Fintech requires technical expertise from both the worlds of finance and technology. When brought together and imbued with enough creativity and enthusiasm, the potential synergies that can be realised promise to revolutionise financial markets.

From the automation of trading and risk management to nascent technologies such as Blockchain and intriguing concepts such as crowdsourcing of talent and finance, fintech has the potential to bring real change to the finance industry.

Malta is ideally suited to play home to the next wave of fintech pioneers. The country currently hosts rapidly growing financial services and IT industries. Between 2011 and 2016, Malta’s IT industry saw its gross value added output increase by around 62 per cent, while the finance and insurance industry has seen its GVA go up by around 30 per cent during the same period. As at the end of Q1 2016, both these industries accounted for roughly seven per cent of the nation’s total GVA, and for around eight per cent of total employment, providing nearly 16,000 individuals with challenging but rewarding work.

Malta’s growth as a hub for remote gaming business has further reinforced the local labour force’s skill in these areas. The gaming industry brought with it new technological, financial and regulatory challenges to be able to process large volumes of data and transactions originating from around the world in real-time.

Through investment in people and infrastructure the nation has managed to establish itself as a preferred location for this creative industry and has prepared us to welcome other such creative industries which make use of the competitive advantage offered by our local financial services and IT sectors.

Strong economic performance and a positive future outlook have also encouraged a new generation of entrepreneurs to take on the challenge of starting up their own businesses. The nation’s dependence on the success of SMEs has, in turn, prompted action from the government to aid the growth of start-ups, especially those in innovative industries.

Malta’s favourable regulatory environment, optimistic outlook and strong, established complementary industries are the core factors that make it right for fintech.

The Maltese economy has flourished in recent years. Between 2011 and 2016, total GVA grew by around 46 per cent, while GDP per capita has increased by around 38 per cent during the same period, indicating strong performance by any standards.

Within the context of the EU, Malta’s performance in these metrics is second only to that of Ireland. This strong economic growth has manifested itself through record low levels of unemployment and an improvement in the standard of living, as evidenced by an improvement in Malta’s Human Development Index score from 0.821 in 2011 to 0.856 in 2015, an increase of around four per cent, roughly double the average of other very highly developed nations.

The gaming industry brought with it new technological, financial and regulatory challenges

Furthermore, foreign investment remains strong and existing market players continue to see healthy levels of growth. As a result, several employers have begun to source new talent from overseas, in a few years transforming Maltese society into one which is far more metropolitan and diverse than ever before.

This coming together of peoples from across Europe and beyond has brought along with it new ways of thinking and experience in serving clients from across the globe. This has strengthened the local labour market, making it more flexible in its ability to adequately service the needs of international clients with vastly different social and cultural backgrounds.

Historically, Malta’s location in the centre of the Mediterranean has been a strategic asset. The nation’s persistence and growth in the labour market’s ability to deliver value to customers regardless of their geographic location has allowed Malta to rise above its constraints as a peripheral region and become a real competitor in global commerce. Little Malta has the potential to be the next big thing for the rising stars in the fintech community.

From a macro-economic standpoint, the fintech industry in Malta would leave positive spillover effects on other aspects of the economy. Synergies with financial services and IT industries will undoubtedly fuel additional growth in both these areas. Meanwhile, an additional influx of expatriate workers in the industry will create new demand for accommodation, boosting the local construction and real estate industries.

Ultimately, those drawn to Malta with the promise of a bright future will settle and begin to build a life for themselves. They will contribute towards the future growth of the Maltese economy through their consumption of goods and services.

The future is bright but careful planning and management is required. A strong fintech industry might compete with the existing players in financial services, IT and remote gaming to attract talent, and this may in turn lead to wage inflation as large industries compete with each other for the best and the brightest – a potential problem for other sectors which must make due with lower margins, such as retail.

On a wider scale, wage inflation will ultimately feed into higher core inflation and a deterioration of our nation’s competitiveness.

Similarly, a new influx of professional expatriates may place additional strain on the local property market (presumably via the rental market) – an upward push in property prices would serve to reduce the affordability of housing to individuals in lower paid positions.

We may be at the dawn of a new economic revolution, one in which technology serves to fundamentally alter the core of professional services. Innovators in fintech will have the opportunity to completely change the way consumers and financial services institutions interact with one another.

While navigating this uncharted territory, market players, consumers and regulators will all require the right guidance, knowledge and insight to enable them to take informed decisions and reap the rewards of success in this exciting field.

Mark Curmi is associate director, Banking Advisory Services, KPMG, while Steve Stivala is senior manager, Advisory Services, KPMG.

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