- Italian FinTech ecosystem in the context of COVID-19 pandemic
According to EY and FinTech District's report on the Italian FinTech ecosystem, published on 17 September 2020, FinTech and InsurTech are rapidly growing, counting as of today approximately 345 start-ups. Among them, as reported in a survey recently carried out by the Politecnico of Milan's FinTech and InsurTech Observatory, 54% have not been adversely affected by COVID-19 pandemic, while 19% considered the latter as a business opportunity, instead.
Lately, the shift towards digitalisation – already undergoing before the health emergency – received a boost. Indeed, newmarket entrants are offering transparent, accessible, and cost-cutting products, while incumbents are reviewing their business models and organisational structures to properly meet their clients' demand for online banking and remote access to financial services platforms.
As the afore-said survey shows, during the lockdown 51% of Italians virtually interacted with their own bank and 73% of them were satisfied with the services received thanks to digital channels (such as wire transfers, digital payments and, execution of documents through the use of digital signature).
These changes thoroughly affecting clients' habits have prompted incumbents to collaborate with newcomers, in an effort to find a synergic approach that can pave the way to a successful clients' relationship.
In light of the above, Italian supervisory authorities have been striving to create the conditions for establishing a level playing field among incumbents and newcomers, by applying, in particular, the "technological neutrality" and "same activity, same rule, same risk" principles, thus without hindering technological innovation.
- Recent institutional initiatives in favour of FinTech
In recent years, both the Italian Government and supervisory authorities have taken several steps towards supporting the development of technological innovation.
Among the most relevant initiatives, it is worth mentioning the granting of tax credits to innovative start-ups through Law no. 169 of 27 December 2019 (the "2020 Budget Law") as well as of public financing to such companies through the Ministry of Economic Development ("MiSE")'s "Smart&Start Italia" program, introduced by Ministerial Decree of 24 September 2014, whose budget was refinanced up to €100 million Euro by Legislative Decree 34 of 19 May 2020 (the so-called "Relaunch Decree"). The latter has further allocated €10 million Euro for the granting of facilities to innovative start-ups in the form of non-repayable contributions for the provision of services by incubators, accelerators, innovation hubs, business angels and other public or private entities.
As far as the regulators are concerned, on 29 November 2017, the Bank of Italy ("BoI") set up "Canale FinTech", a digital channel through which FinTechs may present innovative projects with regard to type of services and technology used to deliver them, which are then scrutinised by the BoI taking into account applicable regulations, business models and potential compliance issues.
Moreover, for the purpose of creating a more favourable environment for FinTechs, a "regulatory sandbox" was introduced by means of Legislative Decree no. 34 of 30 April 2019 (the so-called "Growth" Decree), which entrusted the Ministry of Economic and Finance ("MEF") with the task of issuing decrees setting out conditions and modalities for carrying out the testing of FinTech applications. However, it seems that the regulatory sandbox initiative has not proven to be particularly successful, as it is not considered fundamental for foreign start-ups willing to enter the Italian market.
The Growth Decree also provided for the establishment of "Comitato Fintech" (formerly, "Comitato di Coordinamento per il FinTech", set up as early as in 2018), which represents the first example of collegial approach taken in order to effectively tackle the challenges brought by technology in the financial services sector. The Comitato is composed of representatives from MEF, MiSE, the Ministry of European Affairs, the BoI, the Commissione Nazionale per le Società e la Borsa ("Consob") and the Istituto per la vigilanza sulle Assicurazioni ("IVASS"), and represents a space where to share experiences and best practices, develop coordinated policies in the FinTech and InsurTech's fields also in coordination with EU and non-EU NCAs, as well as to formulate law proposals.
Furthermore, with the aim to close the technological gap in the Italian financial services sector, foster innovation for the development of the Italian economy, as well as to make Milan the centre for financial innovation within the EU, the BoI launched on 4 December 2020 the so-called "Milano Hub".
The latter's main purpose being to establish a closer coordination between public authorities, enterprises and the academic world, under the BoI's guidance and supervision to be provided alongside the traditional role of "watchdog" of the Italian financial system's stability, integrity, and efficiency.
In this respect, the BoI is also going to strengthen its presence in Milan. Its team of financial innovation experts has already examined, by applying transparent and predetermined criteria, twenty eligible projects that involve the use of machine learning and/or big data for the automatic reading of provisions or macroeconomic analysis.
Milano Hub has been favourably welcomed, inter alia, by Associazione Bancaria Italiana ("ABI"), which has said to be ready to collaborate with the BoI in order to encourage innovation in the digital economy field by backing-up pilot projects relating to a digital currency to be issued by the ECB, as well as to improving the efficiency of anti-money laundering controls through the use of IA and big data tools.
Despite the good starting intentions, it remains to be seen whether the establishment of the Milano Hub will effectively become a development flywheel for financial innovation in Italy, and a driving force for attracting talents from abroad.
- Conclusive remarks
Since the COVID-19 pandemic has accelerated the ever-increasing role of digitalisation, showing its importance as a driver of productivity gains that can lead to more inclusive and resilient growth, the Italian G20 Presidency's Agenda has included, under the pillar "Prosperity", a renewed focus on green and sustainable finance issues. This being in line with the recent EU Commission's Digital Finance Strategy, according to which, inter alia, a more inclusive and sustainable economy can be accomplished also through the use of digitalisation and financial services innovation,
However, in order to fully reap the benefits of the digital transformation, and thus contribute to the prosperity of the whole society, it seems indispensable to ensure an equal access to digital infrastructure, as well as an increasing digital and financial awareness of both enterprises individuals and, the only factors that can limit cybersecurity risks. To this end, initiatives such as the "Milano FinTech Summit", which has just takenplace, should be multiplied and made available to the general public.f innovation in financial services.
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