Miguel Ángel Redondo
Madrid has been trying for years to position itself as a leading European financial center. What factors can make this aspiration a reality?
First, it should be noted that Madrid is the main destination for foreign investment in Spain and the third European city with the highest number of cross-border greenfield projects received, with a strong concentration of the headquarters of the multinationals present in Spain.
The presence of foreign capital in the services sector, and especially in finance, responds to the logic of the political-institutional and economic weight which comes with being the capital of the country. It should be borne in mind that the capital hosts, among others, three of the largest financial institutions in the country (Santander, BBVA and Mapfre) with more than 250 million customers in more than 30 countries.
In addition, the main regulatory agencies in Spain such as the National Securities Market Commission (CNMV), the National Commission of Markets and Competition (CNMC), the Fábrica Nacional de Moneda y Timbre (FNMT), the General Directorate of the Treasury and, of course, the Bank of Spain, are also based in Madrid.
Likewise, the main multilateral banking and financial institutions (Inter-American Development Bank, CAF, Latibex, the Ibero-American Institute of Securities Markets or the recently arrived BCIE) are also located in the capital.
Having all these entities and specialized institutions in Madrid is a pull factor for other companies in the sector. In addition, Madrid is a mature market in which investors, universities and research centers and science and technology parks make the city one of the main innovation hubs in Europe.
All this has taken place in a context in which Spain boasts, after a profound transformation, a diversified, modern, and competitive financial system fully integrated into international financial markets. The current Spanish financial sector is highly efficient, liquid, and transparent. Indeed, over the last decade, the incorporation of new technological solutions has helped strengthen the sector in terms of consolidation, capitalization, and resilience.
Finally, and what is becoming increasingly important, the existence of a pool of specialized talent, together with first-class connectivity and infrastructures, competitive operating costs and a favorable environment for business complete the set of factors that make Madrid one of the key financial hubs in southern Europe and contribute to its growth prospects.
In which subsectors or financial activities do you think there are the greatest prospects for investment growth in the city?
Like the rest of the world, the Spanish financial sector has undergone very profound changes in recent years due to the entry into the market of a considerable number of well-capitalized fintech companies and the legal changes that this has brought.
If in 2013 there were 50 companies in this sector in Spain, the number of fintech, insurtech and regtech companies is already close to a thousand today. And many of them are located in Madrid, making it one of the cities with the greatest presence of this type of companies in the world.
Europe has mature local markets in this sector in cities such as Stockholm or Berlin, as well as in other parts of the Netherlands, France or Denmark. But Spain is fast becoming an alternative hub to those already established, with a growing number of operations and substantial levels of financing involved. Not surprisingly, in recent years, Madrid appears among the main cities in Europe by number of financing rounds in the sector.
For all these reasons, and because we believe in the opportunity that the sector presents for Madrid, on March 21st the Madrid FinTech Capital event will be held in Madrid, in which fintech companies from around the world that are interested in expanding operations in Spain and Europe will have the opportunity to learn about the value proposition of Madrid as a center of operations for this sector.
Certainly, the fintech and insurtech sector has exploded in recent years around the world. But what real options does Madrid have of becoming a hub in the sector?
Spain has gone from looking at fintech with curiosity to being one of the biggest powers in financial technologies, and Madrid is making the most of this opportunity.
Several factors have played a role in this change. On the one hand, the good business climate, and the availability of talent. On the other, competitive wage costs and the high penetration rate and increased confidence in digital and mobile purchases. The widespread use of contactless payment methods, not only through mobile phones but also via stickers or bracelets, especially among the younger population, has also played a significant role.
It should not be forgotten that Spain has been one of the first European countries to authorize its financial Sandbox, and that the regulator is very open to new ideas and innovative projects in this area.
Nor should we ignore the importance of the innovation system and the presence of resources in the city, as a result of economic activity and specialization in financial support services. Likewise, we should not forget Madrid’s privileged geostrategic position and its world class infrastructures, including in finance.
The fact that Madrid’s shops and businesses have been opening up to these proposals has also helped their growth considerably. The change of mentality has permeated traditional financial institutions, with which can now work together with them.
That Madrid is the ideal location for fintech companies is demonstrated by the number of companies present in the Madrid ecosystem and the companies in the sector that have established themselves in recent years in the city. Madrid is home to 45% of the fintech industry in Spain, an ecosystem that, in addition to financial institutions, includes nearly 500 startups in all types of financial services and more than 300 Insurtech companies.
Proof of the importance of the sector in Madrid is the existence of the MAD Fintech cluster, which brings together a large part of the Madrid ecosystem and top-level multinationals, helping to promote its growth.
But what perhaps unequivocally demonstrates the attractiveness of Madrid for companies in the sector is the commitment made by many of them in recent times. Examples abound: the investment made by Swedish multinational Klarna, the growth and consolidation of the Dutch company Adyen, the presence of German companies like N26 and Vivid, the arrival of French companies like October, NickeI and Qonto or the British Wise, Revolut or Checkout, etc. Without forgetting the strong commitment that already consolidated financial multinationals, such as Mastercard, have made in the last year, establishing innovation centers in the sector in Madrid.
Talent has become the strategic holy grail to ensure the establishment and consolidation of digital businesses. How does Madrid perform in terms of the quality of talent?
The city of Madrid has a population of more than 3.2 million people and a high concentration of professionals in sectors with high added value, with both technical and business backgrounds. Madrid is the leading training center in Spain, with 19 public and private universities, and three of the most prestigious business schools in the world. The research infrastructure comprises 41 CSIC public research centers in Madrid, 11 unique scientific-technological infrastructures and a dense network of scientific-technological parks.
In addition, many foreign companies have decided to establish their centers of excellence for research, development and innovation activities in Madrid, attracted by these infrastructures and an international network of scientific-technical professionals and students of 181 different nationalities.
At the same time, Madrid is consolidating a dynamic young ecosystem of startups, venture capital funds, accelerators and incubators in which foreign capital plays an essential role.
All this is essential for the positioning of Madrid in terms of the existence and availability of talent in sectors such as finance and fintech in particular, as stated by several of the companies that have been interviewed for our monthly Newsletter published by MIA.
“ In Madrid there is a lot of talent, better prices, people are trained and innovative in their way of working ” (Grégorie de Lestapis, October)
“Being near the center of Madrid is crucial for attracting talent ” (Almudena Román, ING)
“We evaluated all the options when choosing a location for our hub, but in the end we opted for Madrid due to its abundance of talent” (Daniel Espejo, Klarna)
“We opened Madrid as a bet for the future. It has a lot going for it when it comes to attracting senior talent. Moreover, our clients are in Madrid, and this city is one of the great financial centers in Europe” (Zulema Aragonés, Morningstar)
How can Fintech companies benefit from establishing themselves in the city? What can the City Council do for them?
Madrid City Council has the Madrid Investment Attraction (MIA) office as its main point of contact for foreign investors interested in doing business in the Madrid metropolitan area.
Foreign companies in the Fintech sector, as well as other priority sectors for our city, can access MIA’s free, confidential and customized services at any time during the implementation process or development of their activity.
From personalized information on operational or regulatory aspects related to business activity in Madrid, -on incentives or financing-, to the organization and coordination of visits to suitable locations, MIA can also help with liaising with other local, regional, or national institutions, including support in obtaining permits or work visas.
We also collaborate with CEIM, -the Confederation of Entrepreneurs of Madrid-, in supporting the growth and expansion of foreign companies, offering them support with networking events, the launch of new projects and helping them to solve their problems.
But perhaps one of the most attractive services for foreign Fintech companies is softlanding, whereby free coworking spaces in the city center are provided, together with specialized advice. This temporary accommodation allows companies to get to know Madrid and the ecosystem in which they operate, while completing the search for their own premises and starting their activity.
In short, at the City Council of Madrid we create the easiest, friendliest and most effective environment for foreign companies to establish themselves in the city quickly, at the lowest possible cost, and with the institutional support in all phases of their business projects, from implementation to subsequent growth.