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For a long time, conversation about European fintech has seemingly revolved around London. Indeed, since its coronation as king of the industry, London has enjoyed considerable inflows of investment, innovation and talent. However, casting the spotlight on London's fintech scene alone ignores the myriad exciting developments springing up across the continent.
Compelled by the economic and cultural rewards of developing a healthy fintech ecosystem, cities in Germany, Estonia and Lithuania are in hot pursuit of London. Able to learn from its strengths (propitious regulation, financial infrastructure, talent and proximity to traditional financial institutions) as well as take advantage of its weaknesses (the spectre of a Brexit-induced talent shortage), Europe's up and coming fintech hubs are poised for growth. Let's explore a few.
Nestled between Latvia, Poland, Estonia and Kaliningrad, Lithuania is one of the tech stars of the Baltic strip. Despite having a relatively small population of 550,000, its capital Vilnius has its eyes on a slice of the fintech pie.
Inspired by the tech forward policies of its Latvian and Estonian neighbours, in February 2017, the Lithuanian government introduced a fast-track visa programme for non-EU citizens. The move hopes to encourage the influx of IT and engineering talent, as well as ambitious fintech founders.
Testament to its status as a business friendly and economically free country, Lithuania's Central Bank introduced a special purpose banking license. The first of its kind in the EU, the license allows a bank to be formed with registered capital of just €1m. Lithuanians can also use the Bank's API to access the Single Euro Payment Area (SEPA), allowing them to circumvent bank fees.
Remittance service TransferGo, payment platform WoraPay, lending platform Blender, cybersecurity startup Simplex and IBS investment bank are a few of the fintechs taking advantage of the up-and-coming investment and talent ecosystem in Lithuania. The corporates are moving in too: last year, Barclays opened the seventh branch of its Rise fintech co-working franchise in Vilnius. Fintech fanatics looking for the city's pulse will feel at home at Rise, as well as Vilnius Tech Park, which is home to over 750 entrepreneurs from 40 companies.
Frankfurt & Munich, Germany
By focusing on the rivalry between London and Berlin as international hubs of fintech activities, the media sometimes forgets about the other powerhouses of German fintech. Perhaps unsurprisingly, Frankfurt – Germany's traditional financial hub – is stepping up its innovation game. As is Munich, the city home to PAY.ON and Wirecard, two of Germany's biggest fintech success stories.
Generally, Germany is a fintech friendly country. World-renowned for its skilled, analytical workforce, it boasts a talent pool rich in the skills needed to run a successful fintech business. With its feet firmly within EU, it also has more relaxed visa requirements than other western European countries (a non-EU working visa costs an employee €60, for example).
In November 2016, the German government officially knighted Frankfurt as the 'digital hub for FinTech and financial services'. Given the existing financial infrastructure and expertise in the region, it makes sense. It is also home to several seriously successful fintechs, including 360T, an electronic FX trading arena (acquired in 2015 for 725 million euro), and investment advisor Vaamo. Frankfurt has a wealth of incubators, like the Deutsche Börse FinTech Hub and Accelerator Frankfurt.
Munich, regarded by some as the economic heartland of Germany, is taking care to refresh its traditional business culture. Startups are enticed by the prospect of collaborating with corporates to galvanise growth. For example, DriveNow, a startup offering pay-per-minute car-sharing, is owned by BMW.
On the fintech side, Munich lays claim to fintech superstar Wirecard. The payment provider – dubbed the 'infrastructure backbone' of the new wave of startup banks – currently processes around €42.5 billion worth of transactions per year. PAY.ON, another megastar, made headlines in 2015 after it was acquired for 180 million euro. Other successful Munich fintechs include online fundraising platform Altruja, mobile payments processor, Boku and online bank Fidor Bank.
Fintech hotspots in Frankfurt include the Deutsche Börse FinTech Hub and TechQuartier. Sharing the goal of strengthening the city's fintech prowess, the spaces offer events, talks and mentorship for startups and entrepreneurs. In Munich, WERK1 coworking space is host to a dedicated 'Insurtech' programme, featuring big names like Allianz, die Bayerische and Generali.
Now home to The Web Summit tech conference, Lisbon is leading the way for fintech in Southern Europe. Keen to reap the benefits of a healthy tech ecosystem, the Portuguese government is helping to nurture the industry. Schemes like Startup Portugal offers financial assistance up to €400 million to stakeholders, including startups, accelerators and venture capitalists. Taking advantage of post-Brexit uncertainty, the government has introduced relocation incentives to foreign companies.
Portuguese regulators are open to fintech innovation. According to João Vasconcelos, Secretary of State of Industry, Portugal has a regulatory sandbox for fintechs. While the sandbox has 'more strings attached' than its British cousin, it is a symbol of progressive regulation in continental Europe.
Amongst others, equity crowdfunding company Seedrs, mobile apps company CardMobili and money transfer startup Moneytis are based in the blossoming Lisbon. The sunny city is also home to the Lisbon Investment Summit (LIS), a yearly startup showcase that connects seed and early stage startups with investors.
Get into the fintech mix by heading to Startup Lisboa. "Everything but an office centre", it offers mentoring, links to strategic partners, access to investment and networking activities.
It's both interesting and inspiring to watch fintech hubs spring up across Europe. While London continues to dominate, other cities are learning from its successes and finding opportunities in its weaknesses.
While Frankfurt's growth as a hub may be attributed to its history as a financial centre, the ascension of cities like Vilnius, Munich and Lisbon is really interesting. These hubs, not traditionally regarded as financial hotspots, are benefiting from two political and cultural shifts: the refinement of regulatory best practices and the fintech industry's growing popularity. City councils are making no secret of their fintech-favourable assets.
Fintech is no longer the preserve of cities with existing financial infrastructure. This raises a fascinating question: when it comes to fintech hubs, is it a matter of nature or nurture?