Collaboration: the key to success in Europe’s thriving tech sector
With innovation in technology rocketing ahead at scale and pace, sustainable market growth depends on initiatives that will build connections and partnerships
The European market’s reputation as a global technology powerhouse has been strengthened by phenomenal growth over the past year. The first quarter of 2022 proved especially successful for start-ups and scale-ups, with total tech investment surpassing €33bn, outperforming the same three months in 2021 by €10bn. This increase is off the back of an already extremely strong 2021, which saw the region’s tech start-up scene raising more than €100bn in funding, representing a year-on-year growth of 133 per cent, and a faster acceleration than its counterparts in China and the US.
This growth is remarkable, and can be attributed to a number of factors, including more early-stage investing, greater appetite for digital innovation and the introduction of legislation such as the Payment Services Directive 2. “A combination of a strong regulatory framework, consumer and business expectation, as well as new technology, has caused everybody to lift their game,” says Jason Lane, Mastercard’s Executive VP of Market Development for Europe.
The pandemic has also highlighted the importance of digital transformation. However, the risks of bringing cutting-edge tech to the market, along with the capital and resources required, means that smaller and newer companies don’t always have the opportunity to thrive. It is becoming clear that the key to a sustainable, flourishing tech market across Europe depends on efficient corporate start-up collaborations that will serve as catalysts for further growth.
Beyond borders
The financial tech market has gone from strength to strength in Europe, and today fintech companies are worth twice as much as any other tech sector on the continent. There are now more than 30 fintech unicorns in Europe, and seven of the top 10 countries in the 2020 Global Innovation Index are European. Within this, paytech companies have seen year-on-year growth, spurred by digital acceleration. Europe is globally viewed as a market that nurtures corporate technology development, as demonstrated by the emergence of game-changing innovation such as cloud technology. Since the beginning of 2017 the European cloud market has grown almost fourfold, reaching €7.3bn ($8.8bn) in the second quarter of 2021, while European service providers have more than doubled their cloud revenues.
However, that market share has declined from 27 per cent to under 16 per cent and, among the European cloud providers, Deutsche Telekom is the leader with just 2 per cent of the European market, followed by OVHcloud, SAP, Orange and other national and regional players. If European tech companies are to flourish and help build a resilient, sustainable tech market, they will need support to reach maturity and scale – and this is true for market players of all sizes. This will be achieved through connections that transcend borders, both in terms of geography and industry, and between established companies and start-ups.
Strength in numbers
With the ambition of strengthening the European ecosystem and helping to create a more cohesive and collaborative market, Mastercard is partnering with smaller banking and technology players who focus on innovation. With an established footprint in the market, it is well placed to help connect players of all sizes. “Fintechs essentially start as SMEs,” says Mastercard’s Lane. “Our basic principle is understanding how to help SMEs thrive in this space, how we can drive collaboration and create ease of doing business for these companies, which account for over half of GDP in Europe.We’re very much a European company at heart.”
Mastercard has also pioneered Start Path, which helps to scale promising later-stage start-ups by connecting them to partners in its global network of banks and merchants as well as technology and digital players. In light of recent events, a Ukraine-specific initiative has been announced to support the immediate and long-term rebuilding of the country’s economy and its growing start-up scene.
The Mastercard Developers programme seeks to support the expansion of emerging fintechs and, in doing so, aims to accelerate payments technology, creating healthier, more efficient conditions for businesses and consumers across Europe. It does this by providing start-ups and smaller digital companies with the tools and resources they need to work on innovative payment systems. To date, Lane points out, Mastercard has worked with eight out of 10 paytech companies in Europe.
It is through initiatives such as these, between companies with a strong track record in the market and those at the cutting edge of new technology, that the power of leveraging partnerships becomes reality. The future ability of the European market to compete globally relies on consistently high levels of innovation. As Lane concludes: “When we all collaborate across an ecosystem, we all come out as winners.”
