Report: Rules, capital and infrastructure limit EU fintech scale

The report, published this month, identifies regulatory fragmentation, limited access to late-stage capital, skill shortages and uneven payments and digital identity infrastructure as the main barriers to fintech scaling across Europe.

The analysis draws on surveys of fintech founders, investors and regulators and on market and funding data from multiple European countries. The authors mapped obstacles facing firms that seek to expand beyond their domestic markets and noted sustained demand for digital financial services across the region.

Regulatory divergence raises costs and delays expansion. Firms encounter different licensing requirements, supervisory approaches and anti-money-laundering standards as they enter new markets, forcing multiple applications, duplicated compliance systems and higher legal spending. Passporting arrangements differ by country and national interpretations of EU rules lengthen approval timelines.

Payments and digital identity systems vary across markets. Some countries operate instant payments rails and established open-banking APIs, while others require local integrations and partnerships, adding development time and expense.

The report documents a gap in late-stage funding. Many start-ups obtain seed and early rounds but struggle to secure the larger growth capital needed for pan-European expansion. It also identifies shortages of cloud engineers, data scientists and regulatory compliance specialists and reports competition for experienced hires from global technology firms.

On opportunities, the authors point to EU-level initiatives to harmonize digital finance rules, broader open-banking API adoption and rising customer demand for cross-border services. They identify cross-border payments, corporate banking for small and medium-size enterprises and embedded finance in e-commerce as areas where scale can lower costs and expand offerings.

The report recommends clearer and more consistent licensing frameworks across jurisdictions, stronger coordination among national supervisors to reduce duplicate approvals and expansion of pan-European regulatory sandboxes to test cross-border services under aligned rules.

It proposes standardizing APIs and data formats, wider use of common digital identity schemes, public-private measures to lower investor risk in later-stage funding and incentives for institutional investors to back scale-ups. The authors also call for streamlined visa regimes for tech and compliance specialists and public support for skills training in fintech fields, and suggest banks and large corporates open distribution channels through standardized partnerships to give fintechs faster access to customers in new markets.

“Scaling fintech across the continent will require clearer rules, more patient capital and stronger cross-border infrastructure,” the report states. It adds that coordinated regulatory action can reduce costs and speed market entry for firms ready to expand.

The report urges European institutions and national regulators to set a timetable to address the identified bottlenecks and to monitor progress with measurable targets for cross-border market activity and funding flows.