Insight

Amsterdam: Europe’s Silicon Valley for FinTech

Amsterdam: Europe’s Silicon Valley for FinTech

Amsterdam is often dubbed Europe’s Silicon Valley of FinTech, and for good reasons. With a strong financial sector and a fast-growing ICT ecosystem, Amsterdam offers a winning combination as well as a high rate of adoption of new technologies, making it the perfect breeding ground for FinTech companies.

We can see that Amsterdam is at the forefront of driving innovation, at a time when FinTech and Blockchain are revolutionising the traditional operations of the global financial services industry. According to PwC’s 2017 Global FinTech Report, FinTech's growing influence on financial services is such that 82% of incumbents expect to increase their FinTech partnerships in the next three to five years, while 77% expect to adopt Blockchain as part of an in-production system or process by 2020, and 20% expect annual ROI on FinTech-related projects.

Looking more closely at the Netherlands, a survey conducted by Statista at the start of 2017 on familiarity with alternative digital currencies revealed that 46% of respondents had heard about it. In terms of the use of new virtual currencies, during the first nine months of 2017 there were approximately 44,000 trading transactions in Bitcoin in the Netherlands, which suggests an interest and growing confidence in new payment methods at a time when the number of Bitcoin ATM installations in Europe is expanding.

With the Netherlands already firmly on the map for blockchain and cryptocurrencies, Amsterdam has huge potential to reinforce its position as a leading FinTech hub in Europe. Finance is one of the largest sectors in the Netherlands, with innovative and major banks such as ABN Amro, Rabobank and ING, and a large capital base. There are already 350 companies active in FinTech in Amsterdam, with a particular focus in the areas of payments (Adyen, Payvision, GlobalCollect), trading (IMC, Optiver, Flow Traders) and alternative finance (Funding Circle, Symbid, Spotcap). Amsterdam plays host to one of the fastest-growing start-up ecosystems in Europe, and promotes the sector through creative initiatives such as the Amsterdam2London FinTech bootcamp and the Swiss-Dutch FinTech trade mission.

Many new Blockchain projects start out by following a crowd-funding-like process named an initial coin offering (ICO). This is a very unique event where a token is generated with a specific functionality which, depending on the project, may be used within the blockchain as counter performance for various outcomes effected by the blockchain.  As this is a very new and specific way of fundraising, some regulators are still devising strategies on how to deal with it, while others have closed the door to such projects. 

Although the Dutch Authority for Financial Markets (AFM) has issued a caveat to investors regarding these projects, they have reiterated the importance of innovation in financial markets and have invited potential issuers of ICOs to contact the InnovationHub and the Regulatory Sandbox, which is an initiative between the AFM and the Dutch Central Bank for:

  • Explanation of specific supervision rules and policies
  • Guidance in navigating the Dutch supervisory landscape
  • Information on potential supervision issues, for example if you are developing an innovative concept
  • Explanations of supervisory rules applying to innovative products and services

These welcoming initiatives set the climate for disruptive technologies to spar with the regulators to achieve a reciprocal outcome that will eventually accelerate innovation.

So what makes Amsterdam such an attractive proposition for FinTech players? First of all, it is an attractive location based on its strong business environment, excellent (digital) infrastructure, well founded and cooperative regulators, and skills and talent.  Most recently, 12 FinTech start-ups from the Netherlands have been nominated for prestigious Accenture Innovation Awards, and there will surely be further recognition of FinTech talents in the future.

Second, the Netherlands is the country with the fewest cash payments in the world, having already embraced a digital and efficient future, and so this rapidly evolving market is perfect for start-ups.

Third, it already has the key ingredients to reinforce its position as a credible hub, since a number of major innovative tech companies like WeTransfer, Booking.com and TomTom have their bases in Amsterdam. In total, over 2,600 international companies are based in the city, which is also becoming known as a friendly destination for expats. Many of them are techies with expertise in FinTech (including such important subfields as security and identity), and giants like Bitpay and Ethereum are already known to be sourcing their developers from Amsterdam.

In terms of securing international exposure, the city’s historic ties with Asian markets also provide significant leverage, and the fact that English is the de facto second language in the country is a further advantage. It is not uncommon for Dutch companies to look to Asia when they consider global expansion. FinTech companies may face cultural challenges in harnessing global opportunities, and again the open culture of the Netherlands combined with innovative ideas, creative expertise and techniques, will help to realise the FinTech scene’s promising potential. The city is doing all it can to make it easy for start-ups – and corporates – to adapt to the world’s tech-related finance demands.

At IQ-EQ, we are strongly committed to embracing the FinTech revolution to the benefit of our clients. We recently went live with the administration of a cryptocurrency fund, which makes us one of the first administrators in the Netherlands to administer such a fund. We have set up a dedicated desk for Blockchain and FinTech, staffed by team members who already have expertise in this field, to ensure that we keep pace with ongoing developments. Amsterdam is already well on its way to establishing Europe’s Silicon Valley for FinTech and IQ-EQ looks forward to contributing to future growth and innovation in Amsterdam as well as the wider industry.