The global economy has slowed down considerably during the past few months due to COVID-19. Many businesses and industries have been negatively affected, including financial services providers.
The pandemic has destabilized private capital markets. Investments in new initiatives and early-stage companies have decreased significantly. During the first quarter of this year, venture capital-funded Fintech activity fell to $6.1 billion across 404 deals. It was the worst-performing first quarter for financial technology deals since 2016.
It was also the worst quarter, since 2017, in terms of total funding acquired by Fintech businesses. This, according to The State of Fintech Q1 2020 Report published by CB Insights.
In addition to decreased funding, there were not too many Fintech licenses issued to new projects. Advapay recently conducted a research study that looked at European E-money and Payment Institution (PI) licenses issued between January and May 2020. The company compared these figures with results from the same time period last year.
Advapay looked at the total number of issued PI licenses, which only includes the ones for remittance services. The company specifically examined licenses awarded during the first five months of 2019 and 2020 (between Jan 1 – May 20).
Advapay found that regulatory authorities issued 131 PI licenses during this time period in 2019. Meanwhile, the number of licenses awarded during this same period in 2020 was just 34.
Spain was the leader in 2019, however, in 2020 it has experienced a significant drop in PI licenses awarded. 44 licenses were awarded by the nation’s regulators during the first five months of last year. However, only two firms in Spain have been issued PI licenses so far this year.
The Netherlands issued 39 PI licenses during the first five months of 2019, but only 4 for the same time period this year. There was an 11% decrease in the number of PI licenses awarded by UK regulators this year, compared to the first five months of 2019. Interestingly, Germany’s regulators issued two more PI licenses this year when compared to the number of such permits issued between Jan 1 and May 2019.
There were 13 countries in the EEA region that awarded 33 e-money licenses during the first five months of 2019. These same countries only issued 18 such licenses during the same period this year.
The UK, Ireland, Lithuanian, Spain, the Netherlands, and Luxembourg awarded the most e-money permits in 2019. The FCA issued 20% fewer e-money licenses between Jan 1 to May 20, when compared to the same period last year.
Ireland has not yet issued any such license this year.