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1、October 2022Europes fintech opportunity Europes fintech opportunityThis article is a collaborative effort by Alessio Botta,Sarina Deuble,Constance Emmanuelli,Fernando Figueiredo,Max Fltotto,Christian Irlbeck,Andr Jerenz,Timo Mauerhoefer,Tunde Olanrewaju,Alessia Vassallo,Stefanie Vielmeier,and Eckart
2、 Windhagen,representing views from McKinseys Financial Services Practice.ContentsExecutive Summary1.Fintechs are a force for growth,modernization,and customer satisfaction in Europes financial-services sectorFintechs are substantially improving customer satisfactionFor the financial ecosystem,fintec
3、hs are a catalyst for disruptive innovation and growthFintechs contribute to economic growth and employment2.The divergent national performance of fintech ecosystems in Europe points to considerable untapped potentialThe variations in Europes fintech ecosystem performance are evident at all three gr
4、owth stagesCountry-specific market conditions explain some of the differences in ecosystem performance across EuropeCalculating the upside:Europes fintech opportunity promises more jobs,larger funding volumes,and higher valuations3.A focused push along six strategic areas could help all European cou
5、ntries catch up with fintech leaders46 67 810 12 17 21 23The deteriorating macroeconomic environment in Europe and around the world is hurting start-ups across sectors and has hit fintechs hard,with valuations declining and access to financing becoming more difficult.1 Viewed from a long-term perspe
6、ctive,however,European fintechs continue to gain in strength and relevance for customers and the economy.In each of the seven largest European economies,as measured by GDP,at least one fintech ranks among the five top banking institutions.2 While some fintechs may not survive the current environment
7、,others will gain market share and benefit from structural trends.Those able to build resilient,profitable business models with solid cash flows will become more competitive in the long term.3 Strong fintechs offer customers greater choice and convenience.The competition they bring to banking system
8、s is already helping modernize the financial-sector ecosystem in several European countries.In this report,we focus on three key aspects of Europes fintech sector:founding,funding,and scalingthat is,the ability of fintechs to set up in the first place,the ease with which they can access capital,and
9、how well they can grow and thrive(see sidebar“Sources for this report”).Our analysis highlights growing fintech activity in every European country(chapter 1)including some unexpected pockets of strength in a few comparatively small economies such as Estonia,Luxembourg,and Malta.At the same time,we f
10、ind a wide divergence of maturity and performance among fintech ecosystems by country,with substantial gaps between the top one-third and the rest(Exhibit 1).Two countries in particular stand out for their superior fintech ecosystem performance:the United Kingdom and Sweden.If fintech ecosystems in
11、all European countries were able to attain the level of performance of the best in the European region,the upside could be substantial(chapter 2).Our analysis suggests that if the Executive SummaryThe insights in this report are drawn from three principal sources:analyses and assessments of the fint
12、ech industry based on public data on key criteria and indicators,focusing on European countries with a comparative look at the United States proprietary data from surveys and databases about European fintechs more than 30 interviews with fintech founders and management teams,top management of establ
13、ished banks,leading investors,and representatives of regulatory authoritiesSources for this report1 We define“fintech”in this article as financial-services companies driven by digital technology(excluding direct banks)that were launched after 2000,have raised funding since 2010,and have not yet reac
14、hed maturity.For the purposes of this paper,Europe includes Switzerland and the United Kingdom post-Brexit as well as the EU-27 countries.2 Excluding insurance and stock exchanges;valuation of nonlisted European fintechs determined based on latest funding rounds and market capitalization of the larg
15、est banks listed in the STOXX Europe 600 banks index as of June 30,2022;for Switzerland,we used the market capitalization of the largest banks listed in the SMI Expanded index as of June 30,2022.3 “Fintech value creation in a changed investor climate,”McKinsey Global Banking Practice memo(available
16、on request).4Europes fintech opportunity bottom two-thirds in Europe could catch up with the top third,and if the top third could catch up with the United Kingdom,the number of fintech jobs in Europe would grow by a factor of 2.7 to more than 364,000.The potential funding would grow by a factor of a
17、bout 2.3,adding about 84 billion in investments,and valuations could grow by a factor of 2.3,to about 981 billionalmost twice the combined market capitalization of Europes top ten banking players with 516 billion.4 As they look to boost fintech growth,countries across Europe and stakeholders in the
18、fintech ecosystem need to address some overarching challenges,including market maturity,access to capital,a regulatory and legal framework that does more to foster innovation and growth,the mobility of talent,the requirements for scaling across borders,and customer openness.Existing market prerequis
19、ites such as language or currency will also be a factor in determining whether fintechs can emerge and scale.We conclude with some of the imperatives for the fintech sector in Europe as it seeks to build on its momentum and inject new competition into the financial system(chapter 3).These include th
20、e need to foster the harmonization of market structures within the European Union,encourage more diverse“homegrown”capital,foster regulation with an innovative mindset,become a magnet for global talent,enable fintechs to thrive in target markets,and increase customer choice and access.Exhibit 1Finte
21、ch performance is variable across Europe,with the United Kingdom,Sweden,and northern European countries leading.Fintech ranking by performanceNote:KPIs considered for all EU-27 countries,United Kingdom,and Switzerland:fntechs founded per million capita,2021;fntech funding per capita in,2021;deals pe
22、r million capita,2021;unicorns per million capita,2021;workforce(fntech jobs)as share of total workforce in 2021.The boundaries and names shown on maps do not imply ofcial endorsement or acceptance by McKinsey&Company.1We have also considered the United States as an additional market for comparison(
23、a top-third country based on our analysis).Source:Dealroom.coSweden,and northern European countries leading.Top third1Middle thirdLower thirdNot consideredUnited KingdomSwedenMaltaLuxembourgSwitzerlandEstoniaIrelandNetherlandsDenmarkGermanyRepublic of CyprusLithuaniaFinlandAustriaFranceLatviaSpainBe
24、lgiumPortugalItalyHungarySloveniaCzech RepublicCroatiaPolandGreeceBulgariaRomaniaSlovakiaCountries with GDP$100 billionCountries with GDP$100 billionCountries with GDP$100 billion.Source:Dealroom.co;World BankThe number of fntechs per capita varies widely among European countries.IrelandSwitzerlandU
25、nited KingdomSwedenDenmarkNetherlandsFinlandBelgiumGermanyAustriaFranceSpainPortugalHungaryCzech RepublicItalyPolandSlovakiaRomaniaGreeceUnited States5967674726234443322210examination of the Global Entrepreneurship Indexan indicator of the entrepreneurial
26、attitudes,abilities,and aspirations of the local population as they affect the establishment of new companiesreveals that countries with a higher entrepreneurial index also seem to produce more fintechs per capita.14 14 Global Entrepreneurship Index,January 2020.13Europes fintech opportunity Exhibit
27、 5By the end of 2021,Sweden and the United Kingdom were the leading fintech ecosystems for funding per capita.ecosystems for funding per capita.Fintech1 funding per capita,millionsIncrease,201921SwedenUnited KingdomDenmarkNetherlandsSwitzerlandIrelandAustriaGermanyFinlandFrancePortugalSpainHungaryBe
28、lgiumItalyCzech RepublicPolandGreeceRomaniaSlovakiaUnited States2x2x5x6x2x1x110 x2x3x3x9x3x6x3x9x3x6x1x5xN/A3x0474639321101271Fintechs founded after 2000 that have raised at least one funding round since 2010.This refects only countries with a GDP$100 billion.Source:Dealroom.co
29、;World BankFunding growth.Access to capital plays a key role in our ranking of fintech ecosystem performance.The countries in Europe that perform the best have among the highest funding per capita,as do the others in the top one-third of our ranking(Exhibit 5).In countries that perform less well,inc
30、luding Greece,Poland,and Romania,per capita funding is significantly lower.While some countries have managed to increase per capita funding by as much as a factor of six in the past three years,Hungary,Italy,Poland,and Portugal still lag behind their peers significantly because the total volume of f
31、unding is still low.14Europes fintech opportunity Exhibit 6The United Kingdom led in both early-and late-stage funding in 2021.Early-stage(seed and series A)and late-stage(series B+)fntech funding for countries with highest overall fntech funding,2021 in 1/100,000 of GDP1Fintechs founded after 2000
32、and raised at least one funding round since 2010.This refects only countries with a GDP$100 billion.Source:Dealroom.co;World BankThe United Kingdom leads in both early-and late-stage funding.Early-stage fundingLate-stage fundingUnited Kingdom53330United States33159Netherlands40105High early-stage an
33、d late-stage fundingDenmark5170Austria4103Germany1181Portugal888High late-stage but limited early-stage fundingSweden3828Switzerland3826Finland5021High early-stage but low late-stage fundingThe growth rate in recent years of fintech funding in some countriessuch as Germany,Greece,and Irelandhas been
34、 lower in comparison with markets such as the Netherlands and France.This lower growth rate makes it harder to launch future fintechs and more challenging for existing ones to scale.When it comes to different growth stages,the United Kingdom is the top performer in both early-stage(seed and series A
35、)and late-stage(series B+)per capita funding(Exhibit 6).The United Kingdom led the European market with a total volume of approximately 1.3 billion for early-stage funding and 8.3 billion for late-stage funding in 2021.That performance compares favorably with other countries,including the United Sta
36、tes:while US GDP is about ten times larger than that of the United Kingdom,US spending on funding is only four times larger(see sidebar“How fintech in Europe compares with the United States”).By contrast,several countries in Europe,particularly in eastern Europe,had very little early-stage funding i
37、n 2021 and no late-stage funding at all.15Europes fintech opportunity Using the same three life cycle aspects of founding,funding,and scaling,a comparison between Europe and the United States is instructive(exhibit).The United States exceeds the European average and is within the top third across al
38、l KPIswith particular strength when it comes to the contribution of US fintechs to the economy and the workforce.How to explain the strength of the United States compared with the European average?Many factors could be at play here that correspond to similar factors in Europe.For example,the United
39、States has a large home market,but it also has just one primary language and largely harmonized banking regulationthus benefiting from favorable market structure conditions.Market maturity is also stronger than in various European countries,with the venture capital(VC)community,especially in the tec
40、h sector,perfecting funding mechanisms from earliest seed funding through to IPOs.The United States has strong connections with all the other large economies and has long served as a magnet for investors,making access to capital easier:US pension funds and other institutional investors provide ventu
41、re capital in ways that are restricted in some parts of Europe,where risk concerns tend to be larger.Nevertheless,our analysis shows that some individual countries,including the United Kingdom,outperform the United States in the funding stage.In addition,US companies can easily attract talent from t
42、he worlds best universities;regions such as Silicon Valley,south of San Francisco,or New York City,as the US financial center,exert a strong pull on foreign talent,although immigration measures have somewhat limited the flow.How fintech in Europe compares with the United StatesExhibit In 2021,the Un
43、ited States would have ranked in the top one-third of Europe for all of the performance indicators we evaluated.1For details on our scoring system based on parameters of founding,funding,and scaling,see Exhibits 1 and 3.2Ranked from worst to frst.Source:Dealroom.co;World Bankall of the performance i
44、ndicators we evaluated.Bottom thirdUnited StatesEU leader(GDP$100 billion)Lowest scoreMiddle thirdTop thirdFintechs foundedper million capita,2021Fintech fundingper capita,2021,Dealsper million capita,2021Unicornsper million capita,2021Workforce(fntech jobs)as%of total workforce,2021Overall score(av
45、erage ranking)5.44298.8UnitedStatesUnitedKingdom20.520.612.621300.216.5UnitedStatesIreland5.44.315.33.76.90.0UnitedStatesSwitzerland0.90.73.30.50.60UnitedStatesSweden0.30.10.40.250.350.00UnitedStatesSweden0.050.011271700UnitedStatesSweden3944616Europes fintech opportunity The limited scale of fintec
46、hs may be related to the relatively low level of internationalization of business models,which can serve as a constraint on growth.Scaling fintechs.As a proxy to judge the ability of countries in Europe to scale their fintech ecosystems,we looked at the prevalence of fintech unicorns.15 Most countri
47、es with more than one unicorn show a timeline between six and eight years from funding to becoming a unicorn.The United Kingdom has the best scaling track record by far with 32 unicorns in totalfour times as many as France and the Netherlands,the countries with the next largest numbers of unicorns.I
48、n some countries,the limited scale of fintechs may be related to the relatively low level of internationalization of business models,which can serve as a constraint on growth.Europes fintech leaders,including the United Kingdom and Sweden,tend to have a global footprint.For example,the leading neoba
49、nk in the United Kingdom had a presence in 34 countries including the United States and three Asian markets in 2021.In Sweden,an open-banking platform is present in 18 countries.Country-specific market conditions explain some of the differences in ecosystem performance across EuropeClosing the gap b
50、etween leading European countries and those in the bottom or middle third of the rankings requires an examination of the factors inhibiting the sectors success.Here we focus on six factors that can have an impact on the ecosystem,and for which strategic improvements can make a difference in both the
51、 short and medium term.The six factors are market structure and maturity;access to capital;the regulatory and legal framework;talent mobility and acquisition;requirements for scaling,including internationalization;and customer openness.Market structure and maturity.These elements can depend partly o
52、n culture,language,and history.For example,having a widely spoken language or a common currency and harmonized regulation can helpand the lack of those factors can be a hindrance.We see three main dimensions to this aspect.The first is how long a fintech or broader start-up scene has been present,si
53、nce markets learn and improve over time.Second,mature markets can differentiate themselves by the extent to which a second generation of entrepreneurial founders is emerging that can learn from the previous generation and count on them to be mentors,supporters,advisers,or investors.Such networks do
54、exist:for example,more than 15 former employees of two of the largest UK fintechs are now active with their own start-ups.16 This demonstrates that fintech hubs can be developed around unicorns and decacorns,with new start-ups providing complementary services to them and their customers.It also show
55、s the potential of clustering effects 15 Fintech unicorns are defined here as fast-growing,technology-based companies with a valuation exceeding$1 billion(based on recent funding rounds).16 Isabel Woodford,“Digital bank mafia:Monzo and Revolut employees who have become founders,”Sifted,September 2,2
56、020.17Europes fintech opportunity Regulators and other authorities in both France and the United Kingdom have played important roles in helping develop local markets.In France,rapid growth of unicornsIn 2019,the French government set a goal for start-up growth in France:25 unicorns by 2025.1 That nu
57、mber had been exceeded by January 2022well ahead of schedule.Behind this success story are several government initiatives that support young tech companies,including fintechs,in key ways:Process guidance.The regulatory landscape can be complex and overwhelming for fintech start-ups.To address this i
58、ssue,regulators in France set up a body to support fintechs and help them navigate the landscape by directing them to the relevant authority.This body also convenes ecosystem players in the Fintech Regulation Forum to discuss the current regulatory requirements,review the appropriateness of the meas
59、ures,and initiate adjustments if necessary.A tale of two countries:Fintech lessons from France and the United Kingdom17A decacorn is defined in this context as a grown unicorn with a valuation greater than$10 billion.18“Building a world-class Dutch start-up ecosystem,”McKinsey,forthcoming.19 Venture
60、 capital database,PitchBook,2022.emerging in regions such as Zurich,where prominent tech giants have headquarters or large local offices.17 For example,McKinsey analysis shows that the Netherlands already has a strong start-up ecosystem,with a high number of start-ups per capita and a society in whi
61、ch starting a business is highly valued.Market maturity may be one contributing factor to the Netherlands strong fintech landscape.18 Access to capital.Fintech funding in Europe has significantly increased over the past five years,but not uniformly and with sizable funding gaps between European lead
62、ers and their peers.Looking at the various funding stages,we find that less than 20 percent of all capital raised goes to early-stage financing,which points to risk aversion among some European investors.More than one-third of all European countriesmost of them in eastern Europedid not have any late
63、-stage funding.This unevenness threatens to dry up the pipeline for early-stage fintechs because they have less access to funding than the overall investment numbers might suggest.In addition,some late-stage fintechs may need to seek funding from countries outside their home market.The source of fun
64、ding is as important as the recipient,and the little funding available in some of these underserved markets mostly comes from abroadas much as 81 percent in 2021.19 Significant European money pools such as pension funds and life insurance policies tend not to be sufficiently tapped because of more r
65、estrictive regulations compared with the United Statesalthough here too there is some movement.Pension funds in the United States are large investors in private markets with sophisticated investment teams and board members who are familiar with the risks and returns of VC.Some European countries are
66、 trying to build similar strengths.In Scandinavia in particular,capital accumulation institutions are already taking a more active role.Sweden,for example,allows pension funds to invest up to 40.0 percent of their capital in illiquid assetscompared with just 7.5 percent in Germany(excluding a 25.0 p
67、ercent limit for real estate investments).18Europes fintech opportunity A tale of two countries:Fintech lessons from France and the United Kingdom(continued)Business-creation simplification.Enacted in 2019,the Business Growth and Transformation Action Plan(Loi PACTE)aims to simplify business creatio
68、n for start-ups and adapt labor laws and regulations as necessary.One update has made employee savings plans more attractive to prospective employeesstrengthening fintechs by helping them secure top talent.Innovation enablement.Loi PACTE also ushered in a regulatory change that supports fintechs pro
69、duct offerings in the cryptocurrency space.This change is related to initial coin offering regulations and creates special visas that allow the issuance of digital tokens.Banque de France launched an experiment using central bank digital currency,and various fintechs participated.Building on the amb
70、ition set in 2019,the French government launched the Scale-Up Europe initiative in 2021.In collaboration with the European Commission and other member states,the initiative has convened more than 300 founders,investors,researchers,and corporations with the goal of Europe becoming home to ten tech gi
71、ants,each valued at more than 100 billion,by 2030.In the United Kingdom,a focus on greater sustainabilityThe United Kingdom has historically been an attractive market for fintechs in Europe and a front-runner in promoting open banking.It interacts with fintechs in a relatively nonbureaucratic way.Fo
72、r example,it states licensing requirements clearly and provides legal support to help entrepreneurs easily understand the process.To further pave the way for a green and technologically advanced financial sector,the government in 2021 announced that the United Kingdom will be implementing many of th
73、e recommendations made in the Kalifa review of UK fintech and the UK listing review.These include the following:Policy and regulation.Plans call for the design of a digital finance package for emerging technology and implementation of a“scale box”to support firms focusing on innovative technologies.
74、The goal is to integrate fintechs into trade policy.Investments.The United Kingdom will expand R&D tax credits,establish a fintech growth fund of 1 billion,and reduce the percentage of capital freely available to the public to improve the listing environment.International attractiveness and competit
75、iveness.Steps include the design of an international action plan for fintechs,launch of an international fintech credential portfolio,and international collaboration through the Centre for Finance,Innovation and Technology.National connectivity.The government will nurture the top ten fintech cluster
76、s;enhance the national coordination strategy through the Centre for Finance,Innovation and Technology;and accelerate the development and growth of fintech clusters.1 Fintech unicorns are defined here as fast-growing,technology-based companies with a valuation exceeding$1 billion(based on recent fund
77、ing rounds).19Europes fintech opportunity 20 David Chinn,Solveigh Hieronimus,Julian Kirchherr,and Julia Klier,“The future is now:Closing the skills gap in Europes public sector,”McKinsey,April 27,2020.21 Heike Schrader,“ETH Zrich bringt rekordviele Ausgrndungen hervor,”Switzerland Global Enterprise,
78、January 6,2021.The regulatory and legal landscape.Some European countries see their regulators as an important facilitator of innovation.For example,in France,financial regulators are evolving to become strategic partners for the financial sector,and in the Netherlands,local regulators have recogniz
79、ed that fintechs products and services do not always fit with existing rules;Dutch regulators thus interpret obligations for fintechs in proportion to their size and complexity.In other countries,existing regulatory frameworks to support the establishment,growth,and value of fintechs have room for i
80、mprovement.Regulators and political actors serve as crucial enablers for the creation and protection of an innovative fintech ecosystem.Mandates of relevant bodies can reflect the ambition of finding the right balance between enabling fintech innovation and ensuring customer protection.While mandate
81、s define key goals and boundaries,responsible actors are asked to set priorities and translate ambitions into actions(see sidebar“A tale of two countries:Fintech lessons from France and the United Kingdom”).European payment service directives for data exchanges in financial industries may create new
82、 opportunities for fintechs.These directives will enable fintechs to access customer data from all financial players in Europe,giving rise to new business models.This has happened in the United Kingdom,a pioneer in open data for finance.Other countries with advance regulation include Switzerland.The
83、 Swiss Financial Market Supervisory Authority(FINMA)was among the first regulators to approve token trading on distributed-ledger technology(DLT)and has since spearheaded a technology-agnostic regulation approach enabling DLT and other new technologies to flourish.But obstacles to fintech growth rem
84、ain.Collaboration models with regulators are not always structured optimally,especially for small fintechs.For example,these collaborations might lack a clearly defined fintechregulator interface.Overall,there is still a heavy focus on risks and control,while support for innovation tends not to be c
85、onsidered to the same extent.As a result,standardized processes associated with regulations often inhibit fintechs ability to move quickly in an environment in which agility is essential.Talent mobility and acquisition.Europe as a region has a major skills gap that needs to be closed,and not just fo
86、r fintechs.20 Along with an overall shortage of talent,visa requirements and bureaucratic processes for obtaining work permits in some countries can act as a brake on talent acquisition,as can high income taxes.Perceptions about the attractiveness of financial centers like London or Zurich as places
87、 to live and work also play a role.While one in four graduates in Europe finishes higher education with a STEM degree,the share of STEM graduates varies widely across European countries,especially in computing and information technology(IT),which are critical for fintechs.Fintech ecosystems in some
88、European countries thus rely heavily on foreign talentalthough attracting that talent is challenging.Remote work has increased the competition between fintechs and other tech firms for IT talent.The United Kingdom,for one,has announced a new visa scheme that allows workers in the fintech industry to
89、 come to the United Kingdom without employer sponsorship.However,talent can come to the country not only through attractive employers and working conditions but also through active university promotion.Switzerland is home to ETH Zurich and EPFL in Lausanne,two of the highest-ranked universities in t
90、he world.The high level of state support for these universities helps produce top talent and create new start-ups.At ETH alone,34 start-up spin-offs were created in 2020.21 In general,European countries have great appeal.Many European cities appear year after year in the rankings of the worlds most
91、livable cities,which makes them favorable locations for fintechs.Nevertheless,the downside to an area concentrated with attractive employers is an emerging competition for talent.This 20Europes fintech opportunity To scale up,fintechs in Europe need to be able to expand beyond their home market.may
92、be one reason why some fintechs have decided to build new hubs in attractive but lower-cost regions such as Portugal.Requirements for scaling and internationalization.To scale up,fintechs in Europe need to be able to expand beyond their home markets.Even within a single market such as the European U
93、nion,differences in language,regulation,culture,and sometimes currency can create barriers.Export agencies can support companies in their global ambitions with advice but are not yet equipped to meet the needs of fintechs;their expertise is in more typically established trade relations based on phys
94、ical goods.Fintechs may therefore be tempted to limit their international growth or focus only on markets where they feel comfortable because of factors such as a common language or cultural similarities.For example,one large European neobank is scaling from Barcelona to Latin America by taking adva
95、ntage of the shared Spanish language.Customer openness.Different levels of digital maturity,the lack of broadband infrastructure,and other structural challenges in some countries can limit the reach of fintechs.Customers may also have limited understanding of risks,including data security.Such issue
96、s play out in favor of incumbent banks,which tend to have a higher level of trust among the public than fintechs.Research from the United Kingdom shows that fintechs need to offer significantly superior products that provide clear benefits or convenience to customers to overcome this lack of trust.I
97、n other countries,customer protection associations or governments may be pushing fintechs to provide solutions that increase customer trust.Regulatory differences can be factors,too.For example,customer protection laws are tougher in some countries than in others.Know-your-customer stipulations in s
98、ome countries,including Estonia and Sweden,are more digital,making it easier for customers to switch to new offers from fintechs.In Estonia,for example,residents and“e-residents”who do not have to live in Estoniacan open a bank account with minimal requirements without going to a branch.All they nee
99、d is an e-ID card,which 99 percent of the Estonian population has.With the help of the e-ID card,customers can verify their identity in a few minutes and at any time,and thus open an account completely digitally.Calculating the upside:Europes fintech opportunity promises more jobs,larger funding vol
100、umes,and higher valuationsWhat is the potential upside for European fintechs if the lower-performing countries could rise to the level of the best in region and if the leading countries could catch up with the United Kingdom?We have built a model that estimates what could happen to fintech jobs,fint
101、ech funding volume,and fintech valuations if all countries in Europe attained the levels per capita of the best-performing countries.21Europes fintech opportunity Exhibit 7European fintechs could have significant growth potential if all countries caught up with the best in region.Relative ambition o
102、f countries compared with United Kingdom and leading European fntech ecosystems,as of end of June 2022 Note:Figures may not sum,because of rounding.1Numbers current as of end of June 2022 for United Kingdom,top third(Denmark,Estonia,Ireland,Luxembourg,Netherlands,Sweden,and Switzerland),and middle a
103、nd bottom third(Austria,Belgium,Bulgaria,Croatia,Cyprus,Czech Republic,Finland,France,Germany,Greece,Hungary,Italy,Latvia,Lithuania,Poland,Portugal,Romania,Slovakia,Slovenia,and Spain).2Ambition level determined as EU followers compared with EU leaders potential and EU leaders compared with UKs pote
104、ntial.3Normalized to total employment in respective markets fnancial industry.4Normalized to gross fxed capital formation of respective market.5Normalized to GDP of respective market.Source:Dealroom.co;McKinsey analysiscaught up with the best in region.6229446250253364PotentialFintech valuation,bill
105、ionsFintech jobs,thousandsStatus quoPotentialStatus quoFintech funding volume,billionsPotentialStatus quo312.0 x6.0 x1342.7x230,000additional jobs4.0 x3.5x2.3xFunding gap:84 billion2.0 x6.0 x632.3xValuation gap:555 billion427United KingdomTop third(excl United Kingdo
106、m)Middle and bottom thirdExhibit 7 shows the result of this hypothetical exercise.The overall number of jobs could grow by a factor of 2.7,to more than 364,000,and the number of jobs in the“follower”countriesthose catching up with the leaderscould increase as much as sixfold.These would be next-gene
107、ration jobs in fields such as data science,digital marketing,IT,and design.Potential funding would grow by a factor of about 2.3,adding about 84 billion in investments.The relative strength of the United Kingdom is evident herefunding volume for the top third of European countries would grow fourfol
108、d if lifted to the United Kingdoms level.Showing a potential of more than half a trillion euros,valuations in Europe could grow by approximately 2.3 times to 981 billion.Getting there is possible,but it requires the aligned and collective push of multiple stakeholders along a clear action plan.22Eur
109、opes fintech opportunity A focused push along six strategic areas could help all European countries catch up with fintech leaders For lower-and middle-performing countries,catching up with the leaders will require a clearly defined programmatic agenda and ongoing commitment.In the process,establishe
110、d structures will need to be further developed.The success of this agenda requires the buy-in and active participation of all stakeholdersincluding investors,incumbent banks,political players,regulatory bodies,and fintechs themselves.In this final chapter,we examine several strategic options that fi
111、ntechs and their stakeholders in Europe can consider as they look to grow and develop the sector.Drive the alignment of market structures within the European UnionThe goal:a European market structure that is easy for fintechs to navigate and that enables them in developing a truly scalable business
112、model.An overall simplification and harmonization of fragmented national country regulation is already taking place in the European Union,enabling fintechs to understand key pillars of legal frameworks and to focus on regional specifics.The further development of cultural exchanges among countries w
113、ill better equip fintechs to understand key customer needs outside their home market.Meanwhile,customers may catch up with a more digitalized way of living.Encourage more diverse,homegrown capital The aim here is to increase funding for fintechs along all stages(seed,series A,and later stages)for th
114、e protection of influence and local interests and,at the same time,reduce exposure to geopolitical developments.In addition,successful and sustainable growth depends on an effective support ecosystem beyond capital injectionsfor example,strong adviser networks and access to experts.Local political p
115、layers and regulators have an important role to play in shaping restrictions on institutional investors access to growth capital.For example,they could create stronger incentives for venture capital and private-equity investments compared with debt investments.Relaxing investment restrictions for ca
116、pital accumulation institutions and aligning them with those of other countries could also make a difference.For example,only about 10 percent of German insurers investments are currently in alternative assets such as venture or private capital,whereas in the United Kingdom this share is at approxim
117、ately 30 percent.22 Increased attention to diversity in society can also lead investors to use their interest,and ultimately capital,in a fair way without disadvantaging specific groups.Politics can play a supporting role in this through campaigns and other activities.22 Investing in private markets
118、:A road map for insurance companies,StepStone Group,October 2021.23Europes fintech opportunity 3Foster regulation with an innovative mindsetThe goal:a regulatory framework that fosters innovation and provides companies with the necessary conditions to compete domestically and internationally while e
119、nsuring stability and protecting both investors and customers.Fintechs can actively work to make regulators even more aware of the societal benefits of their products and services.They can also commit to taking regulatory considerations into account early in their product development process.In addi
120、tion,fintechs can use their customer orientation to implement regulatory requirements in a user-friendly way.Political actors and customer-based regulation with a systematic focus on growth and innovation can contribute to an environment that fosters fintech start-ups and their growth.Programmatic c
121、oordination aimed at strengthening the fintech ecosystem is particularly important in this context.Specifically,this can mean minimizing the administrative burden and associated costs for fintechs and adapting regulatory requirements where necessary as well as making implementation more customer fri
122、endly.Likewise,innovation for better capital intermediation and mobilization is required to ensure fintechs have the necessary capital composition at the right time.Whereas some countries,such as Estonia and the United Kingdom,try to reduce bureaucratic hurdles in the licensing process,the United Ki
123、ngdom also provides a support structure between regulators and fintechs to create trust.For example,regulators provide“sandboxes”that allow fintechs to test and demonstrate innovative business models with dummy customer data.This keeps regulators informed about innovations in the financial sector an
124、d helps them align regulation with the latest market developments.Become a magnet for global talent The goal:a fintech ecosystem that can compete with global tech hubs for top talent from around the world.Fintechs can do their part by offering attractive jobs with excellent development opportunities
125、.They can also commit to creating a modern work culture that responds to a diversity of backgrounds and needs.For example,the ability to work remotely with no in-person office requirement can be a valuable offering for prospective employees.Likewise,fintechs could meet the special needs and requirem
126、ents of international hires.A holistic program that offers support in obtaining a visa,for example,could be a very attractive perk.Political players and regulators can also help establish modern ways of working within their countries.For example,remote working could include working from another coun
127、try.This is currently easier in some countries than others due to regulatory restrictions,but more flexibility in labor laws could make it easier for fintechsespecially for those based in less attractive cities or regionsto attract the right talent.Furthermore,local political players are in a positi
128、on to make the tax framework appealing to foreign talent.For example,reducing the individual tax burden on income or employee stock ownership plans provides incentives for talented people to apply for jobs in such countries;low income tax rates in Switzerland may be a contributing factor to the coun
129、trys relative strength in fintech ecosystem performance.Additionally,political players and regulators could consider simplifying visa processes.This move would not only allow companies to more easily integrate foreign hires but also signal to the world that the country values international diversity
130、 in its fintech ecosystem.The promotion of talent exchange programs at universities or international internships within the European Union may also help attract talent.24Europes fintech opportunity Enable fintechs to thrive in target markets The aim:a support structure of hubs in target markets that
131、 advise fintechs on market requirements and help them to adjust their business model accordingly.Fintechs may be able to make more informed decisions about future target markets if all stakeholdersfrom investors to incumbent banks to public players and regulatory bodiesbundled their insights on fore
132、ign markets with the respective foreign regulations and industry requirements in one central hub.The establishment of internationalization hubs in key areas could create central points of access where fintechs and other start-ups could receive legal advice,get market insights on customer segments,an
133、d connect to support networks in the target country.A European institution such as the Enterprise Europe Network could serve as a potential central point of contact for this purpose.Increase customer choices and accessThe goal:a wider range of innovative,safe,high-quality,and convenient-to-use offer
134、s with low barriers and minimal risk for customers switching to or participating in fintech.If fintechs put as much focus on product safety and stability as they do on customer experience,they might be able to avoid some regulatory challenges from the start.For example,they could go beyond establish
135、ed data and customer protection norms and be more transparent about securities and the inherent risk to customers before trading.By using their capabilities in customer communication and implementing customer requirements,fintechs can even turn regulatory compliance into a competitive advantage.Incu
136、mbent banks have an opportunity to partner with fintechs to drive innovative B2C and B2B propositions,because each can learn from the other.Such partnerships also foster customer trust in fintechs and new digital business models.Political players and regulators could also develop Europe-wide initiat
137、ives to make it easier for fintech companies to demonstrate their credibility to customersfor example,by recognizing fintechs with official certifications or awards such as Singapores SFF Global FinTech Awards,announced by the Monetary Authority of Singapore and the Singapore FinTech Association.23
138、Such prizes,awarded by public authorities,can increase customer trust in fintechs.Fintechs have made major inroads into Europes banking landscape and are becoming central to its core.That is good news for customers,who will benefit from increased choice,and for financial systems,which will become mo
139、re competitive and modern.But this is just the start:while a few countries have already emerged as leaders in Europes fintech space,the potential for growth is strong everywhere in the region.If countries could rise to the level of the best in region,the upside could be significant for the economy a
140、s well as for fintechs themselves.In the coming months and years,it will be critical for all stakeholdersincluding public institutions,established financial industry players,and fintechsto combine their strengths by establishing the enabling structure and mechanisms the sector needs to reach its ful
141、l potential.23“MAS and SFA announce award winners at Singapore FinTech Festival,”Monetary Authority of Singapore,November 12,2021.25Europes fintech opportunity 26About the authorsAlessio Botta is a senior partner in McKinseys Milan office,where Alessia Vassallo is an associate partner.Sarina Deuble
142、is a consultant in the Frankfurt office,where Timo Mauerhoefer is an associate partner and Eckart Windhagen is a senior partner.Constance Emmanuelli is a partner in the Paris office,and Fernando Figueiredo is a partner in the London office,where Tunde Olanrewaju is a senior partner.Max Fltotto is a
143、senior partner in the Munich office,where Stefanie Vielmeier is a consultant.Christian Irlbeck is an associate partner in the Dsseldorf office,and Andr Jerenz is a partner in the Hamburg office.The authors wish to thank Christopher Blaufelder,Pascal Bretlnder,Sven Enkirch,Pierre-Matthieu Gompertz,Re
144、inhard Hll,Laura Hofstee,Himanshu Jatale,Matthias Lange,Deepa Mahajan,Fernando Martin del Agua,Mohcine Ouass,Hiro Sayama,Giuseppe Sofo,Dominik Termathe,and Birgit Teschke for their contributions to this article.October 2022 Copyright McKinsey&Company Cover illustration:IgorShishov/Getty ImagesMcK McKinsey McKinsey