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What are the ten most important centres for fintechs
The Valley and the Bay Area
PayPal, the mother of all fintechs, is located in San Jose und still the region hosts a bunch of big successful fintechs like SoFi, Square, Lending Club, Prosper or Stripe. Still, the lead over the field is much narrower than in other startup areas and - that is our guess - it will be lost to other fintech hubs in the course of the next 2-3 years.
Building both on the thriving startup scene as on the global financial hub, London is the major European fintech location. For now it is still missing an Uber-fintech, but maybe Funding Circle, WorldRemit or TransferWise will do this job one day.
New York City
Like London, NYC hosts a wide and established startup scene and offers fintechs direct access to the headquarters of the biggest financial service companies. The list of most important fintechs comprise Kickstarter, Betterment, Oscar and OnDeck.
By size, some of the biggest fintechs are Chinese. The top dog in Beijing is the micro-loan platform Qudian. Like many startups in China the majority of fintechs are only addressing the domestic market.
The second most important center in China, with startups like ZhongAn, the internet insurance company and the wealth management platform Lufax. As in Beijing most startups exclusively address the local market.
Hosting an extremely dense and innovative fintech scene - but at the moment missing a fintech superhero. This may change, some of the fintechs in Berlin like N26 (an app based bank with more than 200K customers), Smava, Spotcap, Friendsurance are growing rapidly.
Building on Sweden's lead in digital and mobile paying, Stockholm is an early starter as fintech hub, dominated by a few, very successful players, like the payment services Klarna or iZettle.
Down under the fintech industry is concentrated in Sydney. Top dogs comprise the business loan platform Prospa and Tyro Payments.
As a traditional center for finance in the Region of Asia, Singapore is also leading in the area of digital financial services. The very successful payment provider 2C2P (Cash and Card Payment Processor) or the payment platform Fastacash are located in Singapore.
Many smaller startups and some big players such as PolicyBazaar and Paytm qualify the New Delhi region as a hot spot for the local Fintech scene.
Are classic financial centers strong attractors for the fintech industry?
At first sight, it seems as if the classic finance industry in London or New York is the driver for the development of the local fintech industry. In our view, however, the strong startup landscape at the two locations is the root cause for the success of fintechs. Financial centers with a weaker start-up scene such as Frankfurt, Singapore, Paris and Dublin also develop rather weakly. On the other hand, the absence of the financial industry does not prevent the development of a strong fintech scene as we see in the Valley (negligible banking industry) or Berlin (a municipal savings bank and a few smaller banks).
Offshore centers such as Luxembourg, Switzerland, Cyprus, or various Caribbean states are important habitats and pro forma headquarters of the financial industry but can not attract many fintechs with their mix of low taxes and low regulation. In future the quality of regulation may play a greater role – the active, supportive stance of the UK’s FCA towards fintechs may give startups in London an extra boost, while for instance the more passive and bureaucratic approach of the German BaFin will maybe curb innovation in Berlin. However, the rather restrictive approach of the different authorities in the US towards financial innovation was not able to stop the local, fintech industry from gaining leadership.
Beyond the Valley
While most of the world's top startups are headquartered in the Valley, the fintechs are much more spread across the globe (admittedly, the Valley is still the top player). One reason is the local regulatory and political framework: Fintechs in China and other emerging markets are predominantly targeting their local market, which is often difficult to access from Western countries.
However, most large and successful players in Europe and North America address a number of markets with a very heterogeneous regulatory environment - still being able to adapt their service to a variety of local markets. In our view, the Valley has lost its dominance mainly because the fintechs are latecomers in the startup business. The big picture we see - a multicentric landscape - could be the future landscape of the whole startup industry.
Still, at the moment there are only five countries (USA, UK, Germany, Sweden and Australia) with a significant number of fintechs with a really international focus. Will that stay so? It is an open question, if the big players of the emerging markets will and can go international. And whether the existing fintech hubs in other western cities like Tel Aviv, Vancouver, Toronto, Paris will grow fast enough to catch up to with the top hubs.
A fintech provides products or services in one of the following fields: Payment, lending, investment, insurance, retail banking, personal or business financial management, cryptocurrency.
The business model of the fintech relies heavily on the internet.
The age of the fintech is not a criteria.
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