Spanish Fintech Industry Comes into its Own

Rapid growth and an influx of young talent has transformed this Western European country into a fintech hub.

The Spanish fintech ecosystem has been a steadily growing force over the past few years, swelling from just fifty financial technology startups in 2013 to well over three hundred in 2017. This rapid surge is only going to continue with this number estimated to hit four hundred companies by 2018.

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However, the growing population of startups is not the only phenomenon unfolding in Spain, which has quietly emerged as one of the fintech leaders in Western Europe. In terms of the value of the operations, this sector passed rose from just €35 million in 2014 to €206 million in 2016, justifying a 600 percent growth in just two years. This trend is telling, though also promising, given that many forecasts point to an exponential growth rate of this business in the short- and medium-term.

Perhaps the biggest boost for the fintech sector in Spain will be in terms of personnel however. According to the Spanish Association for Fintech and Insurtech (Asociación Española de Fintech e Insurtech – Aefi), companies operating in this space in Spain are going to create a total of 10,000 jobs in 2017 alone. This is a huge boost for an economy that is already grappling issues of unemployment, particularly with youth unemployment, which is hovering at 38 percent.

While the value offintech operations in Spain is increasing, two areas that constitute the most focus are the crowdfactoring or invoice factoring crowdfunding platforms – these saw a total of €120 milion euros in 2016, that concentrate most of the operations domestically, followed by crowdfunding with €43.5 million and crowdlending or p2p lending with €42 million.

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Interesting, the level of unemployment in Spain provided a key impetus for this trend, given the availability of a large pool of talented graduates willing to join the most innovative startups or to start their own firm. Together with a relatively low cost of living even in Barcelona and Madrid, this has made Spain into a competitive fintech hub, especially when compared to extensive living costs in other cities such as London, Singapore or New York. It’s also important to note the role that Spain can play with the countries in Latin America (LATAM) – indeed, Spain currently represents the biggest fintech market in Ibero-America.

Positive outlook

In terms of equity crowdfunding in particular, the market in Spain is also materializing rapidly, with Spanish platforms garnering more than 60 percent of the total funds raised in 2016 – in Q1 2017, this area saw €5.6M invested in nineteen companies.

Fintech firms such as Crowdcube, The Crowd Angel, and Capital Cell currently reflect platforms where most of the funds are raised (85 percent of all equity crowdfunded deals) in Spain. However, there are also other cases of success, like Housers, a Real Estate crowdfunding platform that is growing very well. In just over two years, this group saw its register user base climb to 54,000 and more than €26 million invested in approximately 100 properties. On the wave of their success, they have now recently launched in Italy as well, where the Real Estate crowdfunding market has yet to start and there’s a lot of space.

All in all the situation in Spain reflects a positive outlook on the investments side. Fintonic, a company that aims to optimize personal finances, has at the end of June closed its latest round of funding worth €25 million with the participation of ING Group and the insurance group PSN, amongst other investors. Moreover Spain-based, Banco Santander, through its venture arm Santander InnoVentures, took the first place in the ranking as the most active major European bank investing in fintech over the last five quarters.

Madrid and Barcelona are now both trying to develop their fintech ecosystem further and this year will be fundamental to see where the market in Spain can arrive. The sensation is that we will have exciting months ahead.

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