Starting A FinTech Business In Berlin
With London’s continued reputation as the financial centre of Europe subject to some uncertainty as a result of Brexit, many major EU cities have been looking to position themselves as viable alternatives.
With a high cost of living, steep employee salary rates and fierce competition for investment money, London is no longer the self-evidently superior choice for FinTech startups. In the light of Brexit, too, many of the biggest financial institutions are abandoning the British capital altogether in favour of more promising locations such as Germany.
Berlin, in particular, has been eager to court British startups and convince them to make the leap – to the extent that a colourful mobile billboard funded by the German Free Democratic Party bearing the legend “Dear startups, keep calm and move to Berlin” appeared on London’s streets shortly after the announcement of the Brexit referendum result. So what makes Berlin attractive?
The Berlin tech business scene
Berlin is already home to a number of successful FinTech enterprises – in fact, a study from early 2017 showed that the city has attracted more FinTech investment than any other on the European mainland.
Some of Berlin’s FinTech residents have been making huge waves: N26, the innovative mobile bank, now operates in 17 European countries and reports having more than a million customers across the continent. Raisin, a hybrid savings comparison and money management platform, is also going from strength to strength (having been declared the best German term deposit marketplace four years running and retaining more than 150,000 customers in thirty countries).
Berlin has a dedicated campus for tech startups in general; dubbed “Silicon Allee”, the area is well-populated with innovative enterprises, venture capital firms and coworking spaces, with regular meetups for local entrepreneurs and community members – all a stone’s throw away from the Hauptbahnhof, the main train station.
Nearby, many of the wider tech industry’s biggest players (Facebook, Google, Apple and Airbnb) have already established a presence in the heart of the city; perhaps three miles away, German shopping giant Zalando also has its head office overlooking the bank of the river Spree.
The advantages of launching in Berlin
For a new firm in the financial sector, having ample funding early in the process is hugely important for navigating regulations and getting legal help.
The abundance of venture capital investors in Berlin means that the city has one of the best-funded startup scenes in Europe; coupled with the fact that the cost of living in general is relatively low, with rent for a modest flat costing around €650 (£575) per month – less than half of what you might expect to pay for the equivalent in London – setting up shop in Berlin makes overwhelmingly good financial sense.
The Investitionsbank Berlin offers funding opportunities for new enterprises, and the Berlin Partner agency can help business newcomers with matters such as securing visas for staff and finding office space. There is also English-language assistance offered by the state to help guide entrepreneurs through many of their paperwork obligations.
Staffing costs are favourable, too, with salaries 28% lower on average in Berlin than their equivalents in London. This is doubly important for an industry such as FinTech, where the delivery of innovative, highly secure systems necessitates the hiring of very talented and experienced programmers and developers – with skills that carry a significant price tag.
Even by German standards, the capital city is haven of affordable staffing, with human resource costs 40% lower than elsewhere in the country.
Berlin’s startup scene has a cultural emphasis on promoting a healthy work/life balance – unlike the vast majority of other tech startup environments, where long working hours and “crunch time” are commonplace. If the runaway success of some of the city’s startups is any indication, taking a balanced view of the need for both work and leisure time can be as good for business as it is for employee health and wellbeing.
The German capital also boasts an excellent transport infrastructure, with the U-Bahn and S-Bahn allowing cheap and easy travel around the city as well as via trams and buses. Even for foreigners with a limited grasp of German, navigation is relatively simple; in addition, English is spoken widely in Berlin – to the extent that a German politician courted minor controversy in 2017 by complaining that English was being spoken too much in some areas of the city.
Making a German Fintech startup official
In addition to the usual paperwork considerations when starting any new business in Germany – such as selecting the right company structure, filing for tax and so on – FinTech startups must also carefully approach the issue of finance industry regulations. At present, there are no new German laws that specifically relate to FinTech, and therefore regulation for these companies is handled exactly in the same manner as it is for traditional finance organisations.
A significant proportion of German law is inherited from the EU legal system, and so it is often compliance with European regulations and directives rather than local-level stipulations that is required for FinTech enterprises. While complicated, these regulations are not insurmountable – a fact proven by the sheer number of FinTech startups to have already been given the green light to operate in Berlin.
You may be required to deal with a number of different authorities in order to legitimise your operation, such the Bundesanstalt für Finanzdienstleistungsaufsicht (the Federal Financial Supervisor), Bundesbank, or the European Central Bank – depending on the exact nature of the services you plan to offer; for investing services, you may be required to contact the Berlin Chamber of Industry and Commerce.
The regulations don’t end there – FinTech companies must also be very careful to comply with data protection laws and cybersecurity directives, in line with GDPR and other legislation. There are also fraud and money laundering laws to consider, with the Geldwäschegesetz (Anti-Money Laundering Act) requiring that all financial services providers carefully monitor their business relationships and report questionable transactions to the authorities whenever necessary.
None of these hurdles need hinder an ambitious entrepreneur for long, however, and especially with the aid of professional help the paperwork can be swiftly put in order for business to get underway.
With the UK extracting itself from the EU in a matter of months, there may be no better place than Berlin for an up-and-coming European FinTech company to put down roots for 2019 and beyond. Germany’s geographic situation in the heart of the EU puts Berlin-based businesses in a prime location for expansion and prosperity – and with the German capital offering unrivalled access to investor funding and an environment designed to foster ambitious startups, your FinTech idea will have every chance of huge success.