One of the best regions in the world for a fintech company is Europe. The EU is a single market comprising 28 states, 21 million businesses, and half a billion affluent consumers. It is the world’s largest market with no internal duties, tariffs, or barriers. Fintech companies that are licensed and registered in one member nation of the European Union can do business in all of the member states.
But how do you proceed if your fintech company wishes to start doing business in the EU? With that question in mind, we at EMBank have listed the 7 most important steps to start a fintech in Europe.
The Financial Regulations Governing Fintechs in Europe
Fintech regulations in Europe vary from country to country. For example, in Germany fintechs are regulated by the Federal Financial Supervisory Authority, and in France, they’re regulated by the Financial Markets Authority. On a European level, the body responsible for fintechs is the European Securities and Markets Authority.
Running a fintech business in line with the regulations is a complex process, and there are three key actions that need to be taken to ensure compliance.
The first is ensuring that client funds and company funds don’t mix. That way, if the fintech suffers financial difficulties, client money can be returned without problems.
The second is complying with the terms of the Single Euro Payments Area, which ensures straightforward cross-border transactions within the EU.
The third is putting in place multi-factor authentication for all transactions, which gives businesses and consumers added security and peace of mind by making them verify transactions in two or more ways.
One other regulation to keep in mind is the General Data Protection Regulation (GDPR). It means that fintechs, in common with all businesses, have to take steps to protect the use and transfer of consumer data.
As Fintechs need to comply with these European regulations and standards, an experienced legal consultant partner familiar with these regulations, can save both time and money while starting their businesses.
Target Your Fintech Services for the European Market
The EU offers fintech companies a large, integrated, and mature market in which to operate. Virtually any fintech service can find a profitable niche in the European Union. Mobile banking, mobile payments, digital credit and lending, blockchain applications, cryptocurrency use, embedded loans and insurance, investment, and trading platforms are all viable and potentially profitable services within the EU.
Develop or Modify Your Technology Capabilities
When you have a clear idea of what services your fintech will offer, you should reflect on your “tech stack” to see what services you are capable of delivering. It’s practical to target your services based on your current tech capabilities or work to expand those capabilities to fit a particular plan.
Europe has a vibrant and competitive fintech sector that’s steadily becoming more accessible to the population, more integrated into everyday life, and safer to use. That means services like digital lending, mobile payments, and cryptocurrency trading are becoming much more widespread.
Team Building Is Crucial for Fintechs in Europe
Team building is an essential part of any business, and fintechs are no exception.
Specifically starting in the European Union, with 28 member states and 24 official languages, a language barrier may hinder many potentials. That means a multilingual team is a big advantage.
Also, fintechs need competent legal teams to comply with various legislations and adapt the legislative changes.
Obtain Funding for Your European Fintech Enterprise
Financial technology is an established business sector having moved through financial software, e-payments, and widespread digital applications, open banking, banking as a service and embedded finance.
You will not have to explain to a European investor just what fintech is. On the contrary, many pioneering investors are keen to invest in fintechs. Nonetheless, you will need to present a business plan that is viable in the competitive world of European fintechs. The good part is that if you have a new and novel approach to this business you may be able to find attractive startup financing that does not strap you for cash.
Focus Your Services and Your Customer Base
Financial technology can take so many forms that there is a temptation for both brands and fintechs to be all things to all customers. The better choice when starting a fintech company is to focus on one set of fintech services for a targeted customer base and work at doing what you do very well. As you get to know your targeted customer base you will be able to adapt your approach or approaches to optimize your efforts and your profits. This is especially important when working in multiple nations, cultures, and languages.
Get to Know the Competition
Europe is a potentially lucrative market for fintech companies and, for that reason, it is a competitive market. Before starting to invest in any given fintech niche in the EU, take a look at the competition. As with any business, you can go head to head and try to out-compete your adversaries or you can aim for a niche with less completion and the potential to grow.
How Can EMBank Help?
European Merchant Bank (EMBank) offers accessible financial products for fintech companies and local/regional SMEs across various industries. Established in Lithuania and licensed by the European Central Bank, EMBank provides a Banking as a Service offering, combined with Safeguarding Account, Business Account, and Accumulative Account types as well as payment options through SEPA, Swift, and Target2.
Please keep in mind that the above information has been prepared or assembled by the EMBank and is intended for informational purposes only. Some of the information may be dated and may not reflect the most current legal developments.
Please send an email to [email protected] to arrange a telephone call.