Europe is not doing well today. Most countries are either climbing their way out of recession or are suffering from anaemic growth, while unemployment, especially in the south of the region, has reached unsustainable levels. In these circumstances, it’s easy to blame Europe and its leadership for inaction, yet the original promise of a single union among European countries should not be dismissed.
Among the pillars of the EU, the Single European Market is one of the most important. Taken as a whole, the EU is the single largest economy in the world (by GDP), and with a total population of 508 million people represents also the single biggest market. While regulations have done a lot to create the conditions for the single market to unfold, the reality remains one of fragmentation for both citizens and companies.
The issue here is not regulation, it’s friction. Between us and the promise of a true single market lie mountains of paperwork, intricate policies and legislation, and language and cultural differences. Startups could be our best chance to tackle these problems.
Here are some of the areas where entrepreneurs can make a difference:
Help people move more freely
Today most Europeans can live and work freely in another country. But legal permission is not enough. Mobility within Europe is much lower than in the U.S. and this can be easily explained by the differences among the European countries. Differences in language, habits, rules, and taxes all contribute to make moving across borders in Europe a difficult step.
Yet never have we needed high mobility more than today. Youth unemployment rates have reached dismaying levels in many Southern Europeans countries, while on the opposite side of the spectrum, permanent labor shortages have similar negative effects on national economies.
Startups like Teleport are tackling the problem (although from a global perspective), but more are needed. What are some of the opportunities to help cross-borders workers?:
– Facilitate transparency in job opportunities in a real Europe-wide labor market
– Help the transfer and comparability of skills
– Discover talent where it is more abundant
– Take care of the bureaucracy and paperwork that still exists
– Help people settle down, find an apartment, open a bank account, find a school for their children.
– Help transferees learn a new language and meet new people
– Facilitate communication back home and preserve the culture of origin (including teaching it to their children)
– Manage relationships with institutions in both country of origin and residence (public administrations, banks, pensions)
Help capital move more freely
If we all share the same currency, the same interest rate (from the ECB), the same protections and rights, why do we then pay very different rates on our loans (or get less for our savings) depending on where we live? The diversity that still remains across European countries offers great arbitrage opportunities when it comes to capital allocation. Interest rates are different, availability of credit and appetite for investing are different. The single market gives people the possibility to pick and choose for the best opportunities across the region.
But reality is very different. Have you ever tried to open a bank account in another EU country? Or a pension plan? Individual institutions can refuse applications from non-resident customers, and they do it. How good is a single market for capital when people are prevented from enjoying its benefits?
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Startups in this space can take advantage of existing regulations and unlock opportunities for both private individuals and companies. Here are some ways of doing it:
Decouple credit assessment and credit giving:
– The main reason credit institutions give for denying foreign customers is the inability to assess risk properly. Companies that specialize in that part of the value chain can immediately open opportunities for a more open marketplace of borrowers and lenders, beyond borders. Kreditech and Novicap are moving in this direction. More can be done, especially in the business lending and mortgage segments.
Remove administration and paperwork:
– Even when possible, opening a savings account in another country is a very cumbersome process, often requiring signing papers in person at the bank’s branch. In a world where money is bits, this is an unnecessary burden. Standardizing and digitalizing these processes would finally create transparency in the market and allow consumers to pick the best options available. This is precisely what SavingGlobal is doing, starting with savings accounts.
One of the main roles of tech startups, and of the software people that run them, is to reduce friction by hiding complexity behind technology and design. After having eaten commerce, media, and communication, it might be time for software to start chewing on local regulations that prevent the unfolding of the single market.
Stefano Zorzi was born in Italy and today lives in Denmark where he is a partner at Founders, a startup studio based in Copenhagen. Follow him on his blog, Building Squared, or on Twitter @stefanozorzi.