Country Report
While Spain has one of the largest fintech ecosystems in the world,
there is no organized way of funding them:
S
pain has one of the largest fintech
ecosystems in the world – over
300 fintech companies and more
than 200 insurtech firms. The numbers,
however, do not convey the state of health
of the sector as there is a huge challenge in
terms of investments and quite a few of the
startups are very small in terms of funding
and operations. Many of them have not even
completed the initial round of funding. But
the hope is when funding comes in some of
them can really flourish and even become
unicorns.
Spanish laws do not have any restriction
on fintechs in securing funding. However,
most of the fintechs in the country are
funded through equity and there are several
investors - PE firms, VCs, angel investors
and financial services institutions, which
have come forward to fund them. Crowd-
funding too is another source and there
are several incubators and accelerators.
In addition, fintechs can approach banks,
but this source is not very popular as these
entities as startups do not have the required
creditworthiness in the eyes of banks.
A recent study has indicated that while
the sector is struggling for funding, it
accounts for some 5000 direct jobs getting
generated in 2019 and this number is
expected to touch 10,000 in 2020. Similarly
insurtech startups have given employment
to 3000 and 1500 jobs are expected to be
added in the next year. The study maintains
that while the formal sector may not be able
to generate the required number of jobs, the
startups have indeed the opportunity to
create technical, digital and high value jobs
and improve the job scenario in the country.
Curiously, Spain does not have any specific
regulation for fintechs, especially in
finance-related activities. Laws relating
to crowdfunding and crowdlending
platforms apply to fintechs. In fact, any
entity operating in Spain that uses fintech
will be subject to any laws and regulations
of general application in the country. For
instance, if an entity provides banking,
financial or insurance services, it will be
subject to the same licensing requirements
and regulations applicable to other entities
operating in those sectors. The Spanish
Association of FinTech and InsurTech
(AEFI) has published a white book of fintech
regulation in Spain, suggesting changes in
the regulation to better adjust it to the use
of fintechs and to boost these activities. The
Spanish authorities are also considering
some initiatives to promote these activities
and clarify their legal regime.
A law enacted in April 2015 on
the promotion of business financing
regulates crowdfunding and crowdlending
platforms. Under this regulation, the
activities of reward-based crowdfunding,
equity crowdfunding and crowdlending
are subject to licensing requirements under
the supervision of the National Securities
Market Commission, or CNMV. The
regulation covers the legal regime of these
platforms and the accreditation of investors,
as well as limits for the investments.Payment services in Spain are regulated
by a law of 13 November 2009 on payment
systems and Spanish Royal Decree of May
2010 on the legal framework for payment
services and payment institutions. These
implemented the Payment Services
Directive (PSD), which has now been
replaced by the new Payment Services
Directive (PSD 2) ((EU) 2015/2366). But
PSD 2 has not been implemented, as only
a preliminary draft law has been approved
by the Council of Ministers in May 2018.BETTER COLLABORATION
One of the improvements experienced
in recent years has been the relationship
between the financial services companies
and the fintechs. Until recently, they
were competitors. The scenario has now
changed because companies now have a
more collaborative vision where they want
to work together and are willing to invest.NO SPECIFIC REGULATOR
Another major challenge the sector faces
when achieving optimal development in
the coming years relates to regulations. TheSpanish fintech startups
need funding to flourish
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