It is unclear how, when and where the term "FinTech" was born. Financial services (Fin) and technology (tech) have always been closely linked. Banks and insurance companies are among the early customers of the computer industry. And their centers? – Let's face it, New York and London dominate the (investment) banking world and the Silicon Valley is the global technology and venture capital center. So, it is no wonder that one of the first FinTechs, namely PayPal (founded in 1998), is headquartered in San Jose, California and thus in the heart of Silicon Valley. Moven (2011), the world's first pure-bred mobile banking FinTech is headquartered in New York and Zopa (2005), one of the most successful FinTech credit platforms, comes from the UK based in London.
For more than ten years, New York and London have been fighting not only for global banking, but also for the FinTech segment. Substitutes of this competition are moven founder and “Bank 2.0” bestselling author Brett King from New York and “Digital Bank” author Chris Skinner from London. Every day, both of them blog the news from the FinTech scene and heat each other, not least as part of the weekly radio show "Breaking Bank $". The exact figures are unclear, but we can assume that more than 10,000 FinTechs have been founded in New York and London. Key success factors are the close proximity of the numerous technology and banking experts, young and older FinTech founders, who are disappointed by the traditional banks, risky investors who are hoping for a high return on investment and, last but not least, financial authorities.
On the other hand, Germany was a FinTech developing country only a few years ago. It was only in November 2013 that the first FinTech Forum took place in Frankfurt, whereas c had already established themselves in New York and London for several years. The aim of the Fintech Forum is to bring together German-speaking FinTech founders with investors and banks. There were just 14 FinTechs in 2013, including German-speaking FinTech pioneers such as moneymeets, wikifolio, justEFT, OpenBankProject, lendstar, FinPoint and moneygarden, which have developed very differently ever since. Significantly, among the approximately 50 participants, there was not a single representative of a German bank or savings bank, nor was a German investor. For this, bankers and investors from London, Madrid, Moscow, Amsterdam and even Sydney traveled. Side effects: even today, the FinTech Forum is only presented in English.
Change in the FinTech sector
The picture has changed a lot. Deutsche FinTech pioneers, investors and bloggers such as Sebastian Diemer (kreditech, bezahlt), André Bajorat (figo), Spiros Margaris (kapilendo, niiio, Werthstein) and Samarth Shekhar have also made FinTech a topic in Germany. We now have more than 400 FinTechs in Germany, Austria and Switzerland. However, not as concentrated as in the US in New York and UK in London, but distributed to the big cities like Berlin, Munich, Frankfurt, Hamburg, Vienna and Zurich. While CB Insights has determined FinTech Investments in the amount of 233 million euros in Germany between 2012 and 2014, approximately four times or 872 million euros were invested in FinTech in Great Britain during the same period. In the meantime, Germany has overtaken Great Britain. In the first three quarters of 2016, 421 million euros were invested in Germany and 375 million euros in the UK.
Effects of Trump and Brexit
The question arises as to what effects can be expected from Brexit and the election of Trump for German FinTechs. There are uncertainties among founders and investors, especially in the UK. And for those who are already resident in London today and have planned to start an European roll-out by means of passporting of their own UK license. It is unclear whether this will be legally possible under Brexit. English FinTechs are currently thinking about opening offices in Berlin or Frankfurt. The effects of the uncertainty can also be seen clearly in the case of Asian or American FinTechs, which are planning to enter the European market. Without Brexit, these FinTechs would start in London due to the lesser language barriers. But given the uncertainties, for example, we can see AliPay's European market entry as part of a cooperation with the Munich Wirecard and a field trial at Munich Airport.
What Trump's impact on the German FinTech market means is speculating. Trump has announced that he wants to relax the regulation of the financial service sector again, and on January 13, 2017, the US Treasury Department has also published the eleven-page Whitepaper "A Framework for FinTech" to promote FinTechs. The American financial economy and FinTechs are getting backwind. This could trigger a counter-reaction in our country and also lead to state funding for FinTechs. And thus, from FinTech view, a positive innovation competition with new funds. Perhaps these developments give the German FinTechs, such as the initiative paydirekt of the German banks and savings banks, more motivation to meet American competitors, such as PayPal, and to assert themselves in the medium term.
Regardless of Brexit and Trump, the German-speaking FinTech scene with its more than 400 FinTechs and several hundred million investments is currently developing magnificently. This is reflected not least by the large number of cooperations between banks and FinTechs. André Bajorat reports regularly about on his paymentandbanking blog.
Frank Schwab
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