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The Brexit bill has now been passed. Is now the time that we all accept that Berlin will take over London’s role as fintech centre of the world? With today’s announcement from German startup solarisBank, in addition to other partnerships at the end of last year, it’s safe to say that fintech in this European country is booming.
solarisBank’s Series A funding round of £22.9 million from Arvato, owned by media organisation Bertlesmann and Japanese internet investment company SBI Group will aid the German fintech’s expansion in Asia, according to Business Insider. The startup only began operating last March and this investment will see the bank continue to offer services through its online portal.
Alongside this, former DAB Bank, Mercedes-Benz Bank, Deutsche Telekom and Deutsche Bank employee, Roland Folz, will be brought on as CEO. Folz highlighted that what they are offering is something simple. “It’s digital banking, we can open accounts for third parties and run those accounts for them. We do e-money, which is pre-paid cards and that kind of stuff. We do deposits and we do lending."
The funding from SBI Group will be exceedingly beneficial because of the rate fintech is expanding in Asia, and especially in Japan, where technology reigns. Folz explains that the plan is to launch a new company this year in an undecided market and go live in early 2018. It’s clear this project is in it’s early stages but from what we have seen in terms of tech collaborations in Japan, this could result in something big.
One example would be SBI’s work with blockchain payments company Ripple in order to expand in Asia. In addition to Ripple, this Japanese financial services company seems to be interested in fintech as has been shown by the launch of a $200 million investment fund, a research lab, and investing in companies like Ripple and digital currency exchange Kraken.
The start of this year also saw £1.7 billion of customer investment into Berlin-based deposit marketplace Raisin. A couple of months before this, another Berlin fintech, Cashboard raised £2.5 million from Luxembourgish fintech fund Digital Space Ventures. It is evident here that German fintech is expanding – it could be said that fintech everywhere is expanding – but in Europe, Germany’s definitely shown some growth.
Figures released by KPMG and CB Insights last year revealed that Germany brought in a whopping $186 million in comparison to the $103 million that British businesses pulled in in 2016’s second quarter. The report also explored how funding to venture capital backed fintech companies worldwide has fallen significantly and this could be due to the UK’s decision to exit the European Union and the uncertainties associated with it.
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The report found that Germany outpaced the UK last quarter and saw 80% more funding than the UK did and notable funding rounds went to fintech startups Finanzcheck that raised $46 million, N26, $40 million and AEVI, $34 million. The UK’s top deals were from challengers Tandem Bank which raised $31.7 million and Azimo, $15 million, as well as Transferwise that raised $26 million. In total, Germany brought in $64.9 million from five deals and came in second for payments technology investment activity, under the US that brought in $251 million from 26 deals.
But have London-based fintech left and set up shop in Berlin, Frankfurt, Hamburg or Munich, for that matter? Barkow Consulting found that although there was a gap between Germany and the UK, this gap is closing and it is closing rapidly, but this is not necessarily a good thing. UK investment has declined 34%, but Germany’s has risen by 38%.
According to Financial News, Berlin will not make gains in the fintech space from startups leaving the UK, US and Asian businesses will choose to invest, collaborate and partner with German fintech, as we’ve with the likes of solarisBank. It is a question of choice. CEO of Berlin Partner Stefan Franzke predicts “Berlin is home to roughly 80 to 100 fintechs and expects that number to double by late 2018.”
At the time of EU Referendum, fintech icon Eileen Burbidge expressed that the potential loss of passporting would become a problem for London’s banks, but this would not affect the fintech industry because of the difference in regulations. But, as the article explores, as a top financial hub, London will be hard to overtake.
Interestingly, FinLeap co-founder Ramin Niroumand predicted that solarisBank would benefit the most from Brexit because it helps companies operating in the EU, while other ventures might not see much impact. Niroumand has said previously that Brexit is not an entirely positive thing for Berlin and that the UK’s upcoming departure from the EU is “hurting us all in the end”. He actually worries about the prospect of US and Chinese payments giants like Visa and Alibaba entering Europe on a grander scale.
“I don’t wake up every morning and say, ‘How can I beat London today? That’s not the way we think,” he said.
Follow me at @MadhviMavadiya on Twitter.