Bi-Monthly June 2023

A mixture of freedom, internationality, and a healthy distance from traditional financial centers such as Frankfurt am Main have contributed to the fact that something new has been created in Berlin. And the technology-driven financial sector in the capital has developed rapidly compared to other financial hubs. Of the more than 1,000 fintechs currently operating in Germany, more than a third are based in Berlin. Six of the seven German unicorns, i.e. fintechs with a market valuation of over 1 billion euros, have their home here. The undisputed top position of the German capital is also visible in the amount of investments – around 2.5 billion euros in 2022 which represents 94 percent of all fintech investments in Germany.

But the steady growth of fintech values to over 22 billion euros in Berlin and of VC investments peak of 4 billion euros in 2021 since the beginning of the start-up boom a decade ago came to a stop during 2022. Tech companies devaluated massively worldwide – due to the interest rate hikes of the central banks and its effects on the investment climate.

For the time being, this development is the culmination of a rapid momentum over the past decade combined with the slowdown in 2022, still ongoing this year. The fintech sector is experiencing some adjustments which urgently calls for a better competitive environment in startup Germany compared to other countries like UK, France, Sweden, the Netherlands, and Switzerland.

The development of the financial and tech scene in Berlin is to a significant extent the result of a momentum of its own and must be seen by everyone in European competition. Attractive locations such as London, Amsterdam, Barcelona, Madrid, Paris, Stockholm, and Zurich are the direct competitors. Berlin would do well to take a thorough inventory of the advantages and disadvantages of the location, the factors where there is still room for improvement, and those aspects that could stand in the way of continuing the success story.

The successes that have been rightly celebrated in Berlin so far at many award ceremonies on rankings are those of a decentralized, rather uncoordinated approach. Since the local stars have long since outgrown their infancy, we in the Berlin industry, together with politicians as part of the Berlin Finance Initiative, have recognized that it is time for further development to support the success of the past and to bring the fintech ecosystem to the next level.

The questions arise: What growth conditions are needed to make the financial and innovation location fit for the coming decade? How to attract and to educate the best talents? How to share knowledge and cooperate better with universities and business schools? What about diversity in companies and financial literacy in the society? How to take advantage of disruptive innovation such as digital currencies, blockchain and web3? Can data security and data use be reconciled in the German – in the European – framework? Is there a need for a politically supported strategy or is the decentralized approach the one that will continue to bring success to the finance and technology hub in the future?