The Fintech Scene at the World Cup (Part 5)

World Cup 2022 has been nothing but full of excitement so far! From Saudi Arabia beating Messi’s Argentina to Japan beating Germany! World Cup really said, “no Eurocentric nonsense allowed!” While Germany and Costa Rica lost to Japan and Spain, respectively, let’s see if they can win in this fintech game!

Germany

Everyone in Egypt knows that Germany is a powerhouse when it comes to tech. I mean, the majority of our talented tech-savvy youth are enjoying the cold weather there. So, it comes as no surprise that German fintech is the fourth biggest fintech market in the world and the second largest in Europe. With more than 1,000 companies in the sector, the country is thriving! Fintech companies also receive the largest investment from corporate and private venture capital (VC). In 2020 alone, the sector grew to over $880 billion.

The largest fintech segments in Germany are digital payments, Robo Advisors, digital remittance, and alternative finance. As we always said, the rise of fintech depends on how much people trust it. And while fintech is taking over Germany in more segments than others, when it comes to alternative lending, the growth is not high as one would expect. That is because the people, unlike most countries, highly trust the banking sector with its low-interest rates.

Costa Rica

We’ve previously covered Latin America’s (LATAM) fintech space in Mexico and Argentina. Now, let’s see how well is the fintech sector with its neighbour, Costa Rica. To start with, the country has a high rate of technological literacy and ranks above average for the region. The usage of online banking has become as easy and accessible as going shopping.

When it comes to infrastructure, Costa Rica’s Financial Innovation Center (CIF) was designed to support and advance the fintech sector. However, there’s no law that is specific to governing fintech companies. Instead, they are regulated under several existing laws such as; the Data Protection Law, the Law on Money Laundering and Activities for the Transfer of Narcotics, and the Law on the Regulation of Non-Banking Financial Companies.

Spain

Spain has had an incredible start at the World Cup beating Costa Rica 7-0!! Unbelievable is an understatement. Will it perform as well at the fintech games? Let’s see!

In 2021, there were about 376 Fintech companies in the country. Out of these companies, 275 are Spanish fintechs and the rest either belong to foreign fintechs or acquired by banks or private equity. When the government launched its Regulatory Sandbox in 2020, it was the entry ticket for Spain’s fintech race. The sector, like other European countries in the EU, is regulated under the Payment Services Directive (PSD 2), Anti-money Laundering (AML), and EU’s General Data Protection Regulation (GDPR), in addition to the Sandbox, of course!

As for the fintech segments, lending, tax and accounting solutions, and payments get the lion’s share and on the other side of the spectrum, we can find trade finance and neobanks. The most challenging part for Spain is adapting to the ever-changing regulations as well as having access to fund startups.

Japan

Bullet trains, karaoke, and Ghibli Studios. It’s known that the Japanese are quite innovative in many things, but do they have the same energy for fintech? Not so much! While it may surprise you that Japan, a rich creative country, lags behind in fintech, it all goes back to two main reasons. First one is the extreme rigidness of the financial setting due to the lack of transparency as well as the difficulty to obtain regulatory licenses. The second one is the lack of innovation in the financial sector.

As we know, the success of fintech requires gaining the people’s trust and the Japanese tend to dislike it. Despite this, Japan was one of the first countries in the world to make clear its legal position on cryptocurrencies. Since 2020, NFTs-related businesses and crypto have been huge in the online gaming sector. And like most countries, Japan has no specific laws regulating fintechs, but it follows some already existing laws. So it seems that even though Japan has won against Germany,  it doesn’t seem this will be the case when it comes to the fintech scene!