EU’s new fintech regulations, record high year for fintech deals, and global fintech growth

Financial Well-being

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Fintech companies are very worried that the EU’s new Payments Services Directive (PSD2) will negatively impact growth due to “lack of industry preparedness.” While the new regulations, which require an extra level of verification for online payments over €30, were designed to reduce fraud and will be put into place in September.  Patrick Collison, CEO of Stripe, notes that these new regulations will have a “huge negative effect” on conversion rates for companies who aren’t properly prepared. The Financial Times reports:

EU new fintech regulations

Industry executives are concerned that not enough consumers have installed their bank’s app or provided their mobile phone numbers to facilitate authentication, or that the new techniques have not yet been tested at scale. The result could be large-scale abandonment of transactions at the checkout, with smaller retailers seen as particularly vulnerable.

“It’s going to require basically every European merchant to fundamentally restructure their checkout flow,” Mr Collison said. “It’s almost certainly the largest migration that European online retailers have ever had to do.”

A survey commissioned by Stripe and conducted by analysts at 451 Research suggested that the EU could lose €57bn in economic activity in the first year after SCA takes effect.

While it’s most likely too late to delay implementation of these new regulations, industry players are hoping for a grace period in which they can fully prepare for the transition.

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Fintech deals hit a record high in 2019, with eighty-seven deals totaling $116.6 billion (USD)—a four-fold increase from 2018.  Business Insider reports:

Fintech deals hit a record high in 2019

This explosive activity has been driven by three large US-based fintech transactions this year — Fidelity National Information Services’ $43.3 billion acquisition of Worldpay in March, Fiserv’s buying First Data in January for $39.4 billion, and Global Payments’ $26.2 billion purchase of Total System Services in May.


Experts say that while methods of electronic payments are growing in popularity, the world is a long way away from becoming fully cash-free. And to be fair, cash usage varies by countries and regions. The BIS found ATM withdrawals were flat in advanced economies while rising in emerging markets.

Electronic payments are growing rapidly, and consumers are growing to rely on them more and more across the world. That said, there are very few societies that are close to being entirely “cash-less.”

The US leads the world in fintech deals, followed by France and the UK.

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The fintech game is rapidly changing from a local to global outlook. Aside from verticals like cross-border finance, most operations with fintech companies geographically focused on a local market. That is changing, as more and more new fintech companies are going global at an earlier stage. EU digital banks like N26 have built “pan-European operations” and are planning to launch in North America, while some fintech companies are building multi-market strategy from the beginning. Forbes reports (contributor):

Fintech deals

This trend will only accelerate. More and more fintechs will be global, driven by three mutually reinforcing reasons: an evolution towards regulatory openness, a rise of fintech enablers and a growing global outlook.

Basically, regulators are making it easier for fintech companies to experiment and expand into new markets. New companies are also emerging that make it easier for fintech companies to do business—for example, “companies like Plaid and Stripe make it easy for fintechs to connect with customer bank accounts or payment rails.” But ultimately, it comes down to the entrepreneurs, and more and more are choosing to take a global outlook and strategy.

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