Almost two weeks after Britain voted to leave the EU, many in the financial industry have disagreed on the impact on London’s banks. “London has committed suicide as a leading fintech centre,” according to Jochen Siegert, chief operating officer of Traxpay, a Frankfurt-based payments platform.

The Financial Times reported today that Germany’s digital entrepreneurs not only believe that “London is finished”, but that they can steal its crown as Europe’s centre of fintech. This confidence is particularly felt in Berlin, the hub of Germany’s tech industry.

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Europe’s Strongest Economy

Put simply, if the UK loses access to the European single market, London shrinks as a global banking centre and investment in their start-ups will stop.

Cornelia Yzer, Berlin’s economics minister, said: “Berlin will exploit the opportunity provided by Brexit. These companies need to be in the heart of Europe, and where is better than the capital of Europe’s strongest economy?”

For example, TransferWise, a London-based money transfer company, is considering the option of moving to Berlin, according to Financial Times sources. The company’s co-founder Taavet Hinrikus tweeted on Sunday that “Ireland, Switzerland and others” had been “reaching out and tempting TransferWise to start or move operations there”.

Higher Returns

TransferWise is not alone. Berlin Partner, an agency which promotes investment in the city, reported that on the day after the Brexit vote it was contacted by five London-based fintech start-ups who said their investors were forcing them to consider relocating because “capital must go where the returns are higher.”

Berlin has in recent times become home to a multitude of small German companies attempting to disrupt the business models of the established banks, through innovations such as peer-to-peer lending, crowd investing and online marketplaces. The city has proved a big pull for web entrepreneurs across the world largely due to cheap rents and was positioning itself as a rival to London even before Brexit.

A recent survey conducted by EY suggests it may be succeeding, naming Berlin as Europe’s start-up capital. Berlin’s tech companies received €2.15 billion in venture capital funding last year, exceeding the €1.77 billion attracted by London.

Comparatively Small Sector

However, the sector remains relatively small and out of a total of 12,000 fintechs in the world only 300 are in Germany, according to PwC’s management consultancy. In addition, only one German fintech financing round topped $50 milion in 2015 whereas in the US, 38 managed to do so.

Up until now, London has led the way in fintech due to its challenger banks and a vast range of blockchain, machine-learning and data-mining companies. In 2015, the British fintech sector generated £6.6 billion in revenues and attracted £524 million in investment, according to EY.

However, one of the main reasons London has thrived is its proximity to the large global banks which use the UK as a gateway to ‘passport’ their goods and services to Europe’s single market of 500 million customers. Many now doubt the banks will be able to retain their European passport if Britain leaves the EU.

With a post-Brexit Britain likely to seek curbs on immigration, foreign IT staff may also find it easier to work in Berlin than London. If the UK imposes constraints on attracting international talent, it may lose out against cities such as Berlin.

Undoubtedly, time will tell.