So is fintech finance or technology? For finding investors to providing funding, being in a technology hub is proving to be a better recipe than headquartering in a financial center.
Producing an interactive multimedia, the Dow Jones site eFinancialNews, published a map of fintech funding for 2014 using data from VentureSource. The map of Europe (using the term loosely as it resembles the Eurovision version of Europe’s boundaries and includes Russia, Turkey, and Israel) measures individual countries by funding and is similar to results published by Accenture on the global fintech market.
being in a technology hub is proving to be a better recipe than headquartering in a financial center
Not surprisingly, the UK leads the way with the most funding at $956 million finding its way into fintech firms. The country is followed by Germany and Israel which each have over $300 million in investments. In the four, five, and six spots is the Netherlands, France, and Sweden respectively with between $203 million to $263 million of fintech related funding.
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The data relates that just having an established financial center ins’t enough to become a driver of financial technology. While a global financial center, the UK fintech sector is boosted by government initiatives to support fintech startups, as well an accommodating regulatory environment which is helping grow the P2P lending, crowdfunding, and cryptocurrency sectors. As a result, London has developed an eco-system which is matching both startups and traditional banks to work together in creating innovation in financial technology.
In contrast, both Israel and Sweden aren’t known as global financial centers. Neither country can be considered lagging in banking or capital markets, but their financial markets are limited in size due to Israel and Sweden both having a population below 10 million. In contrast, Germany and France’s populations are at 80 million and 65 million respectively.
Nonetheless, what Sweden and Israel both do have is an active technology sector. Known as leaders in semiconductor, mobile, adtech, and web development, Israel has both spawned multi-billion dollar technology companies as well as being an R&D center to many of the largest tech firms in the world. Similarly, Stockholm has quietly developed a large startup eco-system that is a world leader in design that is attracting local talent to remain in the country as well as foreigners to settle in Sweden.
For fintech firms in Sweden and Israel, they are also benefitting from their countries technology foundation. This includes accelerator groups, local talent, and venture funding availability.
Perhaps the best example of the importance of being in a technology center for fintech firms to find funding is the US. Despite being arguably the financial capital of the world, New York lags Silicon Valley in terms of fintech funding. Similarly, as the eFinancialNews map shows, Central and Eastern Europe are poor performers for fintech firms to source funding. Countries like Poland and Hungary barely register in terms of fintech investments. This is the case even though they have developed their capital markets sector, with Warsaw specifically attracting many foreign financial firms that have entered the market. Local Polish banks and brokers have also been hot markets among financial technology firms selling them solutions to provide trading services to their customers. Nonetheless, even a local market exists , the lack of much of a technology eco-system is hampering the fintech sector from growing in Poland.