The future of Europe’s fintech will not be defined by rules alone. While regulations like MiCA, PSD3, and AML directives certainly shape the framework, it is RegTech that makes compliance truly scalable and efficient. Without accepting RegTech as a strategic imperative, Europe will have a much harder time growing as a global fintech hub.
Europe has been clear about its desire to become a global fintech leader. Large-scale initiatives like CMU (Capital Markets Union) and MFF (Multiannual Financial Framework) show that there is a strong push to improve the EU’s financial ecosystem and make it more attractive to innovation and long-term investment.
That said, there is still a big barrier that keeps getting in the way of growth for Europe’s fintech. Namely, fragmented regulation. Even with efforts like MiCA or the upcoming Payment Services Directive 3 (PSD3) taking place, the reality is that, for now, fintech firms that want to expand across Europe have a hard time doing so. They still face a patchwork of differing national rules, compliance processes, and high entry costs.
And as all those rules keep growing more and more strict, fintechs need to find ways to scale without getting buried under tons of paperwork and inefficient processes that slow down their operations.
This is where RegTech comes in.
Regulation Alone Has Limits
It isn’t hard to see that Europe’s ongoing wave of financial regulation is designed with one core purpose in mind: to provide greater clarity and consistency for companies to operate across all of its territories. Where MiCA aims to unify the crypto-asset market, we also have DORA (Digital Operational Resilience Act) setting cybersecurity standards, or PSD3 reshaping electronic payments.
On paper, these steps should bring harmony and improve oversight across financial services. But in practice, things are rarely so simple. For one, all these frameworks are still in different stages of implementation. Until the dust “settles,” so to speak, there will be a lot of chaos as market players on all sides struggle to adjust. That is usually the case when you try to introduce change this big.
There is also the fact that the enforcement and interpretation of these new rules still vary across EU member states. One country, for example, may interpret AML obligations more strictly than another.
Because of this uneven landscape, fintechs often need to rebuild their compliance functions time and again when trying to work in different countries. It means dealing with higher costs and longer delays on product rollouts. And that’s a big challenge given that these same companies also need to continue serving their customers reliably, no matter how the rules keep changing.
Regulation alone cannot solve these inefficiencies — not when it’s in part what’s causing them. To turn things around, Europe needs scalable solutions that make following compliance practices less taxing.
And this is where we come to the benefits of RegTech: through its thoughtful application, what many see as a burden can be turned into a built-in feature that comes as a baseline for a business.
The Strategic Role of RegTech
Broadly speaking, RegTech uses tools like automation, AI, and standardized data systems to help firms comply faster, cheaper, and more accurately.
Take AML and KYC checks — instead of manual reviews that grow increasingly unsustainable in today’s business realities, we already have many AI-based systems that can scan vast sets of data, verify digital identities, and flag anomalies in real time. All at great speeds that old-school methods can’t match.
Here’s a good practical example of how RegTech can make things easier. Let’s look at the digital identity frameworks, such as those envisioned under the European Single Access Point (ESAP). If implemented correctly, they will allow for standardized, reusable verification processes across borders – meaning that a firm onboarding a client in, say, Germany could rely on the same verified digital identity when that client later accesses services in Spain. No need to go through the entire KYC process again.
For customers, this helps reduce friction and needless button-pressing, instead allowing them to get directly to the services they need. For businesses, there’s no more need to repeat the same checks again and again, which saves them time and money. And regulators get much clearer records, making any additional checks a lot easier.
This kind of common digital infrastructure is precisely what’s needed if Europe is to have truly borderless financial services.
Europe’s Place In the Fintech Race
It’s also worth remembering that Europe doesn’t exist in a vacuum. It has competitors on the global fintech stage, and so the impact of it adopting RegTech also goes beyond just Europe’s borders.
Take the U.S., for example: the country is actively pushing forward tech innovation, attracting new capital and talent — especially when it comes to things like AI. Meanwhile, in Asia, places like Singapore chose to follow a sandbox approach, giving fintech firms the ability to experiment freely in lighter conditions.
EU’s approach being stricter isn’t a bad thing by itself — if anything, it shows a sense of responsibility, which is important. But for this region to look attractive against the competition, rules alone aren’t enough. There is also a sharp need for technology that can make those rules work in practice.
Regulation may provide the framework, but RegTech makes it functional. Without it, there is no realistic way for companies here to scale and find success in this region.
But on the other hand, if Europe can get this right, it stands to gain a lot. Imagine a Europe where fintechs of all sizes can expand across borders with minimal effort — that wouldn’t just be a compliance win, but a major competitive advantage.
About the Author
Roman Eloshvili is the Founder and CEO of XData Group, a B2B software development company. There, he directs the development of AI in banking while also playing a pivotal role in navigating investor relations and fostering business scalability. Roman is a C-level executive with an extensive background in developing fintech solutions for banks and a serial entrepreneur with over 20 years in business administration across Europe.
