Fintech in Germany Is Quietly Big But Lacking a City Magnet

British people sometimes complain about how much London dominates the UK economy. However, when it comes to Fintech that is a huge advantage. In London it is easy to gather techies, bankers, investors and digital growth hackers all in one room.

To see the difference, travel on the Fintech City Tour through Germany. We have to go to Frankfurt (360T, Traxpay), Berlin (Mambu, Open Bank Project, Smava), Munich (Fidor, Paymill), Hamburg (Kreditech) and Gauting (SOFORT).

Fortunately I was driving the latest Mercedes on those famous Autobahns and did not have to worry about the speed cops. Actually, I traveled even faster on the digital express (plan to visit in person at a later date).

Germany has some huge advantages:

  • Big economy & German speaking neighbors in Switzerland and Austria.
  • Great engineering skills (it’s a cliché, but think how much we love our German cars).

Germany is not as big a domestic market as America (#4 in GDP ranking). However, Germany is one homogenous market, while the States in America still have a lot of local regulatory power when it comes to finance. Germany is part of the European Union, which in aggregate is a bigger market than USA and more homogenous when it comes to financial regulation (all those derided “Brussels Bureaucrats” do serve some purpose).

The German Fintech ventures are bigger than one would guess from the lack of name recognition. There are four reasons for this:

  • Many are B2B (white label), which means they don’t spend any time or money getting name recognition among consumers. For example, 360T was reported as trading $55 billion FX trades per day in March 2013.
  • The Consumer focused ones tend to stay within Germany for a long time because it is such a big domestic market. For example, SOFORT has a name that is clearly designed to resonate with German speakers and would sound strange to American ears. SOFORT grew quietly and were then acquired by Klarna (a European Fintech Unicorn that I will be covering soon).
  • Germans have a deep aversion to hype. They prefer engineering to marketing and cash to plastic. German Banks were deeply wounded by the hype and shady marketing of subprime assets; many German Fintech startups view engineering as the best way to fix the broken global financial markets.
  • Many German Fintech ventures have grown without any splashy VC funding rounds that get covered by the tech media. This is true across Europe (for example, Saxo Bank from Denmark). That makes Germany prime hunting ground for Growth Equity Funds such as Summit and General Atlantic that like to invest large amounts when a company is already well established and then help them grow as a private company.

Germany is also home to the only publicly listed VC Fund, Rocket Internet.

The lack of a major city magnet does not seem to be hurting German Fintech ventures, which are clearly doing well. Historically, it has been hard to get early stage financing in Germany, but that seems to be changing with incubators starting to appear and Rocket ready to finance high-performance teams.


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