Business & Tech

Where Finance and Technology Come Together

NEW YORK — The hub of the technology industry is Silicon Valley. In finance, the world capitals have long been London and New York.

But in the emerging industry that combines finance and technology, often called fintech, the center of activity is less obvious.

The traditional centers — London, New York, and San Francisco — are attracting substantial investment, but so are less-established capitals such as Berlin, Singapore, and Sydney.


The lack of a clear winner has been apparent to executives such as Chris Larsen, chief executive of the San Francisco company Ripple, which offers international payment processing services to banks.

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Larsen fields a steady stream of calls from representatives of foreign cities hoping to lure him and his company to their shores to bolster their finance credentials.

“Everybody recognizes that the capital of fintech has yet to be determined,” said Larsen, who founded the companies Prosper and E-Loan.

Several cities around the world are competing to become the capital, or at least one of the regional capitals, of the sector. If the young financial technology industry has the transformative effect that some have imagined, the contest could also determine the future capitals of finance as a whole.

At the recent Money 2020 conference in Las Vegas, the largest financial technology conference in the world, government representatives from Dublin, Hong Kong, London, Luxembourg, and Belfast, Northern Ireland, among others, were walking the floor looking to woo companies.


In the exhibition hall, Invest Hong Kong, a quasi-governmental agency, had a booth where startups could learn about the regulatory benefits and subsidies the government of Hong Kong recently began to offer fintech companies.

“The whole industry is waiting to be disrupted,” said Lawrence Tang, the agency employee at the booth. “We are at the right place to try to capture some of these high-flying fintech companies.”

Hong Kong has the benefit of being connected to China, which has, mostly in isolation, been home to some of the most notable developments in the sector. Chinese companies such as Alipay and Tencent have been processing more financial transactions than the largest Chinese banks. The four most highly valued financial technology unicorns (companies valued at $1 billion or more) are based in mainland China, according to most recent surveys.

Early this year, the chief executive of Hong Kong’s central bank, Norman Chan, revealed a multipronged effort to become a “Fintech Innovation Hub.”

The city-state’s government is offering to put money into companies that locate in Hong Kong, and its regulators have a new “supervisory sandbox” where new companies can try their products without needing to fulfill all the normal regulatory requirements. Hong Kong brought in several foreign companies this month to attend its first government-sponsored conference.


Nowhere, though, has the competition been fiercer than in Europe, because of the British vote to leave the European Union.

Before the so-called Brexit vote, London had clearly established itself as the hub of financial technology activity for the Continent.

But if Brexit comes to pass, financial institutions in London are likely to find it harder to do business freely with European companies and financial institutions. Equally important for startups, young developers from outside Britain may not be able to remain in London.

“The big question for London is, what will happen to talent?” said Taavet Hinrikus, the Estonia native and co-founder of one of the biggest London-based financial technology companies, TransferWise, which lets people send money abroad in real time.

The day after the Brexit vote, the Irish government sent a playful message to Hinrikus and TransferWise on Twitter: “Dublin sure is a nice place for a fintech company. Just saying…”

Berlin, which has become a hub for young technology workers, took an even more aggressive approach. The city’s minister of the economy and technology wrote a letter to dozens of companies in London pitching Berlin as a better option.

Berlin Partner, a government-financed agency leading the city’s effort, opened a small office in London in September to court companies full time.

Stefan Franzke, chief executive of Berlin Partner, said that five London-based financial technology startups had already decided to move to Berlin, and he has 40 more prospects.

London is certainly not watching business go quietly. The primary British regulator, the Financial Conduct Authority, has set up Project Innovate to help startups clear regulatory hurdles.

At the Las Vegas conference, the British Department for International Trade was co-host of a breakfast at a bistro, where startups could meet with the head of Project Innovate.

In the United States, the government has been slow to act, but the Office of the Comptroller of the Currency has been talking about creating a type of charter, with more limited rules, for financial technology companies.