A new FinTech hub is emerging in Europe

Generally, when talking about the FinTech sector, we automatically associate the concept with a place; specifically with San Francisco, in the US, and London, in the UK. Without a doubt, they are the two main proponents of FinTech worldwide.

Nonetheless, as was the case in the (first) Industrial Revolution, in very little time the FinTech Revolution has spread to the rest of the world, with new hubs emerging in Europe, where the sector’s major players have set up camp and new start-ups are taking their first steps towards success.

Similarities between the First Industrial Revolution and the First FinTech Revolution

In broad terms, the First Industrial Revolution—considered to mark the transition towards the modern model of economic growth—can be characterised by a sharp increase in technological advances, according to a great many historians. Using machines to complete rudimentary tasks led to an increase in productivity and, ultimately, to the creation of a more efficient economic model.

The first FinTech Revolution is more similar to the first Industrial Revolution than it might initially appear.

Times have changed, as have the location and the sector, but at its core, the idea is the same.

During the first Industrial Revolution, many made the shift from artisan workshops to huge factories, and working by hand was replaced by automated work; workers came to see the machine as more of an enemy than an ally—It was a tool that could make work easier, yet it alienated many in the workplace.

In the first FinTech revolution, many working in the banking sector will move from working in branches and offices to working in IT department, thus creating a “brain drain” away from traditional banking and into the FinTech sector. They will need to become specialised and increase their understanding not only of the financial world, but also of technology.

The first channel for the dissemination of Fintech in Europe: The new hubs

Various authors, such as Ohkawa, Rosovsky and Abramovitz have described social capability as the set of skills a country or region has that enable it to import or develop technology.

Hubs can be found in very specific locations, forming concentric circles: Those areas that fall within the radius of such a hub experience growth in the FinTech sector, boosting productivity in the region’s financial sector and increasing employment in skilled positions, such as those of mobile app developers or financial experts.

Remarkably, despite the passage of time, many of those regions with “social capability” remain the same. In Europe, for example, we see the rise of a new FinTech hub in Barcelona.

In the first Industrial Revolution, it was the cotton textile industry that brought economic prowess to this historic city, along with the other areas that fall within its concentric circle, that is to say, the whole Catalonia region.

Before, it was Barcelona’s port that provided a trade advantage; now it is because it offers the possibility of making the leap into Latin America.

During the first third of the 19th century, Barcelona’s industrialisation lacked the raw materials and energy sources that were typical of the first Industrial Revolution.

However, the successful nature of its industrialisation can be explained by two things: Its “social capability” and its advantageous geographical positioning, with a sea port that made it easy to trade with other countries.

Today, many international companies in the FinTech sector see Barcelona as the perfect place to set up shop, earning themselves a share in the Spanish market and preparing themselves for a launch in Latin America, where many major emerging markets are awaiting the arrival of the FinTech revolution.

Conferences relating to FinTech take place in Barcelona, thus providing opportunities for networking, and startup accelerators and investors are constantly landing in the city, looking for the next revolutionary idea that will shape the next steps to be taken within the FinTech sector.

Companies such as ID Finance are meeting needs that have not been met up until now by traditional banking models, making Alternative Finance and innovation their hallmark, with products like MoneyMan and AmmoPay. We moved HQ from Moscow to Barcelona in 2016 due to great potential of the Hispanic part of the world. Thus, basing a Barcelona allows us to stay within the European context and create a springboard for expansion in Latin America at the same time. Which in general has already happened: ID Finance has launched operations in Latam region in late 2016.

The leading players in the first FinTech Revolution

100% FinTech Companies

Companies that carry FinTech in their DNA, who have begun their activity through digital media, via a website or an app. They offer innovative products that meet previously unmet consumer needs. For each niche in the financial products and services market we now find a FinTech company.

Digitally Native Banks

Banks whose activity is entirely online, without any physical branches or offices, who have always carried out their business in this way, and who will continue to do so. Customers can access the banks’ products, and manage direct debits and transfers via the app or website. One example of a digitally native bank is that of Number26.

Traditional banks who want to make the switch towards digital banking

Having seen that “their way of playing the game” is becoming obsolete in this rapidly changing market, these banks want to adopt the successful model employed by digitally native banks, shifting the focus away from their branches—making cuts to the infrastructure and staff—and turning it increasingly towards the digital world. BBVA is one example of a traditional bank that is trying to make the switch to digital banking.

The real battle to hold a share of the market no longer happens on the street by giving face-to-face customer service; it happens through mobile apps and websites, with innovative and competitive products.

It is not a question of loyalty to a financial institution. Everything revolves around making the right decisions in the interests of the consumers. 

About the Author

Boris Batinecofounder & CEO at emerging markets fintech company ID Finance. Boris Batine graduated with honors The University of Cambridge in England. He has an extensive investment banking background. Then received MA degree. Boris has a Ph.D. in Economics. Prior to starting ID Finance with another co-founder Alexander Dunaev in 2012, he held several top-management positions from deputy director of capital market division to vice-president in Deutsche Bank Group in London, Renaissance Capital and Royal Bank of Scotland. Boris is fond of wakeboarding and snowboarding, participates in sport events on marathon race, swimming and triathlons.

About ID Finance

ID Finance is a data science, credit scoring and digital finance company that is pioneering fintech innovation in emerging markets with a range of convenient, competitive and transparent loan products available over the internet. Thanks to its operational excellence and advanced IT infrastructure and risk management capabilities, it has a rapidly scaling and increasingly diverse loan portfolio covering Russia, Eastern Europe, Spain and Latin America. The company is headquartered in Barcelona, Spain, and employs over 400 staff across offices in Spain, Georgia, Russia, Kazakhstan, Belarus, Poland, and Brazil.

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