changed this, with Italian banks becoming much more competitive and acquisitive than in the past. This change in mindset has extended to the digital space with several banks creating digital challengers often with interesting offerings to stand out in the market. One of the most recent being Flowe part of the Mediolanum group – Oscar de Montigny, Chairman of Flowe, described how his firm was created to prove banking and environmental sustainability can and must work together. In addition, we are seeing Italian firms growing through acquisitions – the recent acquisition of Nets by Italian payments firm Nexi to create a global payments leader is a good example of this.
Furthermore, the Italian Banking Association (ABI) is entering the neo-bank space by sponsoring the creation of Spunta Banca. This new FinTech is using DLT (Distributed Ledger Technology) to increase speed and transparency of the interbank payment processes.
DEMAND
The Italian customer is still one of the less frequent users of internet banking in Europe according to Eurostat. But this is set to change. Covid has seen a strong push to digitalisation as confirmed by Intesa Sanpaolo’s Paola Papanicolaou. More interesting is the growing interest of foreign financial disruptors in the Italian market. Payments firm Satispay recently received a substantial investment by the US firm Square and Chinese firm Tencent.
Non-Italian firms like PayPal, Revolut, N26 and Qonto (all present at the summit) are all keenly interested in the Italian market and are facing growing competition by the likes of challengers like Hype, Plick, Credimi and Enel X. Italy promises to become one of the most contested markets in Europe.
TALENT
With talent comes innovation too. As Pietro Sella, CEO of the Sella Group, recalled, Italy is the country that invented banking centuries ago and the time has come to use the talent and experience of its professionals to play a more active role in the transformation of the banking system, not only within its borders, but also around the world. Italy promises to become one of the most interesting markets in Europe, also because it has long proven to be effective in training highly qualified entrepreneurs and professionals, as evidenced by the large number of Italians who hold important roles in the global FinTech scene. Italy and Milan have long been very effective in creating entrepreneurs and highly trained professionals. This is proven by the large number of Italians in senior roles across the globe. A good example of these were panelists Laurent Le Moal CEO of PayU and Francesco Simoneschi CEO of Truelayer. Both successful in the FinTech industry outside their home country.
But the reverse also occurs, Italy and particularly Milan have been the preferred destination of talented individuals from other countries seeking roles in finance, fashion, design, manufacturing and more. This is also true for FinTech as the City is the de-facto hub of FinTech in Italy with over 45% of Italian FinTechs being based there.
Milan is also home of several of the country’s top universities such as the Bocconi Business Schools and the Politecnico di Milano, a leading engineering and sciences university. As the Mayor of Milan Giuseppe Sala said during the summit, Milan has over 200,000 university students making it one of the largest higher learning centers in the world.
Overall, the Milan FinTech Summit was eye opening both for Italians and for foreigners. The first saw validation that the efforts made by local firms are yielding results in making Milan and Italy start to seize the opportunities offered by digital transformation of finance. For non-Italian it was a glance of what Italy can achieve as it engages more with its domestic capabilities and the global FinTech ecosystem.
