Unlocking Italy’s Fintech Potential: Challenges, Opportunities and the Need for a National Strategy

By ItaliaFintech

Technology has radically transformed the financial services landscape, redefining products, customer relationships and entire business models. Yet across Europe, countries are progressing at very different speeds. A recent report by ItaliaFintech, in collaboration with the Fintech & Insurtech Observatory of Politecnico di Milano, compares the fintech ecosystems in Italy, the UK, France and Spain — revealing Italy’s considerable untapped potential.

Despite growing momentum and a vibrant core of innovation, Italy still lags behind in terms of ecosystem maturity and capital attraction. Only 8% of the fintech startups analyzed in the report are based in Italy — the same as Spain — compared to 17% in France and 67% in the UK. The funding gap is even more striking: between 2019 and 2024, Italian startups attracted only 6% of total capital raised, while the UK secured 73% and France 17%.

These figures do not reflect a lack of talent or ideas. Italy boasts world-class universities, a strong entrepreneurial tradition, and a growing number of promising fintech ventures. What is missing is a systemic and coordinated national strategy to help innovation scale and strengthen international competitiveness.

A fragmented ecosystem in need of alignment

While Italian financial institutions are accelerating their digital transformation, fintech startups are often the true engines of innovation. Agile, data-driven and responsive to emerging trends, they bring real value to the market — not only as challengers, but also as strategic partners for banks and insurers.

Collaborating with fintechs enables traditional institutions to expand their offerings, increase efficiency and engage new customer segments. This alliance has the potential to make Italy’s financial system more inclusive, competitive and resilient.

However, ecosystem growth is still held back by bureaucratic complexity, a fragmented regulatory framework, and limited access to capital. Two-thirds of Italian fintech startups have fewer than 10 employees. The average funding per startup is €12.5 million — a figure skewed by a few large rounds. Excluding outliers, the average drops to just €4.7 million, with nearly half of all funding rounds below €1 million.

In Italy, valid tools exist — such as the Fintech Channel by the Bank of Italy, Milano Hub, and the national Regulatory Sandbox — but what’s lacking is a coherent vision that integrates these initiatives into a broader development strategy.

Among the most urgent priorities is the simplification of authorization procedures for new businesses, including via digital company registration channels. The regulatory Sandbox should become permanent and continuously accessible, moving beyond a system of limited-time windows. Moreover, access to capital needs to be strengthened through targeted incentives, broader eligibility for innovation tax benefits, and greater integration of fintech into international promotion efforts by entities such as ICE, Innovit, and the Ministry of Foreign Affairs (MAECI).

Another critical area is financial literacy and education, which are essential to foster user confidence and enable responsible use of digital financial services. At the same time, Italy’s Innovative Startup regime must be updated to become more inclusive, recognizing diverse and non-traditional skill sets to prevent brain drain and capital flight toward more fintech-friendly jurisdictions.

Regulation and data: The next frontier

A central issue for the future of fintech — both in Italy and across Europe — is the relationship between innovation and regulation. In fast-evolving areas such as , crowdfunding, and open finance, a balanced and proportionate regulatory approach will be essential to ensure market transparency and safety without stifling innovation.

Open finance, in particular, represents a strategic opportunity to enhance the efficiency and competitiveness of the financial system. Yet, regulatory delays and overly cautious institutional attitudes risk slowing momentum. The European initiative FIDA – Financial Data Access provides a promising framework, but it requires bold, coordinated implementation.

As highlighted by the Fintech & Insurtech Observatory, a well-regulated and transparent approach to data access — supported by active cooperation between institutions and fintechs — could become a defining competitive advantage for Europe’s financial ecosystem and, with the right tools, for Italy’s as well.