The Cibeles Manifesto, which was presented at the first MADFinTech General Assembly on 21 July 2020, is the starting point for the cluster and the roadmap for reinventing Madrid’s digital and financial ‘capital’.
It is a document born from the dozens of meetings of the different Working Groups and Commissions of the Madrid Capital FinTech cluster, carried out by videoconference during the confinement.
The Cibeles Manifesto
The Cibeles Manifesto includes 20 vectors of change in the financial sector that are worth considering and accelerating as a factor in the competitiveness of our financial and technological system.
A/ CULTURAL AND MENTALITY CHANGE
1.- EXPAND THE CULTURE OF COLLABORATION AND OPEN INNOVATION
Collaboration must be the axis of transformation of the current Financial Industry. Therefore, Open Innovation must be facilitated in all its aspects, with multi-sector co-creation actions such as those proposed by this cluster.
In this respect, the Enterprise Financial Services Commission suggests, by way of example, some ways to increase public-private partnerships, between FinTech and the traditional financial industry, between companies and universities:
- Open Banking as a market place with integrated API’s, PSD2 and Artificial Intelligence to detect customer needs and analyse risks,
- Leverage existing technology to streamline onboarding and detect fraud,
- Digitalization of the escrow accounts (deposit accounts) releasing funds as milestones are met by the company,
- Private public co-investment via a crowd-equityplatform,
- Digital signature of documents with judicial recognition.
2.- OPEN BANKING
Open Banking as a market place with integrated API’s, within the framework of PSD2 and with Artificial Intelligence to detect customer needs and analyse risks.
Open banking offers the liberalisation of banking information to third parties through an open application programming interface (API). The valuable customer information that banks have at their disposal and which they are obliged to share, always with the customer’s permission, to other organisations. And as long as these institutions are regulated and supervised by the Banco de España.
Promoting open bankingwill be enormously positive for the industry, providing transparency in data management and universal access to consumer information. All entities will have access to the same data and there will be a greater sense of fair play.
It will help promote Bank-Fintech collaboration for the benefit of citizens and SMEs, which will have greater options when it comes to financing their projects.
It will create an opportunity for the whole market and facilitate the birth of a market placeto go to for access to bank and non-bank financing. The COVID crisis has accelerated this trend.
The use of technology should be leveraged to digitize processes, giving agility, fluidity and speed in the financing processes for companies.
Open data with the public administration could be beneficial for the sector and protect the consumer more. This would require the administration to invest more in technology in order to improve its data sharing with the permission of the consumer and for its own benefit.
3.- CONNECTING STARTUPS AND CORPORATIONS
To increase the CONNECTION between large Corporations and the Start-upfabric, facilitating collaboration through large employers’ associations, such as AEB, Ceca or Unespa.
The Silver Economy Committee, for example, in order to increase the weight of the sector in total Spanish economic activity, is proposing a nationwide programme, led by the companies of the Ibex 35, to cover the challenge of the Digital Transformation of Seniors +65 and which would be launched with the IBEX 35 Companies Summit.
The Economic Commission for Europe with a Gender Perspective proposes to work together in the detection of differential gaps in diversity and gender that add value to the new financial services, segmenting and working on the opportunity that this integrating vision of diversity represents.
4.- CYBERSECURITY AS AN DNA
Security is a substantial part of the essential values of the financial sector, which bases its relationship with its customers on trust. Therefore, the new cybersecurity challenges posed by today’s world should not be a brake, but a differential fact of competitiveness for the sector.
The Business Financial Services Commission concluded that the FinTech ecosystem should take advantage of these technological security aspects as a competitive advantage, a necessary condition to compete with traditional financial processes and to give priority in the selection of suppliers by companies. It is necessary to generate confidence in this matter through market standards or certifications. The industry must promote the use of cyber security as a complementary element of cybersecurity.
The Mobile Banking Committee believes that ensuring security, cyber security and customer data protection will continue to be key to the future. It is necessary to inform and educate the client in that sense and to find the balance.
B/ IMPROVED LEGISLATION
5.- THE SANDBOX
The approval of the sandbox is a dormant emergency in the Spanish Parliament for several years now, which urgently needs to be reviewed on the basis of the experience of others sandboxes launched in the world, in order to convert the spanish sandbox in a tool for competitiveness, for attracting valuable projects and for disrupting the global financial ecosystem
Various working groups and committees – such as those on credit to individuals, consumer credit, Legaltech and others – agree on the need to promote the creation of a Regulatory sandbox, where supervisors can make up for the lack of means, resources and knowledge to regulate by collaborating and co-creating rules that encourage entrepreneurship and development of the sector.
In the area of FinTech, explains the Business Credit Commission, a Sandbox is a testing ground, supervised by regulatory institutions, where companies can test their products and services with partial or total exemption from some rules and a commitment from regulators that there will be no sanctions against participants, if they meet certain requirements. The regulatory Sandbox has several objectives:
- Accommodate the intensive growth rate of Fintech companies in compliance with regulations.
- To create a space for innovation for emerging companies that might have been left out due to the rigidity of the regulatory framework.
- To enable institutions to have a better knowledge of Fintech products and services and then to regulate and maintain consumer protection.
As the Consumer Credit working group concluded, the sandbox will be a catalyst for the development of new technologies and financial services.
6.- LEGAL SECURITY IN A STABLE LEGAL FRAMEWORK
The need for a clear and defined legal framework, appropriate to disruptive financial activity, is perceived as an urgent need, which the European Parliament and, above all, the Spanish Parliament should prioritise, in order to facilitate the development of the Spanish FinTech ecosystem and guarantee its competitiveness in the world.
We need a clear legal framework that is appropriate to the digital environment, and to customers’ needs for immediacy. The legislators act in a reactive way, according to society’s demand and, in this case, because of the speed of the sector and the lack of knowledge of the legislators, the laws are not accompanying. It is a vision shared by the whole sector and the subject of special debate in the Financial Services market places working group.
We compete and live in a global world, but the law affecting each country is different and even the regulation in Spain is incomplete as it advances at a different pace. This group understands that crowdfunding is regulated by an incomplete law and even with a non-homogeneous application.
Regulation can be the great accelerator or brake for many companies and that is why we believe that public-private partnerships for development and all parties should work more smoothly, as proposed by the PropTech working group.
The first measure we consider that our ecosystem needs Startup is a law that recognises the particularities of this type of company, that simplifies the procedures for its creation and registration, that makes its evolution more flexible, that facilitates its activity and that allows it to operate safely and quickly.
We consider that, both for the sandbox and for any other measure that may be adopted by the State, the Autonomous Communities or the Local Authorities to adapt the legal framework to the startup reality and enhance this ecosystem, as important as the approval of the measure itself, is the correct definition and configuration of it, so that when adopting any measure, the public authority avoids the temptation to follow the line of our stagnant and hyper-regulated legal system and is guided by the principles of flexibility, agility and speed that inspire startups, creating accessible, clear and easy-to-implement rules from which as many startups as possible can quickly benefit, even if this means, at least once, relaxing security to favour effectiveness. This was the view of the Legaltech working group.
The myth that Fintech is unregulated, because it is subject to the specific regulation of its own activity, must be fought. All regulatory developments relating to the specific activity of each Fintech offers greater legal security to the sector and therefore needs to be driven and motivated by the desire to protect the client while at the same time encouraging constant improvement in the efficiency of services through technology. This is a contribution from the Business Financial Services Commission, but shared by the other groups.
Spanish regulation must be fair, with the same rules for all, promoting competition for the benefit of consumers. Today, the entry barriers for new international entities are enormous in Spain, just as Spanish FinTech entities that want to grow abroad are experiencing enormous problems.
As the Mobile Banking Commission points out, national regulators and public institutions should embrace and respect the Single Euro Payments Area (SEPA), the initiative that allows individuals, companies and public bodies to make cashless payments in euro from an account located anywhere in the euro area using a single set of payment instruments under the same conditions, efficiency and security as they do at the national level.
7.- POSITIVE CREDIT BUREAU
Risk analysis and control is the essence of the financial business and, especially, of lending. Finding a tool for improvement in this area would give Spain a competitive edge over other entities in the world, or just the opposite.
Therefore, the existence in other countries of files or bureaus with positive information for the granting of credit represents an element of loss of competitiveness for Spain and its financial industry, as well as financial exclusion for groups that cannot be financed in Spain due to the lack of information for the study of the credit.
The need to promote the creation of a single positive bureau, which would contribute to the end of the shadow economy and over-indebtedness, was raised in several focus groups.
The first step, commented the Crédito a Particulares group, is to make the market aware of sharing its data. Banks and OTCs must be convinced that the CIRBE mechanism (the Banco de España’s risk information centre) is now obsolete, and that it should lead an initiative to create a single positive online credit bureau in real time.
The Consumer Credit group believes that it is necessary to make it compulsory to do so at a regulatory level in order to provide responsible credit.
The Business Credit Group considers the creation of a positive credit bureau, incorporating data from credit insurance agencies and large companies to facilitate supplier financing, to be very important.
C/ REGULATORY IMPROVEMENTS
8.- PROVISION FOR REGULATORS
The public service role played by the regulators should be recognised with better and greater human and technical resources, as well as adequate training and preparation FinTech, in order to improve its capabilities for dialogue, supervision, regulation and control of the new technology-based financial sector.
The financial ecosystem and FinTech is not against regulation, but against over-regulation; it is not against information and supervision; but it suggests and proposes further digitisation of these tasks for the good of the regulators themselves, the financial institutions and the user of financial services.
In this sense, the MADRID CAPITAL FINTECH cluster offers to advise, facilitate and work jointly with the Bank of Spain, the National Securities Market Commission, the Directorate General of Insurance and any other bodies that request it in order to improve public-private collaboration for better knowledge, digitalisation and compliance with its public function of supervising the financial sector.
In this line, a sandbox working group has just been set up to provide information and analysis, while contributing to the analysis of other sandboxes The aim is not only to improve the implementation of the Spanish model, but also to collect the failed experiences of other countries, because the latter need not be a disadvantage if it benefits from the experiences of other countries.
9.- TAX POLICY
Other countries’ tax incentives for financial innovation have become magnets for the best projects. The Spanish Treasury needs to be aware of this and sensitive to an active tax policy in order to be able to compete on an equal footing with more favourable tax regimes in our environment, such as Ireland, Luxembourg, the Netherlands, Belgium or Estonia.
In the Legaltech group it was stressed that this is a necessity. And the first thing is the adaptation of the tax framework to the reality of the startups, so that it would be possible to temporarily lighten the tax burden by means of deductions, bonuses and/or exemptions; including social contributions. This measure, in practice, would not imply a cost for the Administration; but, in any case, a loss of income in the short term that would be compensated by other benefits such as employment, innovation or the international attractiveness of the Spain brand (the call effect). And in the medium or long term it is likely to generate significant profits for the public coffers through the taxation generated by consolidated startups.
In order to attract investment and promote and strengthen the development of the ecosystem A more advantageous legal and fiscal framework in Spain startup would also be a powerful tool to help solve one of the major problems of the startups such as financing, especially in the initial or seed phase.
The Business Credit group concludes that financing at this time is key, with priority given to those sectors that can cause the greatest job destruction. They suggest the following fiscal needs:
- Adapt financing with flexible terms according to the company’s repayment capacity.
- To reward the companies that use the aid for sustainability, digital transformation and local production.
- Activate tax incentives to encourage investment in the business fabric.
- Postponing the payment of taxes and social contributions to generate short-term liquidity for companies.
- Promote digitalisation and the use of technology in credit processes, both in the private and public sectors.
D/ COLABORACIÓN PÚBLICA (EL EJECUTIVO)
10. PUBLIC AIDS
“Late and wrong” is how entrepreneurs define the current model of public aid for business, technological and innovation development. We believe that there is ample room for improvement in the public aid model of the European Union and of the various Spanish administrations.
It is necessary to reverse the current situation, where startups get support late and need to resort to private funding.
It would be important to obtain public funding first and then, with minimal development, to be able to draw more strongly on private funding – it would bring more benefits to startups and, therefore, to the Spanish economy in all its terms (labour, fiscal, image, etc.), contributing to a greater autonomy of our startups new businesses and less dependence on private investors, both domestic and foreign.
This measure does not call for a further increase in public spending, but rather for its rationalisation and optimisation, adapting existing aid to the needs and timescales of the activity itself and the development of startups.
11.- THE FINTECH DISTRICT
Every country, and every digital capital in the world, has a flagship to aspire to and look forward to. The FinTech District can have a unique regulatory framework that is a magnet, as there are special regulations in other countries for financial districts, such as the City of London, within the British capital, with its own tax and regulatory regime.
Although we are not only talking about a physical building concept, but also about an innovation tool where a necessary critical mass of talent, innovation, financing and other synergies typical of the Digital Economy are concentrated. And that Open Innovation Mecca does not yet exist in Madrid, despite the old promise of creating a FinTech District in public-private partnership.
Barcelona has its 22@ District and Paris, its Station F. Madrid has La Nave and a wide range of nurseries, incubators, accelerators, innovation centres, centres of inspiration, coworkings, colivings, business centres, etc.
An urban public space for innovation is a model that can be seen in cities such as London, Hamburg, Helsinki, Boston, Seoul, Moscow, Miami, Berlin or Manchester.
We are talking about a geographical area where companies, training centres, institutions, research bodies and incubators come together, exchange experiences and generate new ideas, transforming the quality of life in the region.
When planning and executing the project to create an innovation district in the city, a project of this type requires the collaboration of all the administrations (local, regional and national), of the university as a provider of personnel with digital skills, and companies that serve as leverage and help the creative interactions that define an innovation ecosystem.
12.- INVESTOR MARKET
To be able to compete with the London City and other European and North American financial centres, we need to generate a financial market for startups and innovation projects.
There is scope for promoting an investor forum with stimulus in public investment, through Avalmadrid, or other mutual guarantee companies, as well as investment consortia, business angels, investor forums, venture capital funds and other models of collaboration between FinTech entities.
There is also an opportunity to lead the Latin American market, as Bolsas y Mercados Españoles (BME) did at the time, with the Latibex as a financing tool for Latin American companies.
The business credit group adds, in this regard, that all private and public financial actors should be incorporated.
- A web portal for access to public and private finance should be created for companies with the participation of all finance providers according to their risk appetite.
- Supranational financial instruments are about to remain and should be combined with banks and complementary financing mechanisms (PFP’s, Fixed Income Markets, Investment Funds, etc.).
13.- UNIFICATION AND SINGLE CENSUS
All the players in the market and in the Fintech fabric in Madrid and Spain have to be mapped out. The first objective is knowledge: to take a census in order to be able to analyse, plan and project.
But, afterwards, it must be turned into a showcase of attraction, interest and search for synergies.
And, finally, to be able to connect elements and turn it into a circuit through which electricity circulates: ideas, capital, projects, employment, activity, wealth.
Mapping is not the ultimate goal, but only the instrumental goal. Because the important thing is to create a Radar or Corporate Intelligence tool (Business Intelligence) that facilitates to concetar, to generate and to propose projects of collaboration, of open innovation and of co-creation generators of wealth to the ecosystem.
15.- LIFTING HUB
In Madrid’s entrepreneurial, innovation, financial and technological ecosystem there are half a thousand atoms, or activity cells, with the capacity to interrelate in a multicellular model. However, there is no hub that is a pole of attraction to serve as a shuttle for unicorns, universal digital projects with exponential growth and development.
This hub can arise from public-private collaboration, but it requires leadership that the private sector currently does not perceive due to a lack of stimuli (taxation, legal security, etc.), so the public sector, local or regional, should be its true promoter, seeking private collaboration.
The creation of a Fintech Hub would have the task of promoting collaboration between financial services companies and Fintech. It would be a driver that would attract and retain Fintech talent by providing resources and support for Fintech of all kinds. It would be an ecosystem that would favour the evolution of financial technologies and a greater diffusion towards individuals and companies, identifying the needs and the channels through which their demands would be solved.
A collaborative environment will help the financial sector adapt to the new technological context and identify the most competitive Fintech companies for dissemination in Spain and abroad.
16.- FINTECH UNIVERSITY OF TALENT
Every innovation business ecosystem pivots on a knowledge centre that gives it feedback. We find it, for example, in Silicon Valley, with Stanford University, and in Boston, with Harvard University and M.I.T.
Madrid needs this FinTech knowledge centre, which feeds the entrepreneurial, innovation, financial and technological ecosystem.
The Madrid Capital FinTech Cluster has the challenge of building it, hand in hand with its Talent Commission and its representatives in the world of Universities, Business Schools, Consulting, Technology and Finance.
17.– ACTIVE POLICIES TO ATTRACT AND RETAIN FINTECH TALENT
It is up to the Community of Madrid and the Madrid City Council to design active policies for attracting and retaining talent in technological and FinTech,following the model of European regions and Member States that encourage the relocation of technological startups to their cities or countries through economic, tax, co-investment, employment and free land incentives, etc.
18.- FINTECH GLOBAL DIGITAL CAPITAL NETWORK
Madrid has the experience of leading global networks of cities connected by common objectives. An example of this is the Union of Latin American Cities and Capitals (UCCI), whose management is in the municipal headquarters of Cibeles.
Similarly, Spain is doing the same with the Ibero-American Secretary of State, to put political and cultural focus on that continent.
And that is also why there is Casa de América or Casa Árabe in Madrid.
Within this global framework of influence, connection and relationship, it is necessary to generate Network of Digital Cities and Capitals and FinTech in which Madrid is the epicentre, so that everything that happens in Madrid has an external echo, and everything that happens outside and is of interest, because it has an echo in Madrid.
19.- CLUSTER OF CLUSTERS
In this active policy of leading the Digital Economy in Spain and the world, Madrid must strengthen its policy of creating and generating technological clusters.
But in addition, these clusters should work on their connection to make Madrid the cluster of clusters, at the centre of everything that happens.
F/ CRISIS COVID-19
20/A.- FINTECH’S CONTRIBUTION TO THE FINANCIAL INCLUSION OF THE SELF-EMPLOYED AND MICRO-ENTERPRISES IN PUBLICLY GUARANTEED CREDIT
The challenges of today’s world, subject to a health pandemic and a necessary revival of the world economy, require a greater contribution from the world of finance and FinTech.
Therefore, we propose changes in mentality and regulations that will allow FinTech to contribute to the distribution of the Credit with Public Guarantee,which is traditionally processed by the Official Credit Institute (ICO), as well as other semi-public financial instruments such as the Mutual Guarantee Societies (MGS).
20/B.- FINTECH CONTRIBUTION TO THE REACTIVATION OF THE REAL ECONOMY
From the Digital Economy and from FinTech projects it is possible to contribute to the reactivation of more traditional sectors of the economy that need a boost in the special Covid and Post-Covid situation. We are talking about activating sectors such as Consumer Affairs, Commerce, Hotels and Restaurants, Tourism, Leisure, Culture, Shows, Sports, Events, etc.