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Who will decide the future of fintech? Why Europe might be in the driving seat

Who will decide the future of fintech? Why Europe might be in the driving seat

By Armands Broks, Founder of TWINO 

Regulation is set to be a key battleground for tomorrow’s innovation

Comparisons between European tech and the Silicon Valley ecosystem are seemingly endless. While the US dominates in terms of the number of unicorns and is still ahead in the volume of venture capital investment, the future of big tech is not entirely in its hands. Earlier this year, Margrethe Vestager, the European Union’s digital and competition chief, unveiled the EU’s ambitious plans for future tech regulations, putting the pressure on legislators and lawmakers in both the US and China. With the current pandemic causing disruption on an unprecedented scale, Europe could well be in the driving seat in the race to rule tomorrow’s tech landscape.

The US technology ecosystem has always been dominant, even since before the dotcom boom. The country now accounts for 73% of the market capitalisation of the world’s largest 70 digital platforms, and Silicon Valley has long been synonymous with technological advancement and excellence. But Europe’s lack of a Silicon Valley-style hub is also its strength. The tech sector is booming across the continent; Europe is now producing almost as many entrepreneurs as the US, while the number of billion-dollar businesses originating from the continent is rising rapidly.

Armands Broks

Armands Broks

Thanks to its vast, diverse and wealthy marketplace, Europe is an incredible place to do business. Companies founded anywhere from Riga to Rome, Athens to Amsterdam, are able to access a market of over 500 million people, which boasts a per capita GDP average of €25,000. As the European Commission looks to add to its global regulatory leadership, the continent’s single market will become increasingly attractive for entrepreneurs and innovators.

Europe’s push towards reformed regulation is not a new trend. Over the past couple of years, the European Union has been working towards the realisation of a digital single market, as part of a natural evolution of the economic single market. In the first half of 2019, for example, Europe proposed nearly 200 new regulatory policies, according to a review by the law firm Hogan Lovells. This accounted for about half of the global figure.

The EU’s latest ambitions are all part of its wider strategy to boost tech and innovation across the continent, specifically in the fields of artificial intelligence, digital platforms and data usage. The regulation proposals seek to create a competitive advantage for European businesses that are able to operate from within the ‘digital single market’. The first rounds of GDPR have already begun that process, putting in place some protections for European innovation. Now the EU is looking to go further and drive the direction of future tech regulation in favour of the continent.

Given the difficulty of separating digital services for different markets, the EU’s GDPR regulations have been adopted by countries and firms outside the EU as a global standard. Around 120 countries around the world have now adopted privacy laws that closely resemble the European version. The European Commission’s plans for stricter regulations across sectors, such as fintech, social media and artificial intelligence, are intended to force other markets to similarly follow suit.

This is undoubtedly good news for European businesses, which should be ensuring they are at the forefront of compliance and readying their strategies and business models to cater for incoming regulations. However, the EU must be careful that it doesn’t overdo its tendency towards stricter regulations and leave European startups at a competitive disadvantage. While the hope is that tighter data laws will promote innovation across the continent, the European Commission must be careful that its plans don’t become protectionist. Crucially, any proposals must be implemented consistently across the bloc to ensure that international businesses aren’t having to differentiate their regional offerings.

Crises are a catalyst for change, and this current virus outbreak is ushering in a new technological revolution. As changes and advances are rushed through, technological innovation has to accelerate – entire workforces and public systems are shifting online and new businesses will emerge to thrive in this new ecosystem. In the same way that many successful businesses were built out of the financial recession of 2008, this crisis will create opportunity. New challenges mean that there are empty spaces, or voids, to be filled by enterprising individuals who have the vision to solve a problem in this new landscape. Ensuring that the conditions and regulations are right to encourage and foster this innovation is crucial to Europe’s success. The future of technology is up for grabs, and it is the job of regulators to steer it towards favourable waters.

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