Spain has more to offer to FinTech entrepreneurs than just good food, pleasant climate, and low running costs. Mobile payments are widespread across the country, open banking is developing steadily, and it is one of the rare member states offering a regulatory sandbox to start-ups.

Connecting Europe and South America, Spain is quite the settlement place for FinTech entrepreneurs with international ambitions, and there is a growing demand to discover this ecosystem. According to Tracxn, the number of FinTech start-ups reached a total of 522 last year. Before COVID19, Spain was the leading region with the highest number of payment institution licenses obtained in Europe.

On a mission to find out more about Spain’s FinTech ecosystem, we’ve approached Francisco Estevan Vítores, Co-founder and CEO of Spain’s biggest FinTech community. Located in Spain’s third-largest city Valencia, innsomnia is a digital innovation hub that evolved from the first local FinTech accelerator. Working for Spanish and international banks on innovation projects, innsomnia, offers an open innovation platform, connecting corporates and start-ups active in FinTech, InsurtTech, Industry 4.0, and Smartport verticals. Moreover, together with the LHoFT and ICEX, innsomnia is a part of the Talent Route, the first international network of fintech hubs. Seventeen accelerators and incubators across Europe share more than 5000 start-up solutions in the fields of Fintech and Insurtech, promoting local talents and entrepreneur systems and encouraging the internationalization of start-ups – a one of a kind collaboration project across ecosystems.

  • Francisco, you are an entrepreneur, a blogger, a published author, and a fundraising expert. How did you end up building the first Spanish FinTech accelerator? I had a Fintech, tufinanziacion.com, and after failing to implement a B2C model, we began to redesign its functionalities and the business model to do matchmaking with banks. Reaching out to the decision makers within a large corporation and learning how to handle their times is one of the most complex things I have ever done in my life. At airports and train stations, I used to see CEOs of other Fintech companies whom I had met “wandering” in financial institutions. I realized that what happened to us was habitual. There, we saw the opportunity to set up a project that would help linking two different worlds that misunderstood each other, so that we began to design something special, an offer that, so far, was not provided by the increasingly saturated market for Fintech acceleration and incubation programs.
  • And now you run a no-equity open innovation hub. What are some programs you offer? innsomnia has a pretty impressive community – do you only accept Spanish companies into your network?

One of the keys has been the NO EQUITY model. If we wanted to offer the best solutions to the world’s leading banks, we couldn’t afford to have conflicts of interest. We knew that we were giving up an important part of the business – a great exit, the dream of everyone who is involved in innovation for corporations – but on the other hand, this philosophy allowed us to work with more clients and have a deeper vision of the evolution of Fintech worldwide. Today we manage programs for more than 20 banks, and we have a community of more than 1,500 fintech companies with which we constantly evolve through co-creation of solutions. We do not see a Fintech/a project, but we see in Fintech an opportunity to transform in a sustainable way all the convulsive banking reality that we are experiencing worldwide. In fact, today, more than 40% of our solutions come from outside Spain.

We have specialized in bringing the best European Fintech companies to LATAM through different acceleration programs in Argentina, Peru, or Colombia. The main value of Innsomnia, beyond our large community of start-ups and the special relationship we have with them, is that we have become, in some way, the natural bridge to Latin America. In the specific case of Fintech and Insurtech, the transfer of European talent to Central and Latin American countries is not only an increasingly recurrent demand from corporations and global institutions, but it also reinforces our conviction that open innovation is a facilitator for the development of countries and the democratisation of financial and insurance services.

If I need to specify, the first Fintech program in Spain, Bankia Fintech, stands out as an example of our initiatives. This program was created by Innsomnia in 2016 and demonstrate our model well. The program we run in Argentina, together with Red Link, is another critical example of the open innovation programs for financial entities that we have seen flourish. We also work with other entities such as Cajamar.

In total, we ran more than 65 accelerated Fintech projects and ten innovation programs since 2016. We run the Open Insurtech Hub in the insurance vertical, the first Insurtech Club in Spain, which completed ten successful accelerator program cycles already. Our ecosystem hosts two of the top 10 companies in Spain, along with other leading InsurTechs.

In addition to promoting and running programs, we also actively join and support programs organised by the other hubs that bring the network together. European Fintech Discovery Program is a great example of that.

  • In addition to many exclusive programs and trendy events (I heard some rumors!), you have a separate initiative, 100 Startups, running in parallel. What is “100 Startups,” and who does it address? What makes it any different from other industry events?

100Startups is still a dream. The event was supposed to be launched in 2020 but the COVID19 crisis has slowed down our plans. The idea is to make an event fully focused on the sale and purchase of technology. There is already a great offer of meetings on trends, where the best speakers in the world call on the future of Fintech technology and its potential evolution in the world, and of fairs which connect start-ups with investors. 100Startups is a much simpler idea. The objective is to work with a core of 20 banks around the world to see what they really need, and once the impact of that demand is clear, go out and find the best solutions in the world. We count with an important international network through The Talent Route, the first network of accelerators in the world, as well as the support of ICEX (Government of Spain) to turn Madrid into one of the great centres of access to financial technology in the world.

Unfortunately, our meeting requires face-to-face interaction, so we had to postpone it until the spring 2021.

  • Would you also like to give a short intro to the Spanish ecosystem and the recent developments? Spanish banks are quite innovative and are not afraid to test new technologies. They were leading the mobile payment evolution back in 2016, and now other experimental developments like facial recognition ATMs(Caixa Bank) seem to be up and running. The banks are quite progressive, and yet the market appears to have sufficient playroom for the FinTech start-ups. How is this possible?

It’s true that the level of digitization of Spanish banks is very high. Today it is easy to establish a constructive dialogue with all Spanish financial institutions. It is a long-standing process that has now opened up to innovation with startups. Every day we see tests and trials of new products and services that are not yet on the market but are evolving in laboratories and acceleration programs, surprising projects that are in line with transforming banking without return. Beside this reality we find the Spanish Fintech companies: an ecosystem that has grown significantly in the last 3 years and is now suffering important braking. To maintain this level of collaboration, we need to open our ecosystem to the entire world, and to facilitate the access of worldwide startups to the best banking innovation programs in Spain.

From another perspective, this experience also allows us to export the model the other way around: we can help worldwide banks to design their open innovation programs more efficiently. It has already worked here, and it is an experience that we have to learn how to export. We are already doing it in some LATAM countries, and we are starting to operate in Europe in countries such as Italy or Greece.

  • If we flip the coin, what are some common challenges start-ups in Spain experience?

Our startups are small and are not born global. We have to think global from the origin of the idea. From an investment point of view, we capture little and on many occasions, we have to go outside to find more professionalized funds that allow for faster scalability. Of course, we do have some good examples to contradict this opinion but in general, it is an indisputable reality. At Innsomnia we strive for our startups to grow by billing because our goal is that these small structures can become companies and from there, jump to other markets. It is a slow but perhaps more sustainable strategy.

  • We can’t seem to have a conversation these days without mentioning COVID19, so here it goes: what was the pandemic’s impact on the Spanish ecosystem and the start-ups?

Many startups will close because the world stopped when they were just starting, and others will lower their short-term growth expectations because there is no market. That said, one of the evidences of this tremendous health crisis is that the “Contactless” economy has come to stay. In this scenario, the Fintech companies – not only in their relationship with banks but with many other industries such as retail, ecommerce or travel, among others – will have great market opportunities.

At European level, I miss an aid scheme targeted to startups to remedy this critical situation. Efforts are being made at national level (country by country) and this may significantly distort the market. I worry that a handful of large projects get stuck because there are no financial resources to sustain them for a few months. Talent is the great wealth of our era and not knowing how to retain it, take care of it and make it grow is one of the elements that will exacerbate the gaps between States in the coming years.

  • I know that you’ve lived in Istanbul for some time and have an eye on the ecosystem. What do you think about the developments in the Turkish and MENA region? Is there a chance for collaboration with companies located in Turkey?

I had the fortune to get to know the country 20 years ago, when I was working on a mission of the European Commission to improve the Turkish business fabric through the incorporation of technology and the adoption of innovative approaches. I really enjoyed that time of my life because you can feel there a special dynamism and energy. The ecosystem is evolving very well thanks to the fact that the productive fabric has been greatly modernized and that technological and innovative talent comes out of Turkish universities. We do not yet work with any Turkish company, but I am sure that in the coming months we will start to see interesting projects. Turkey is also a very large, strategic, and dynamic country: its startups can and must develop hybrid models that allow them to grow in the areas of B2B and B2C, including B2B2C.

From Innsomnia we are very interested in collaborating with Fintech Istanbul and we are considering our participation in Fintech Istanbul Week for the first time to better understand the Fintech ecosystem and to deepen the needs of local banks – as we can certainly contribute to a sustainable, efficient and affordable digitization of Turkish banking as a whole.

  • I would like to wrap up this interesting conversation with a sneak-peek into innsomnia’s future projects, if possible. 

In parallel to the ongoing initiatives, we are working on a project called the “Fintech & Insurtech Galaxy by Innsomnia,” which we hope to celebrate in the coming months. The Fintech & Insurtech Galaxy is nothing more than monitoring the start-ups that are already in our ecosystem. The creation of this radar grew our ecosystem to a total of 1.012 FinTech and InsurTech start-ups (40% of which come from outside Spain with a large presence of projects born in the UK, USA, and Italy). We are in close contact with our start-ups regarding the developments, and the Galaxy makes it easier to track the ecosystem. The launch of our first “Galaxy” was last December; we launched the data from our start-up radar in a private and close event for our partners.

All in all, the coexistence of start-ups, scaleups, and SMEs in the ecosystem bring together everything from emerging projects with a turnover of less than EUR 100,000 to companies that exceed 1M euros in sales. Quite significant. Similarly, job creation is also diverse: 75% of the radar companies have up to 10 employees, while the remaining 25% have staff ranging from 11 to more than 50 professionals. We are quite happy with the direction our ecosystem is taking.