Financial Inclusion in spain

November 12, 2021

Spain is becoming a breeding ground for financial technology companies. In fact, data from Finnovating shows that the number of fintech companies in the country increased by 15% over the past year, with 462 firms as of March 2021 offering various digital solutions for payments, wealthtech, tax and accounting, and lending, to name a few. More than half of these companies run a business-to-business business model, while the rest operate on either business-to-customer or both B2B and B2C models. 


This proliferation in fintech activity has also led to the generation of more than 12,000 direct jobs in Spain. Moreover, the immense growth of the local fintech space has prompted Spain’s traditional banking sector to lean on fintech companies as partners as opposed to direct competitors. In fact, between 2015 and 2019, eight banks participated in 13 rounds of financing for fintech companies.


Evidently, fintech has become a lucrative market in Spain, opening up opportunities for individuals to access more financial services and for financial institutions to rethink their operations and further promote financial inclusivity in the country.


Spain’s fintech innovations

Even prior to the COVID-19 pandemic, which has prompted individuals and organizations to shift towards digital solutions, the fintech sector in Spain has been receiving considerably high investments. In 2019, Spanish fintech firms raised a total of €192.9 million or $226.4 million in investments. These firms were established as a result of entrepreneurial activity based in Spain’s largest cities, such as Madrid, Barcelona, and Valencia.


One example of these companies is Revelock (formerly named Buguroo), which offers financial institutions like banks and payment processors a platform that detects, prevents, remediates fraudulent activities. Their technology helps protect customers from new account fraud, account takeovers, transaction fraud, and money laundering schemes, among other things.


Another example is BNext, a mobile-first neobank that offers users with a card and a linked mobile marketplace where they can access various banking products and features such as account aggregation, allowing users to manage their traditional bank accounts using a single app. The fintech firm provides a digital alternative to traditional banking services.


With fintech taking over most financial activities in the country, the Spanish government has naturally stepped up to create regulatory frameworks for fintech businesses. For one, the government approved Law 7/2020, which establishes a set of measures to accompany the digital transformation of financial systems and governs a regulatory sandbox for fintech innovations. As of February 2021, 67 projects have been submitted in the first call for participating in the sandbox.


Back in 2018, Spain also implemented the Directive (EU) 2015/2366 on payment services in the internal market (PSD2), which is a European regulation that aims to improve consumer protection, boost competition and innovation in the financial sector, and reinforce security in the payments market. The regulation requires banks to update authentication elements they provide their customers to enhance the security of their transactions. PSD2 also enables consumers to authorize a third party to add their financial information and make payments on their behalf using their bank account.


It comes to no surprise that Spain is progressive when it comes to fintech since it’s the fifth largest economy in Europe as of 2020. As the government continues to open doors for digital innovations, fintech will continue to make its way into every business sector.


Innovating in credit processing and lending

According to October España CEO Gregoire de Lestapis, credit processing will emerge as the next battleground of fintech innovation in Spain, with improvements being implemented on customer experience, service, capital costs, and bad debt provisioning, among other things. Over the next few months, fintech companies are expected to do more for SMEs, particularly when it comes to loans.


Miguel Miranda, a specialist fintech management consultant, also sees Spanish fintech companies providing SME loan facilities with improved digital registration and approval processes for both borrowers and lenders. These facilities will be supported by technology to better understand repayment profiles and monitor borrower behavior. Fortunately, many fintech companies have already started leveraging their technology to enhance the credit processing and lending processes of financial institutions in Spain.


Singapore-based company Credolab, for instance, is already at the forefront of these efforts. Under a newly-formed partnership with Strands, credolab is offering its digital credit scoring technology to help banks in Spain obtain relevant customer insights in real time with embedded risk assessments. Employing an alternative credit scoring method can help these banks realize new potential revenue sources, while improving customer engagement and providing long-term value to their customers.


Spain’s progress in fintech clearly shows no signs of slowing down. As advancements in technology continue to make their way into the mainstream and bring benefits to millions of people, Spain and the rest of the world should see improvements in their economies as well.