Can Germany Overtake The UK As The No 1 Fintech Location In Europe?

Can Germany Overtake The UK As The No 1 Fintech Location In Europe?

by August 20, 2019

The UK has long been a world leader when it comes to fintech, but uncertainties surrounding Brexit, and the rapid rise of fintech hubs across continental Europe, have pushed the financial services industry to consider alternatives and prepare for the worst case scenario.

Where banks go, fintechs follow

In the past two years, banks including Goldman Sachs, Citi, JPMorgan and Barclays have moved operations to Frankfurt from London, and these are only four out of the 25 banks that have done so. Paris welcomed eight banks over the same period, while Luxembourg, Dublin and Amsterdam, have collectively attracted 15, according to a survey by state-owned Frankfurt-based lender Helaba.

For Jochen Biedermann, senior advisor at Frankfurt Main Finance, the financial center initiative for Frankfurt am Main, banks’ exodus to the German city has encouraged several fintech firms to follow suit. Part of the reason for that, is the change in the fintech industry’s dynamic where fintech companies are increasingly looking to work with incumbents.

Startup Competition venture

“Frankfurt is the place to mingle between the fintechs and the banks, and any kind of fintech company from any part of Germany come to Frankfurt whether they’re based in Berlin or Hamburg or Munich,” Biedermann told

“We see a lot of foreign fintechs coming to Frankfurt, looking for clients among the big banks here. Also, there’s a tendency I see with fintechs coming directly from London […] Many of them are coming and targeting the Germany-based banks […] On one hand, you can offer white label solutions to banks and financial institutions, on the other you can offer customized solutions to corporates to offer better supply chain finance, how they do their treasury in a better way, and so on.”

This factor, in addition to the possibility for companies to offer services across the European Union (EU) markets, has made continental Europe an appealing alternative venue for fintech companies.

“One of the issues I see is the mobility, the passporting, the capability of companies to freely move and export and sell things,” said Fabian Vandenreydt, executive chairman at B-Hive, a fintech hub based in Brussels.

“That’s why a lot of them want to have their headquarters or establish a second headquarter within the [EU]: to keep mobility and ensure passporting.”


Germany’s emergence as the next European fintech powerhouse

Germany is rapidly emerging as an appealing alternative to the UK, and more and more fintechs are looking to make the jump, attracted by the growth of the fintech hub there.

“A lot of companies are coming from the UK and have been looking for a new place,” said Frank Jorga, CEO of Berlin-based secure online identity verification firm WebID. Jorga cited Frankfurt but also Berlin and Hamburg, and said that many startups are choosing Germany over the UK in part for the lower cost of set-up and doing business.

“For those companies considering one of those three cities, none of them are as expensive as London,” Jorga said. “For a typical fintech startup, London is just too expensive.”

In addition to these factors, another strong argument for choosing Germany is the Federal Financial Supervisory Authority (BaFin)’s reputation for firmness and high standards.

“More developed fintechs when they go abroad, when they have the approval from BaFin, it’s very helpful in the EU and abroad because Bafin has a reputation for being quite tough with startups,” Biedermann said.


Continental Europe’s fintech hubs

But Germany is far from being the only country in mainland Europe to have attracted a number of UK-based fintechs over the past two years. Today, fintech companies have a vast choice of attractive destinations to choose from with each of these hubs having their own, key strength, according to Vandenreydt.

“What is great is that each hub is specializing in either a business or technological domain,” Vandenreydt said.

“It’s difficult to say one is better than the other […] There’s a big difference in some instances – some hubs are far more advanced than others. You also see more hubs that are initiatives from the financial services sector, with the fintechs themselves, in the country or in the city, like you see in Brussels, in Dublin, in Luxembourg.”

As Brexit looms, one country in particular that’s gained notable traction is Lithuania. In the Baltic state, the ministry of finance, the Bank of Lithuania and Invest Lithuania have been tasked to make the regulatory environment as appealing as possible to fintechs.

Today, Lithuania has a specialized license for challenger banks, and it takes just three months to obtain a payments or electronic money institution license.

The UK’s digital banking unicorn Revolut was granted a specialized bank license as well as an e-money institution license in December 2018, and Google also received its e-money license from Lithuania at around that time.

With the licenses in hand, Revolut is allowed to offer full current accounts, pay interest on deposits and issue loans. By choosing Lithuania, it can operate across the EU.

“We are going to pilot all this in Lithuania and then passport to other countries,” Andrius Biceika, head of business development of Revolut, told BBC News in February. “We are seeing lots of companies using Lithuania as a springboard.”

Revolut said Brexit was a primary reason for its move to Vilnius but the startup will nevertheless retain its London headquarter and the e-money license it has from UK regulators.

Another UK-based fintech that has recently obtained an e-money license from the Lithuanian central bank is TransferGo. The company specializes in money transfer services for migrant workers.


Featured image credit: Unsplash