Italy has room to play a larger part in Europe’s fintech market. To get there, it needs to put its vast pool of savings to work, attract investment and build an ecosystem that brings companies, financial institutions and regulators into the same conversation. This was the focus of the third workshop of SDA Bocconi’s European FS Tech Hub, held on 5 November in the Sala della Regina of the Italian Chamber of Deputies. Moderated by Roberto Luppi of Fortune Italia, the event gathered representatives from government, academia and the financial industry to discuss how the sector can grow and what it will take to make it competitive at European level.

The institutional round table featured Giorgio Mulè, Vice President of the Chamber of Deputies; Marco Osnato, Chair of the Chamber’s Finance Committee; Stefano Caselli, Dean of SDA Bocconi; Renato Loiero, Budget Policy Adviser to the Italian Prime Minister; Maurizio Bernardo, President of Assofintech; Giulio Centemero, Member of Parliament; Francesco Cometa, Principal Supervisor at the European Central Bank; and Nadia Linciano, Secretary General of Consob, Italy’s financial markets authority. The programme also included the presentation of the European FS Tech Hub’s research, with contributions from Gimede Gigante, Director of I.C.E. and of SDA Bocconi’s Rome Campus, Corrado Botta, Silvia Rella and Francesca Scarlini, followed by a workshop with representatives of banks, financial companies and consulting firms.

Now in its third year, the Hub’s research set out to identify what would narrow the gap between Italy’s ecosystem and its main European competitors. “Our ambition goes beyond taking a snapshot of the fintech sector. We want to understand how Italian fintech can close the gap, especially with our European competitors,” said Gimede Gigante. The starting point is a contradiction. “Innovation is not what we lack. We see plenty of fintechs emerging in Italy. The contradiction is that, in terms of capital invested, we lag well behind our European competitors.”

The European FS Tech Hub has built its work step by step: first defining the boundaries of fintech, then developing a valuation model for fintech companies, and finally comparing Italy with other European ecosystems. “This year we address the question of what we can do so that Italian fintech can compete in Europe’s digital arena,” Gigante added.

On the sidelines of the event, Fortune Italia gathered the views of several speakers. Their reflections centred on the relationship between technological innovation and capital markets, the scope for channelling more savings into the real economy, and the opportunities opened up by the tokenisation of financial instruments.

Giorgio Mulè, Vice President of the Chamber of Deputies, stressed the need for an integrated system to support the sector’s growth. “Italy can and must believe in its fintech industry, which should find its natural home in talent and in the ability to attract investment. Above all, it must enable Italian companies to plug into a value chain that reaches beyond the domestic market and aims for Europe. That requires regulators, the fintech industry and businesses to come together in an integrated system that makes this process easier.”

Fintech and savings: the role of institutions

Marco Osnato, Chair of the Chamber’s Finance Committee, focused on strengthening the regulatory framework. In his view, several steps have been taken in recent years to support the sector, starting with the Fintech Decree and the reforms of the Consolidated Law on Finance and of capital markets.

“To make fintech central to Italian finance and turn Italy into a European platform, there are still things to do, but a great deal has already been done. The Fintech Decree, which the committee I chair worked on, the Consolidated Law on Finance, the capital markets reform and a whole series of measures adopted during this legislature have brought significant attention to this area of our financial system,” he said.

For Osnato, the main challenge is to connect Italian households’ propensity to save with companies’ need for financing. “We must keep working to bring together two great forces: Italians’ inclination to save and our companies’ need to be competitive. Using innovative instruments as well, we need to offer better returns on savings and use that momentum to direct them towards Italian small and medium-sized enterprises, with the aim of helping them grow.”

The point ties in with the structure of Italy’s financial system, which is still dominated by SMEs and by a strong reliance on bank lending.

Three ingredients for the growth of Italian fintech

Stefano Caselli, Dean of SDA Bocconi, set out three conditions for Italian fintech to take a leading role in Europe: mobilising the country’s savings, improving the quality of regulation, and strengthening cooperation between banks and financial markets.

“Italian fintech has extraordinary potential. To become relevant at European level, though, it needs three ingredients. The first is to make the best use of our country’s extraordinary pool of savings. Those €6.4 trillion must be invested to drive innovation and development in Italy,” Caselli explained.

The second ingredient is regulation. “Deregulation is not what’s needed. What we need are good rules that allow savings to flow much faster into the real economy and allow the financial industry to evolve.”

The third is to move past the idea that bank lending and capital markets are alternatives. “Italy grew thanks to its banks. We don’t need to replace them. We need to add a new piece: integration with financial markets. Together, these three ingredients will allow Italy’s financial industry and its fintech sector to take centre stage.”

SMEs and capital markets: where fintech can help

Access to capital was also addressed by Renato Loiero, Budget Policy Adviser to the Prime Minister. According to Loiero, Italy’s delay compared with other international markets is partly due to the structure of its economy and financial system.

“The fintech sector in Italy is not yet as developed as it is abroad, because the Italian market has traditionally been too thin and has low stock market capitalisation,” he observed.

On top of this, the business landscape is made up mostly of SMEs, and the financial system has historically revolved around banks. Italian companies tend to turn to lenders rather than going directly to the markets by issuing financial instruments, a step that calls for expertise smaller firms do not always have.

Here, fintech can help lower the barriers to entry. “Because it has lower entry costs and can achieve economies of scale, it can be the answer for tackling this issue even better and more effectively,” said Loiero, pointing to the practical solutions put forward in SDA Bocconi’s research.

Tokenisation: Italy’s market is still in its early stages

Another area of development is the tokenisation of financial instruments. Nadia Linciano, Secretary General of Consob, took stock of the market, noting that Italy has taken its first steps, helped by a regulatory framework that allows new solutions to be tested.

“Tokenisation in Italy is taking its first steps. We have a regulatory framework that supports its development and has set out the enabling conditions, including in relation to the European regime, the so-called DLT Pilot Regime,” she said.

Interest from market players, however, remains limited. “We have to say that domestic operators have shown very little interest in this regime. In practice there have been no applications for authorisation, and across Europe we count only six authorisations, all involving very small entities.”

Italy has already seen its first tokenised issues of shares and bonds, but the market has not yet reached the scale needed for sustained growth. “There are no recurring issues and there is no liquid secondary market, so we need to act on other parts of the ecosystem.”

Among these, Linciano pointed to the need for a cash component and for technical and legal interoperability between platforms based in different Member States. Central bank projects could also play a part here, helping to solve the issue of payments in transactions involving tokenised instruments.