LONDON is often referred to as the fintech hub of Europe, but Germany could be catching up.
In June, the Deutsche Boerse launched its own “fintech hub” initiative in Frankfurt, with the aim of attracting young talent from across the country. And newly-released research has shown the sheer scale of fintech investment across Germany.
According to a new report by venture capital database CBI Insights, the UK and Germany have accounted for 38 per cent and 14 per cent of European fintech deals respectively since 2013. While that may seem like a comfortable gap, Germany’s early-stage funding deals have been progressing at a much faster pace.
Fintech start-ups raised $46m (£35.87m) in Germany in 2013, while $86m has already been raised in this year to date.
By contrast, the UK raised $161m in 2013, and $202m in the year to date. In 2016, the two countries were almost neck and neck, with Germany raising $135m and the UK raising $181m.
Furthermore, in its last Global Fintech Report, CBI Insights revealed that venture capital-backed funding for German fintechs went up by 118 per cent year on year in 2016, while every other country saw VC funding decrease.
All the statistics suggest that Germany is poised to take Britain’s crown as the reigning fintech centre of Europe. And with Brexit looming, there are fears that London may lose its edge.
At a select committee meeting in the Houses of Parliament last November, Zopa’s co-founder Giles Andrews told politicians that Germany was “catching up fast and probably growing quicker than the industry here”, and warned that Brexit could lead to an exodus of fintech talent.
However, the British government has continued to support UK fintech in the wake of the EU referendum.
Just last month, London Mayor Sadiq Khan expanded an existing early-stage business fund, making more money available to fintech start-ups. And Innovate Finance has reported that venture capital investments in the UK’s fintech sector were up by 37 per cent in the first half of 2017.
However, the CBI Insights report highlighted another interesting contrast between the two countries. Although the UK has seen more than 15 early-stage fintech deals in each quarter since the second quarter of 2014, these deal values have been up and down over the past few years.
Germany, on the other hand, has seen a steady increase in both the volume and valuation of its fintech financing deals.
The UK government may be committed to fintech, but in order to compete with its European rivals, a lot more support will likely be needed as Brexit draws ever closer.