The European Union is home to some of the world’s most admired fintech hubs, a blend of the more established, like Berlin and Amsterdam, and smaller, less established hubs like Vilnius and hubs in Malta and Luxembourg.
Industry figures reveal that Europe (including the United Kingdom), with 78 fintech clusters, plays only second fiddle to the US and Americas, with 101 fintech hubs on the global stage.
In this piece, The Fintech Times has focused on five key fintech hubs across the EU: Berlin, Paris, Amsterdam, Dublin and Vilnius. But this only paints part of the EU fintech picture, as areas like the Nordics, home to Sweden’s Klarna and Estonia, the birthplace of the founders of TransferWise, are not included.
Many of these smaller hubs have benefited from devising beneficial national initiatives and marrying them with the benefits of being part of the EU. VC money continues to plough into all of these EU fintech hotspots as tomorrow’s entrepreneurs look to follow in the footsteps of the likes of N26 and Adyen.
Berlin is a thriving fintech hub, with a blend of world-renowned fintechs and startups spanning areas like crypto, insurtech, lending and savings.
An Ernst and Young report found said there are around 2,500 active startups in Berlin which raised a total of $4.5bn (£3.3bn) in venture capital funding in 2019.
Berlin’s shining star is N26, the neobank which is one of the most highly valued fintechs worldwide and has over 5m customers globally.
Other fintechs with a global reputation include Raisin (savings marketplace), Billie (B2B invoicing and payments) and Omni:us (insurtech) while fast-growing Berlin-based fintechs include Moonfare (offering wealthy clients investment in private equity funds) and Penta (challenger bank for SMEs).
Insurtech is a big play in Berlin, with Friendsurance, Simplesurance and Element three Berlin-based players in the sector.
Likewise, crypto is a hotbed in the Kreuzberg district of Berlin (Berlin has been dubbed the crypto capital of Europe), which at one point had the highest density of businesses supporting bitcoin in the world.
According to fintech data specialist Findexable, Berlin is ranked the number two fintech hub in Europe (behind London) and ranked ninth globally (Berlin is likely hoping to improve its status following the UK’s exit from the EU).
Within Germany, Berlin has more fintechs (197 startups) than Munich (84), Frankfurt (57) and Hamburg (51) combined, according to industry figures. An indication of Berlin’s standing is that neobank giant Revolut chose Berlin as the site of German HQ while Facebook, Airbnb, Siemens and Sony have offices in Berlin.
A mix of availability of capital and funding, a creative atmosphere, good quality of life, an international talent pool, well-regarded incubator and accelerators and ease of access to EU, are among the reasons Berlin is proving popular with startups.
A crucial cog in Berlin’s growing status has been Silicon Allee (inspired by San Francisco’s tech hub), which was set up in 2011 to build a startup community in Berlin and helped those arriving from overseas.
Silicon Allee opened a campus in 2017 for tech companies and in 2019 launched the Berlin Founders Fund (equity-free fund for early-stage founders).
Students at the Berlin-based European School of a Management and Technology (ESMT), meanwhile, can pay tuition fees using bitcoin.
Jens Woloszczak, CEO of Spotcap, the Berlin-headquartered lender, said low office rents make Berlin an attractive prospect compared to other European capital cities as well as New York and San Francisco.
Despite its fintech fame, the major financial intuitions are not based in Berlin but Frankfurt and Munich, which can make it trickier for Berlin’s startups to network and exchange ideas with big financial institutions.
Financial regulation is also heavily geared towards consumer protectionism in Germany which presents a further challenge for fintechs.
Berlin case study: Solarisbank
Berlin-based digital banking platform Solarisbank runs a Banking-as-a-Service platform, which allows partners like South Korean Samsung Electronics to offer branded accounts and financial products to their customers,
Baha Jamous, VP marketing and communications, said Berlin is “known as one of the most attractive locations worldwide for founders and tekkies.” He added: “In the beginning, Solarisbank was targeting especially fintechs which is why Berlin was a great location too (home of N26, Raisin etc).
“As the company is growing, Solarisbank will soon move to a new and bigger office within Berlin.”
A rival to Berlin, Amsterdam is one of the most prominent European fintech hubs, home to several unicorns and a thriving payments sector.
Unicorns based in Amsterdam include Adyen, the payments giant and one of Europe’s most valuable fintech at $8.3bn (£6.1bn) which has benefited from the e-commerce shopping boom spawned by the pandemic.
Amsterdam-based payment platform Mollie recently got promoted to unicorn status, following a funding round and Flow Traders, the liquidity provider which specialises in Exchange Traded Products, are other examples of unicorns in the city.
Payment companies in the city also include Payvision and PayU.
Venture capital funding has been flooding in: in 2019, Mollie attracted $25m (£18.3m) while Brand New Day (online pension bank) raised $25m (£18.3m) and Creative Group (online payments) $22m (£16.1m).
Don Ginsel, chairman of Holland FinTech, the fintech hub, said the Netherlands is the country with the fewest cash payments in the world.
A further boon to fintechs has been help from traditional banks: ING has set up innovation labs across four countries including Amsterdam and has a venture fund of $300m (£220m) for investing in fintech.
ABN AMRO, meanwhile, launched payments fintech Tikkie in 2016, which has proved a hit with punters.
Incubators include Startupbootcamp’s FinTech & CyberSecurity accelerator which provides 10 startups access to a global network of industry experts, business mentors, investors and corporate partners.
In partnership with Startupbootcamp, ING is building a fintech campus- to focus on AI, blockchain and UX design.
The Amsterdam Internet Exchange (AME-IX) was developed in the 1990s, and is today one of the largest hubs for internet traffic in the world.
Amsterdam case study: Bunq
A spokesperson for Bunq said Amsterdam had a “personal connection” to Bunq as it’s the company’s home town.
“New developments are popping up everywhere around town and we’re super happy that Amsterdam is thriving even in the toughest of time,” the spokesperson added. “Operating from Amsterdam is definitely an advantage- so many amazing companies are located here, including great startups, so the overall atmosphere of innovation and focus on the future is a great vibe to be surrounded by.
“Amsterdam is our hometown – but we still are growing and spreading out! The latest of our expansions, the new office in Rotterdam, is an important milestone, but our heart still beats in Amsterdam.”
President Emmanuel Macron has promised to make France into a “startup nation” and has pushed through a handful of labour reforms to make France more appealing to investors.
Currently, payments and remittance companies lead the fintech charge in Paris. According to industry figures, between 2014 and 2019 in France, nearly one in every four fintech deals have involved payment and remittances companies.
Wealthtech is another key sector in Paris, which is positioning itself as a rival to Berlin and London.
Key fintech startups in Paris include Alan, the digital health insurance platform; Kayrros, the data analytics company; payroll manager Payfit and Ledger, which makes security platforms for cryptocurrencies.
Helping Paris-based fintechs is the French government which supports the industry with programmes to promote startups and SMEs and financial incentives such as tax credits for research.
Likewise, Paris’s growth as a tech hub has been aided by being a central cog in the EU wheel as well as initiatives like the superhub Station F and the French Tech Visa Programme, offering foreign entrepreneurs and investors a four-year visa to move to Paris with their families.
Station F claims to be the world’s biggest startup campus, offering over 30 startup programmes and is home to more than 1,000 startups. It offers incubators and works with venture capital funds offering resources and fintech knowledge.
Other accelerators in Paris include 104factory while key events include B2B Rocks and Apero Entrepreneurs. Paris also has Anticafe, Europe’s largest coworking café and other coworking spaces include Numa and Kwerk.
Paris case study: Qonto
Qonto, the neobank for freelancers and SMEs, is based in the Paris business district of Opéra which is “very prestigious” with a “dynamic business scene” and is also home to incubators, accelerators and banking institutions like BNP Paribas. “You can attract a strong talent pool if you can offer a well-located office,” the spokesperson adds.
Qonto is based in Wework offices, which she says offers them “flexibility” as it is growing fast. Qonto says it has benefited by teaming up with Station F and other accelerators, incubators and networking events.
On the downside of being located in Paris, the spokesperson adds, “it’s not that easy to fund large offices in the centre of Paris for big companies. It can be a real challenge for us in the future if we’d need to move again.”
Dublin’s strengths as a fintech hub are manifold, running across payments, regtech, lending and financial management. It’s low corporate tax environment and relatively cheaper housing affordability have helped to lure in numerous fintechs.
According to Crunchbase, France, Germany and UK are the only European countries with more fintechs.
Payments giant Stripe, founded by Irish brothers John and Patrick Collison, has one of its dual headquarters in Dublin.
Fintech’s with a growing reputation in Dublin include Future Finance (student lender), Currency Fair (peer-to-peer currency exchange), Travacoin (blockchain-based payments) and Kyckr (providing firms with compliance solutions).
Accelerators and incubators in Dublin include Aon Centre for Innovation and Analytics and Ulster Bank Dogpatch Labs while key events include Blockchain for France and Fintech Start of the Global Nation. Associations include Fintech Ireland and Fintech & Payments Association of Ireland.
Meanwhile, those pondering a career in fintech can earn their stripes by studying for a Higher Diploma in Science in Fintech at Dublin Business School.
Dublin case studies: Fenergo and TransferMate
According to a Fenergo spokeswoman, the firm’s Dublin base provides “a highly-skilled talent pool, proximity to Europe and easy access to the world’s financial centres”.
Support from the Industrial Development Authority (IDA) – which is responsible for attracting FDI to Ireland – and government tax incentives have helped Fenergo’s development, she added.
The firm, which provides firms with regulatory compliance help, is valued at $800 million (£590m) after its most recent funding round in February.
A further boon is the concentration of regtechs in Dublin, which means that Fenergo can “tap into a wealth of regulatory knowledge and talent” that is “unique” to the area. Although none of these regtechs are in direct competition with Fenergo, said the spokeswoman, competition for talent is an “ever-present challenge.”
Brexit is likely to compound the issue as “many global companies will be relocating their headquarters to Dublin, reducing the available talent pool even more.”
TransferMate is headquartered in Kilkenny but has an office in Dublin. A spokesperson for TransferMate said: “As the business hub of Ireland, it was important for TransferMate to have an office in Dublin close to many major international business’ office and some of our banking partners.
“We are part-owned by the ING bank and Allied Irish Bank and AIB even has an office at our headquarters in Kilkenny. We are proud to be part of the Kilkenny community and benefit from its short distance to the capital and amazing spirit.”
Another big European fintech big hitter is Vilnius, the capital of Lithuania, which is defying its moderate population of around half a million by being a leading fintech player.
The city’s strength runs across lending, banking and payments: there are hundreds of fintechs operating in Lithuania with regtech, digital currency and wealth management also displaying strong growth.
Revolut, which has a Lithuanian banking licence, opened an office in Vilnius in 2017 and has hundreds of thousands of customers in Lithuania.
Another example is Nevada-based payment unicorn Shift4 Payments – valued at $2.79bn, which set up its first tech centre in Vilnius, where it developed the fintech’s product design and development functions.
CEO Jared Isaacman refers to Vilnius as a “small version of Silicon Valley” adding that “the city, its infrastructure, the prevalence of technology made an impression on me.”
Lithuania is also home to the founders of TransferGo, as well as being a major market to the money transfer firm.
Up and coming fintechs in Vilnius include NEO Finance (P2P lending platform) and CoinGate (crypto payment company). The Bank of Lithuania provides a regulatory sandbox for startups to test financial innovations.
The bank also claims to be able to authorise electronic money or payment institution licences within three months (around two to three times faster than other EU jurisdiction, according to Go Vilnius).
Vilnius University provides a course in Financial Technology, a programme which it claims can lead to a career as a blockchain developer, AI programmer, crypto investment portfolio manager, big data analyst or startup founder.
Vilnius Fintech Week brings together various fintech stakeholders with the intention of providing scaling opportunities for startups.
Vilnius case study: CoinGate
Dmitrijus Borisenka, CoinGate CEO, said: “Vilnius is a hometown for the company’s founders and the majority of a team. It is also a capital city of Lithuania where the regulators have a very innovative and supporting approach towards fintech space, which resulted in a climbing number of electronic money institutions registered here.
“Combine that with a well-educated population and you have a perfect environment for this type of business to flourish. We have offices all around the city, with the main one in the old town of Vilnius. The city itself has relatively low traffic, countless car-sharing stations, and a good infrastructure for bike riders, so it’s convenient to reach the office from anywhere.
“And since we have a co-working culture developed here, there’s never an issue to make any place your workplace. The technology sector in Vilnius is quite diverse and developed. Companies often form various associations to work with government organisations, encourage education and share their expertise.
“Incubators are also being hosted all the time, where start-ups can learn from more mature companies and their founders. Overall, our region has a strong financing potential, especially in networking and education related to the fintech world.”
Additional reporting by Benedict Smith