A recent report by Accenture highlighted London’s position at the forefront of Europe’s FinTech surge.

It revealed that in 2013, 53% of Europe’s FinTech (which, for the record, stands for financial technology) deals and 69% of its total tech funding took place in the UK and Ireland, with London leading the way.

Though London has some fundamental advantages over other European capitals indeed, it is beginning to face competition from other cities, particularly Berlin.

London: Investment, infrastructure, expertise

One of London’s key advantages is the proximity of its financial institutions to its startup scene around Old Street. While this might seem like an obvious point, it is a major contributing factor to what has happened in the sphere of FinTech in the UK. The city’s greater share of funding and deals is the result of the maturity of this particular space compared to the rest of Europe.

Access to readily available talent, a steady influx of money and a more seasoned VC scene has spurred a crucial head start for FinTech startups in London. It has also provided them with a more solid footing that they’ve undoubtedly taken advantage of.

I’m afraid to say that groups of former consultants operating in the FinTech VC space in Berlin and Paris are, on average, not at the same level as their London-based competitors.

London simply has more VCs who have operated in this market for longer or have significant experience in the wider financial services sector. In short, they ‘get’ the FinTech space.

Another major advantage for London is the predominance of the English language as well as its historical ties to the US.

However, as Accenture pointed out, the European FinTech scene is still dwarfed by that of New York and Silicon Valley.

Unsurprisingly, a lot of US-based talent – both VC and entrepreneurial – are drawn to London because they find it easier to make the switch, or operate in both markets, as compared to other cities in Europe. As FinTech companies often need to operate on a global basis from day one, this offers London-based startups another important edge.

Berlin is beginning to make its mark

With the overall boom in Berlin’s tech scene, the city is only now beginning to wake up to FinTech. The buzz in startup activity is encouraging entrepreneurs – who may not necessarily have tons of experience in the financial industry – to take a stab at launching a FinTech startup.

Contrary to popular belief, their lack of industry expertise isn’t necessarily a disadvantage, either. Many of these entrepreneurs think differently about the sector and often come armed with creative approaches to solving problems.

The difficulty of attracting FinTech talent is also being overcome. With English becoming more widely spoken in Berlin and the German economy remaining robust, more VCs and entrepreneurs from the US are considering Berlin as a destination for their business. It’s certainly still behind the flow of expertise in London, but there are signs that inroads are being made.

The FinTech landscape in the rest of Europe

The situation in Paris, Europe’s other major tech hub, is very different. The simple fact is that the FinTech scene in Paris cannot compete. It doesn’t even seem to be on the map when it comes to interesting FinTech businesses. The reason behind this is not entirely clear, however, regulatory issues coupled with an overall smaller financial industry could be severely restricting the sector.

Scandinavia – particularly Copenhagen and Stockholm – seem to be the dark horses in the European FinTech race. There are a number of interesting businesses operating in this space, such as Klarna.

It would also be remiss to ignore Eastern Europe. Historically, the area has had a lot of developers and many of them have gained significant experience building software for US and European banks.

But let’s get back to the two cities mentioned at the beginning. Though London’s preeminence in FinTech won’t be eroding anytime soon, Berlin is taking this space very seriously and is on its way to catching up. As its market matures, the German capital will naturally attract more experience and talent to help level the playing field with London.

Featured image credit: r.nagy / Shutterstock

  • ESeufert

    You didn’t mention any FinTech companies located in Berlin (which is a bit strange, given the title of the article). It would have been interesting to hear some perspective from some of these firms’ CEOs as to why they started their companies in Berlin and what advantages they see in being located in Berlin (vs. London or wherever else).

  • abarrera

    I’m surprise there is no mention of Spain in there, taking in account there are some interesting companies in that space and BBVA recently bought through their venture branch, Simple.

    Also, despite all the FinTech news, few of the Bitcoin startups are based in London 😉

  • FinTech Forum DACH

    This is a typical uninformed PR-type article: I would have expected much better :-) See excerpts from our Study of 100 FinTech Startups in DACH. http://www.slideshare.net/SamarthShekhar/teaser-1st-study-of-fintech-startups-in-germany-austria In my opinion, Munich with its combination of financial services and serious tech startup scene is the one to watch out for as the FinTech Startup Hub outside London. Here is why there is hope for continental Europe: http://www.finextra.com/blogs/fullblog.aspx?blogid=9218

  • Good to hear and read about what is going on the startup scene around Europe. However some hotspots left out, such as Dresden.

    Certainly Dresden is not the speedy, freaky media-orientated startup place like Berlin or Hamburg where internationality is lived on the streets for decades, and in- and outflows of foreigners is the norm. Research & Development in the various labs, and research institutes around the city, embedded in what once was Eastern Europe’s “Silicon Valley” – Silicon Saxony.

    1961 the legacy around semiconductors started with the first steps by Prof. Werner Hartmann, who had back then a friend who had left the GDR and settled in Silicon Valley in the late 50’s early 60’s. From his friend he learned about the development in semiconductors on the West Coast, only to build on what the region around Dresden has been strong ever since: minerals, optics, fine mechanics, camera equipment.

    With http://twitter.com/HTxA we share and connect the local developments with the global community across multiple disciplines. In 2011 I started the project #InnoBay in order to bind the two Valleys closer together http://bit.ly/oxDy7f

    So looking on where not everybody is looking to can sometimes open up real opportunities. #AppliedResearchAccelerator can become soon a reality

  • Hi Paul, it is 9 months since you posted this article. How do to feel the EU fintech space has changed over that time? Thanks, Shane