Milan Fintech Summit 2024 Underlines Italian Ambitions

When asked to name the fintech capitals of Europe, most people would opt for Paris, Berlin, Stockholm, or the Baltic cities of Vilnius and Tallinn. But another destination has ambitions to play in the fintech ‘Champions League’—the Italian city of Milan.

Milan: Unicredit tower, UnipolSai tower, the Bosco Verticale and BAM public park

While tourists may know Milan for historic sites such as its Gothic Duomo and the Teatro alla Scala, the city has done an impressive job of reinventing itself as an innovation hub – spearheaded by the development of the Milan Innovation District (MIND). With advances in sustainability and urban development, there’s no reason why this Northern Italian powerhouse shouldn’t also set its sights on fintech.

To focus attention on this ambition, Milan has created a dedicated Fintech District which is home to over 300 fintech and techfin companies. It also hosts the Milan Fintech Summit (MFS), launched in 2020. With its fifth edition having just taken place at the Allianz MiCo, the summit aims to reinforce Milan’s status as a critical hub for financial innovation in Europe and spotlight the burgeoning Italian fintech sector.

Here are some key themes to emerge from this year’s event:

The building blocks are in place – but Milan needs a breakout hit: With over 15000 financial companies and 2800 startups, Milan boasts a robust financial ecosystem. The city attracts 69% of investments in the Italian fintech sector, making it a natural focal point for growth. Italy has given birth to two financial unicorns (Satispay and Scalapay) in recent years, but Milan could do with another to truly attract attention. This is not an easy task – because exciting Italian startups often choose other cities as their bases. An example is London-based Desia, launched by a co-founder of Scalapay. One positive development, however, is that the Italian government and regulators are taking steps to support innovation, such as a sandbox managed by various institutions including Banca d’Italia, Italian financial regulator CONSOB, and the Italian Ministry of Economy and Finance. This sandbox allows fintech startups to test innovative models under regulatory supervision for up to 18 months.

Interaction between Milan fintechs and Italy’s regulators is critical: Picking up on the previous point, Milan’s potential is enhanced by a progressive regulatory regime. At the MFS, Alessandra Perrazzelli of Banca d’Italia (which has a regulatory function) talked about the success of its Milan sandbox. Italy is also notable for its willingness to introduce specific legislation around equity crowdfunding. In addition, it takes an even-handed approach to regulation, with fintech players typically subject to the same rules as traditional institutions.

Could regulators do more to energise Italian fintech? There was a sense at the MFS that some sectors, like Virtual Asset Service Providers (VASPs), have faced increased regulatory scrutiny, which may impact innovation. Delegates were also waiting to see how the transition to new EU regulations like MiCAR which addresses markets in crypto assets, will be handled. This is likely to have a significant impact on fintech, requiring careful management.

Milan is nurturing national and international engagement: Fintech is not an area where cities can go it alone – they need investment, industry partnerships and an openness to global talent and ideas. The Milan Fintech Summit plays a key role in this and has taken the positive step of holding roadshow events in other regions, including Rome. There is an acknowledgement here that Milan’s fintech ambitions are entwined with the wider ambitions of Italy’s public and private sectors.

While the Italian fintech sector is growing, there is also recognition that it needs to continue showcasing its potential on the international stage. Milan is leading in this through

the MFS and the Fintech District and Open Banking platform Fabrick which has created an Open Finance ecosystem to encourage collaboration and sharing of ideas around financial services.

It’s worth noting that 30% of the companies now based in Milan’s Fintech District are from markets such as France, Germany, Switzerland, the UK, and the US. One suggestion doing the rounds was that Milan should collaborate more with other challenger fintech hubs like Latvia or Malta.

Milan-based fintechs are working out how to harness AI safely: A survey conducted by the MFS revealed the sectors attracting the lion’s share of investment; with 50% eyeing techfin solutions and 25% targeting wealthtech and insuretech, respectively. Drilling down, the survey found that 50% of Italian fintech investors are interested in innovations in AI, machine learning, and fraud prevention.

A key impression from the MFS is that Italian fintechs are already benefiting from AI’s capabilities in areas like risk assessment, predicting customer behaviour, identifying investment opportunities, and improving fraud detection. However, there was also a clear understanding of the risks involved, such as data privacy breaches, AI hallucinations, the potential for biases and security vulnerabilities. There was discussion around the need for regulatory compliance while implementing AI solutions.

Milan is committed to gender balance in fintech: Milan and Italy in general, supports diversity in fintech leadership. For example, recent data from Milan’s Fintech District revealed that 22 companies in its community have female leadership, including 15 women as CEOs. Among these are Clearbox AI, Tech Engines AI and Vidyasoft. Of course, there is still a long way to go – and how to achieve greater balance was a prominent theme at the 2024 MFS.

Suggestions for improving gender balance included implementing programmes to support underrepresented groups in the startup ecosystem. There were also calls for mentorship and education programmes and a shift towards diverse funding mechanisms. The aim would be to ensure VC and investment decisions are made by diverse teams – to reduce unconscious biases.

Final Thought

The Milan Fintech Summit 2024 provided an excellent platform for showcasing Italian fintech potential and positioning Italy as a key player in European fintech. However, while progress has been made in fostering innovation, there is still work to generate international investment and create fintech winners. As the sector continues to evolve, particularly with the rapid advancement of AI, finding a balance between innovation and regulation will be key to sustainable growth and success.

Author: Alessandro Hatami, Managing Partner of Strategic Consultancy Pacemakers