Fintech is exploding.
It is a global industry, striving to change the future of finance.
…And the future is now. At Kurtosys, we’ve set out to cover exactly what’s happening in the financial industry the world over, one country at a time. With so many places contributing to the advancement of our digital world, each deserves their own time in the spotlight.
A big player already in the sector of digital payments, our focus this time is on Belgium. Potential? Definitely. Underachieving? Possibly. Read on to find out how this Western European country is attempting to solidify its “BeTech” identity.
Horum omnium fortissimi sunt Belgae
– Julius Caesar, an excerpt from ‘Commentarii de Bello Gallico’
For our non-Latin speakers (of which I am not one either, sue me), this roughly translates to “Of all these, the Belgians are the bravest”. This quotation was actually cited by EY in their report Belgium: an unexpected ideal hub for fintech?, so we must surely link Belgium’s 58 – 50 BC battle mentality to their approach to financial innovation – a small(ish) European state looking to fight their way to supremacy against other European big hitters, some being extremely influential in the global fintech scene.
We’ll come back to that report later in this post. First, what else makes Belgium great? For one, they’re big on comics, namely Tintin and The Smurfs (Les Schtroumpfs), which I loved as a kid at least. It also hosts the world’s largest Electronic Dance Music (EDM) festival in the world, Tomorrowland (not as big a fan, but hey), and it is home to the Huyghe Brewery, whose flagship beer ‘Delirium Tremens’ is a fan favourite amongst a few of us here at Kurtosys. Give it a try, you won’t regret it. They put mayonnaise on fries, though. That’s still a bit alien to me. I guess they invented them, so that’ll shut me up.
The State of Belgian Fintech
In a rather disparaging report entitled ‘The Future of the Belgian Financial Sector’, a High Level Expert Group (HLEP, established by the Minister of Finance) outlines the current state of the Belgian regulatory framework and what the outlook for fintech startups looks like. You can read the whole report here (it is rather lengthy), but here are some of its main takeaways:
- The supervisory and regulatory framework has been changed to make itself more “resilient”. The impact these reforms will have on the economy remains unknown, however.
- The digitisation of financial institutions poses major implications for processes, operations and customer services in the industry, leading to substantial investments and competition from newcomers.
- Digitisation also increases cyber risks, which can interrupt financial processes.
- Reforms to the regulatory infrastructure have made the system “safer”, with the role of newcomers increasing interconnectedness, but also cyber risks.
- Bank lending to SMEs has grown, but lending to large companies has declined. Credit supply conditions have improved “considerably” since the start of 2014.
- There is a need for Brussels to become a financial centre. It is ranked 62nd in a list of global financial centres in 2015 by The World Economic Forum. Many comparable cities rank much higher, with Vienna, Stockholm and Amsterdam ranking 30th, 32nd, 36th respectively on the same list.
- It has sectors with high potential, particularly in the financial market (mainly payments). The strengthening and presence of these companies will create a larger fintech industry and centre of expertise in terms of software, services and knowledge, to be spread to other global financial centres.
- Enterprise Investment Schemes (EIS) raise equity finance for SMEs using tax relief. They provide subsidies to start investment for start-ups. There is no large-scale EIS systems at the moment in Belgium. Support systems for young enterprises exist, but are fragmented across the country’s various regions.
- Beyond the initial start-up phase, the growth and nurture of fintech businesses is lacking, with important institutions looking to move away from Belgium if this does not improve.
- Most Belgian companies have had security issues. 80% of companies surveyed had malware running on their network. 88% do not believe that their security meets their organisation’s needs.
- The HLEP welcome the decision by the government to create a Belgian Centre for Cyber Security. The evidence for this is in Dutch, so was of no use to me unfortunately, but you can check it out here.
Returning to the aforementioned EY article, it is heavily emphasised that Belgium is “at the forefront of innovation in Financial Services”, citing companies such as Swift and Clear2Pay as technological godfathers of the financial industry. Most notably, Belgian fintech has strong roots in the payments industry; with the rise of e-commerce, the country was keen to adopt digital payments. In fact, 94% of surveyed fintech users have used money transfer or payment technology, but only 29.9% have used savings and investment platforms, with 10% using “other” services.
What is abundantly clear is that there is a higher focus on B2B fintech than B2C, and the study also noted that Belgium was the first country to use a national clearing code system, and was a key player in the development of the Digipass (which is security-based; think e-signatures, authentication software etcetera etcetera…)
In 2015, investment in “BeTech” was €150m. Up until 2015, Belgium was lagging behind other European countries in regards to funding. By 2016, crowdfunding was expected to reach around €6.5m. To coincide with the assumptions outlined by the HLEP, EY also realised that Tier 1 banks are only in a nascent stage of embedding innovation into their organisations, allying with fintech startups to do so. However, to compete with the so-called ‘sandbox’ principle (as is seen in the UK, for example), EY notes that “in June 2016 the FSMA (Financial Services and Markets Authority) launched ‘the FinTech Portal’, which is intended to support a dialogue between the FSMA and FinTech companies.” There’s more where that came from right here. Considering that Belgium has the highest taxation of the labour force in Europe (59.4% of salary costs go to the government!), it is difficult for start-ups to afford employees. Hopefully the government’s initiatives to reduce these costs will make it cheaper for such companies to attract their initial employees.
So, it’s not all doom and gloom. Belgium is just starting to finally make a move to fulfil its great fintech potential. Here’s a list of some significant deals in BeTech history:
- 2005: Keytrade Bank acquired by Credit Agricole for €45m
- 2012: Callataÿ & Wouters purchased by Sopra Banking Software
- 2012: Immoweb acquired by Axel Springer Digital Classifieds for €128m
- 2013: Ogone purchased by Ingenico for €360m
- 2014: Clear2Pay (they’re back!) acquired by FIS for €375m
Also making another appearance in this article (because of its HUGE importance) is Swift: a secure financial messaging platform which was founded in 1973. It has worked with over 11,000 financial institutions in over 200 countries. Big.
Community / Gemeenschap / Communauté / Gemeinschaft
The first, and largest, fintech community in Belgium is the aptly named FinTech Belgium. They are a non-profit organization bringing together startups, disruptors, entrepreneurs and investors. You can check out their highly interactive site here.
Only founded at the beginning of 2015, FinTech Belgium’s founding members are fintech actors and people directly involved in its development within the country. It aims to welcome every company that is part of the financial services industry, and those that innovate operational, technological and commercial methods in order to benefit the functionality of the industry or to amend its current issues. The Board is comprised of a Business Development Consultant, a journalist, a founder of Keytrade Bank and a CEO, to name just a few.
Furthermore, one of Belgium’s primary fintech ecosystems B-Hive is a part-government owned platform and has recently signed a memorandum of understanding (MoU) with Innovate Finance, a fintech hub based in the UK. After the Brexit referendum, British fintech companies have signed similar “fintech bridges” with Australia, Singapore and South Korea. You can read more about the initiative here.
Below are some Belgian startups to keep an eye out for, starting with those in the payments sector:
IbanFirst (FKA FX4Biz) – Founded in Brussels in 2012 by Pierre-Antoine Dousoulier (CEO), IbanFirst offers foreign currency payments for international companies. Currencies are converted at market rate, with IBAN (International Banking Account Number) available for 17 different currencies. International payment services can be accessed with full transparency, and are more accessible for SMEs. In 2015, the platform processed more than 1 billion transactions, and completed more than 100,000 operations.
QOVER – A new company, founded in Brussels in 2016 by Quentin Colmant & Jean-Charles Velge, which offers personalised “Sliced On-Demand” digital insurance solutions, connecting client websites to their Insurance Product Library.
Twikey – Founded in 2013 in Ghent, Twikey offers fast, low cost payments via online e-mandate signing and facilitated direct debits. No paperwork necessary.
Here are a couple that are specific to wealth management:
Swanest – Founded in 2014 by Silvan Schumacher (CEO), Nicolas Bindels, Youri Tolstoy (CTO) and Cyril Lequeux, Swanest provides technology for self-directed investors to track and personalise their investment strategies. You can start building a portfolio of stocks and ETFs for free. So far, over €200m has been tracked in virtual investment portfolios.
Isabel – Isabel acts as a financial partner for Belgian companies, founded in 1995, with its headquarters situated in Brussels. It offers multi-bank internet services for professional users such as security services and single payment solutions. It has worked with 30,000 companies and SMEs, processing 422 million transactions. It also invests a third of its turnover in innovation, which is pretty neat.
The Belgian fintech scene also contains accelerators and venture capital firms. Here are some of those:
EBAN – The European Trade Association for Business Angels. It acts as a representative for the early stage investor, venture capitalist, accelerator or business angel. What’s more, its E-Xcelerator group acts to create an alliance between Accelerators and Business Angel networks across Europe. EBAN also has four great projects on the go to boost business and financial and technological growth. These are:
- Future Internet Business
- Eureka High Tech Investment Program (E!nnoVest)
Blackfin Capital Partners – Founded in 2009 by Laurent Bouyoux, Eric May, Bruno Rostain and Paul Mizrahi, it is an investor/private equity firm that supports managers and entrepreneurs in the financial industry.
Smartfin Capital – Similar to the company above, Smartfin is a private equity fund investing in businesses with growth potential, particularly in the fintech sector (hooray!). It was founded in Antwerp in 2014.
Smartfin’s fintech platform is the aforementioned B-Hive, which has received €2m of funding from the Belgian Government. As of the 25th January 2017, Smartfin has raised nearly half of its €30m fund target to support startups, with the government adding another €5m through its FPIM Investment vehicle. More information about government spending can be found in this news article.
Belgians & Bitcoin
Digital currency seems to be going through a bit of a revolution at the moment (in a global sense), but Belgium is right up there in the mixture of countries looking ahead to the future and going cashless.
For instance, the European Bitcoin Trading Machine (EBTM) is an ATM in Antwerp whereby you can exchange euro notes for bitcoins and vice versa. It was founded by members of the Belgian Bitcoin Association.
Going one step further is Orillia, which set up the first network of Bitcoin ATM machines in Belgium. Orillia also deliver training sessions on blockchain technology and wire and SEPA transactions for cryptocurrencies, so that the whole country is up to date on sci-fi-esque finance.
And if you think they sound keen on the switch to digitisation, then check out Gent Bitcoinstad. Set up by a group of Bitcoin enthusiasts (most certainly an understatement), this group is attempting to turn Ghent (and perhaps even further afield) into a bitcoin-only city. It sounds like a movie plot, and I love it.
It seems that the fintech influence is growing rapidly in Belgium therefore. We hope you’ve enjoyed discovering the country’s firm role in the payments industry, and it will be interesting to see how this nascent fintech bud can blossom into a successful flower. If you want to know even more, feel free to discover the top 20 fintech influencers in Belgium on social media; a list of them is here. There is also an ever-changing, interactive site all about the Belgian Fintech Ecosystem.
That’s all folks! If you have any thoughts about Belgian fintech, let us know in the comments below, or you can tweet us.
Check back soon for more instalments of The Fintech World Series!