FinTech has been the buzzword of 2014, as both major players in the banking industry and venture capital firms have poured money into various FinTech projects and start-ups throughout the year. Consumers want more transparency, less fees and greater convenience from financial players, and as a result everyone is searching for solutions to stay ahead of competitors. The hype around the segment has now led to the launch of a FinTech ‘factory’ for start-ups. Surpisingly, considering the weight of London corporate finance, the factory has not arrived into the UK’s capital but the more cost-friendly market of Germany. Berlin could play host to some of Europe’s most prospective FinTech wannabes in the future.
German advertising and gaming holding company HitFox Group has launched what it claims to be Europe’s first FinTech-focused ‘start-up factory’, with offices in Berlin and San Francisco. It aims to create between four and six companies per year and provide each start-up with seed funding of between €500,000 and €5 million. FinLeap hopes to leverage the experience of its parent company, which has been essentially doing the same thing with start-ups in the advertising and gaming industries since 2011.
FinLeap kicks off with a 30-strong staff of entrepreneurs, financial services experts, technologists and product managers who are tasked with coming up with business ideas and turning those ideas into FinTech companies. By analyzing the market and seeing issues, experts will find new products, solutions and business models. The goal is to make services more transparent, cheaper or easier to use. 150 new hires are planned.
Venture Capital investment in European FinTech companies reached its highest level in over a decade in the first three months of 2014. In Q1 2014 financial technology companies raised a total of €166 million (+201% compared to the previous quarter), a peak never seen in the industry since 2000 when €263 million flowed into these type of companies.
In the old continent London has become the home of FinTech. According to a report from Accenture, in 2013 the UK and Ireland represented 53% of Europe’s rounds and two-thirds of the total raised by FinTech startups. Berlin’s willingness to compete with the UK capital city has become obvious over recent years, and the German city will also surely leverage its relative proximity to such major financial hubs such as Frankfurt and Dusseldorf.
The idea of a FinTech incubator/accelerator is not new: Commerzbank launched one and Deutsche Bank just announced its innovation labs in cooperation with Microsoft and IBM.
The difficulty of attracting FinTech talent to Germany 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.
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