By Gustav Korobov

The year 2020 is closing, and we all witnessed how difficult this year was for new businesses, including Payment and Electronic Money companies. Covid-19 has had a huge impact on financial systems across the world, including the provision of digital financial services and the functioning of the FinTech market in general.

Fintech Investments and Market Performance

According to the Pulse of Fintech H1’20, a bi-annual report on global fintech investment trends from KPMG International, overall global Fintech funding dropped by 25.6 billion of investment globally across 1,221 deals during the first half of 2020. On the other hand, VC investment remains strong across the globe despite the global uncertainties resulting from the outbreak of Coronavirus. According to the report, the investment could surpass the annual record if the trend recorded in H1’20 continues.

The findings of the Global COVID-19 FinTech Market Rapid Assessment Study suggest that FinTech firms’ operations have continued to grow despite the global situation. According to the survey, on average, Digital Payments respondents, the UK and European companies reported an increase in transaction volume, the total number of transactions and new customers by 14%, 17% and 21% year-on-year respectively. Digital Payments companies also indicated an increase of 26% on retention or renewal of existing customers and users.

 

Total number of Payment Institution and E-money licenses issued in 2018-2020

When comparing the total number of licenses, we can see that the total number of Payment Institution (PI) licenses obtained in 2020 has decreased by 164 licenses or 61% compared to 2019, whereas the number of Electronic Money (EMI) licenses decreased by 30 licenses or 33%.

On the other hand, there also was a decrease in 2019 of issued payment licenses by 39% and 55% for e-money licenses compared to 2018. To have a big picture on licenses issued in the EU countries in 2019 and 2020, we have come up with a table shown below:

Most EU countries this year have issued a smaller number of licenses compared to 2019, however seven countries showed a slight increase of 1-3 licenses. For EMI licenses, there are the UK (33-35), Greece (0-1), Hungary (0-1). For PI licenses the list looks as follows: Finland (1-2), Greece (0-1), Hungary (0-2), Estonia (0-3), Denmark (1-3).

Payment Institution licenses

It is essential to analyse leaders in licenses issuing between 2019 and 2020.

The Big 5 in issuing Payment Institution licenses aren’t quite surprising. In 2019 the first place took the Netherlands, then Spain, the UK, Sweden and Germany. Even though these five countries have retained their place in the Big 5 ranking, they have changed their positions in terms of numbers of licenses issued. After having the 3rd position in 2019, the UK with a small decrease of 1 license holds the top place in 2020. The leader of 2019, the Netherlands, had a decrease of 41 licenses or 78% and holds second place in 2020. Spain, taking the second place and 50 licenses issued in 2019, moved to the 5th place with only six licenses issued in 2020 (facing an 88% decrease). Sweden, with 41 licenses in 2019, had a decrease of 34 licenses or 82%. Germany has moved from the 5th to the 3rd position in 2020 and reported a decline of 67% in licenses issued. The number of PI licenses issued in 2019 (2020) by five regulators with the highest number of licenses issued

E-money institution licenses

A quick note on the statistic of e-money licenses - we can see that leaders of the year 2019 have retained their positions in the chart of 2020.

The UK, as a centre of FinTech business, showed an increase in licenses amounting of 2 licenses or 6% and has kept the first place. Lithuania, following the UK in the chart, showed a drop of 12 licenses or 60% decrease. Ireland showed the same percentage decrease as Lithuania of 60% and has issued six licenses less than the last year. Spain and the Netherlands, which hold the 4th and 5th places, showed a 67% and 50 % decrease accordingly and have reported only two licenses issued in 2020. The number of EMI licenses issued in 2019 (2020) by five regulators with the highest number of licenses issued Whether the pandemic has influenced the development of the fintech industry or not – there are quite a few opinions on this topic, but what is evident is that the Covid-19 pandemic has accelerated the use of FinTech or digital services compared to offline services thanks to the remote provision.