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.
This time, it’s the Netherlands. By attempting to create a fully-connected technological landscape countrywide, it’s no surprise that it is becoming a leading fintech power in Europe, even hoping to push itself to the heights of a global giant. Read on to discover how Holland is looking to make its major cities havens for startups.
The Netherlands is perhaps one of the most recognisable countries in the world, in a cultural sense. The Dutch nation evokes imagery of dancing in clogs through fields of tulips surrounded by windmills. It seems that every person there is way, way taller than I am (although that’s really not hard); in fact, it is home to the tallest men in the world, with women taking second place behind Latvia. The country’s history is fascinating, being home to Anne Frank during the Nazi occupation, as well as Vincent van Gogh and Rembrandt who are revered as some of the greatest artists that have ever lived. Miffy is also a Dutch creation. Plus, if you’re a cheese lover, you should make sure you visit the wonderful town of Alkmaar for its historic cheese market every Friday.
And whilst The Netherlands seems to have a characteristically ‘laidback’ vibe to visitors – as epitomised by the legalisation and regulation of Red Light Districts or its social tolerance of cannabis smoking in ‘coffee shops’ (in the cities at least) – its stance on fintech looks like it’s becoming pretty full-on.
Boasting a population of 17 million, the country’s GDP reached approximately $800 billion in 2014. In 2015, Dutch startups raised €430 million across 153 deals, and more recently, in the first four months of 2016, tech companies based in the Netherlands raised €37 million in capital. It therefore makes sense why last year the Startup Nations Monitor ranked the Netherlands number 1 for “implementing policies aimed at boosting startup growth”, with fintech also benefitting from its favourable trade deals, strong economy and commendable education system. There are around 350 companies already established in the fintech space. 93% of the country has access to the internet, and there are plans to open a new campus to attract banks and financial institutions to develop blockchain.
Around 90% of the population are English speakers, making the country perfectly poised as a place of international trade, assisted by the large ports of Amsterdam and Rotterdam. There is in fact a healthy rivalry between the two cities. Some following sayings are attributed to this competition:
“Amsterdam to party, The Hague to live, Rotterdam to work.”
“Money is earned in Rotterdam, distributed in The Hague and spent in Amsterdam.”
“Amsterdam has it, Rotterdam doesn’t need it.”
Yet for all of this national banter, putting Amsterdam down merely as the capital for hedonism, it is in fact a huge deal in the world of fintech. PYMNTS.com outlines that in 2015’s Global Startup Ecosystem Ranking, the cultural capital broke into the top 20, and came second in 2015’s European Digital City Index, as well as being awarded the European Capital of Innovation for 2016/17. It is now frequently regarded as the “new London” of fintech post-Brexit, and is already established as the European headquarters for such tech monoliths as Uber, Netflix and Tesla, among others. Besides its global trading history, Amsterdam excels in payments expertise, with a focus on digital security (it has an active hacker community looking to commercialise Bitcoin and blockchain). The Amsterdam-based bitcoin wallet provider Blocktrail was recently acquired by Bitmain Technologies Limited, a company from Beijing.
That’s not to say that Amsterdam is the Netherland’s only tech-centric area. Unlike other countries that we have covered so far, it seems like the whole of the country is getting in on the act. It is already regarded as Europe’s most-connected economy, due to its strategic location, its international business climate and solid infrastructure. As outlined in a report by Roland Berger, the Netherland’s digitisation figures are as follows:
- Internet users: 93%
- Smartphone users: 63%
- Tablet users: 50%
- Active on social media: 86%
- Online shoppers: 76%
Here is (another) list of some notable areas and their sector focuses, outlining how committed Holland is toward its technological revolution:
- Amsterdam: Creative, Mobile, Internet, High Tech Systems, Sharing Technology, Fintech
- Arnhem/Nijmegen: HealthTech, Energy, Smart Manufacturing
- Delft: Industrial Solutions, CleanTech, MedTech, IT
- Eindhoven: High Tech Systems and Materials, Health, Energy, Design
- Friesland: Water Technology
- Groningen: Data Services, Energy
- Leiden: BioTech
- Limburg: Smart Materials
- Rotterdam: SmartPort, CleanTech, MedTech, Energy, Food
- The Hague: Security Delta
- Twente: High Tech Systems and Materials
- Utrecht: HealthTech
- Wageningen: Food, Agriculture
Despite the clear vision for the Dutch takeover in the technological world, fintech is still struggling to break out to dominate Europe. As is required, the government and relevant supervisors need to reform their laws to help startups flourish. There has already been the establishment of nurturing networks (more on investors and accelerators later) and the government is working on legislation to make it cheaper and easier to launch a startup, alongside residency programs for entrepreneurs. But, these plans need to be made concrete ASAP for the Netherlands’ fintech potential to take full flight.
In March 2016, the Minister of Finance Jeroen Dijsselbloem constructed a letter to the Dutch parliament, outlining how certain opportunities and risks should be addressed and managed to develop the fintech industry in Holland. The letter can be downloaded from this page, but please note that it is (unsurprisingly) in Dutch. Here are its main points (not translated by myself, I have to admit – I found a little help from Van Doorne, a founding member of Holland Fintech):
- The emergence of new companies and suppliers means that there is competition to make better products for less money.
- In the digital age, a focus on customer-driven services is an absolute must.
- Even in the financial world, there should not be a sole dependency on the banking sector, and utilising financial technology companies in conjunction with traditional players will ultimate lead to financial stability.
Mr Dijsselbloem also proposed a three-point list of policy measures to be addressed by the government and relevant supervisory authorities:
- Alter legislation, regulation and supervisory frameworks to allow for the easier acquisition of licenses and permits. That way, new Dutch startups will be able to compete.
- New startups need to be constantly monitored to avoid complete disruption. This should be handled by such supervisory authorities including De Nederlandsche Bank (DNB) and the Netherlands Authority for the Financial Markets (AFM). These organisations have already raised the subject of fintech and privacy matters with the Netherlands Authority for Consumers & Markets (ACM).
- Holland Fintech has already boosted the esteem and value of its native ecosystem. The government wants to create an appealing landscape. As the quality of companies increases, the amount of investment will follow suit.
So, just how disruptive is Dutch fintech?
According to PWC’s Global Fintech Survey (2016), the Dutch share in Fintech funding in Europe is only at 21%; funding seems to be just one problem that the sector faces, despite the country’s access to potential foreign investors being fairly easily, being so close to London.
However, 89% of Dutch respondents to the survey believe that consumer banking will be the industry disrupted most in the next 5 years. 59% believe it will be fund transfers and payments, and 39% believe it will be SME banking. Undoubtedly, Dutch fintech is bound to be disruptive to traditional banks, and only 26% of financial institutions have already engaged in joint partnerships with fintechs. 18% have being involved in setting up venture funds for them. It is important to note that only 3% of those surveyed do not deal with fintech at all, though.
Going back to the Roland Berger report, there seems to be highs and lows in regards to Dutch fintech. A notable trend in this World Series is that regulation is not aligned across Europe, which is why some countries’ fintech scenes flourish as others lag behind. The Netherlands has amongst the strictest regulations in Europe, especially when dealing with Payments Services providers. If you check out page 14 of the report, you can see a graph which usefully shows an assessment of factors allowing for accelerated innovation, such as environment, talent, entrepreneurial community and potential funding. Whilst Holland scores pretty highly in some fields, it is mainly behind the European benchmark for every factor.
Nevertheless, the Dutch financial services market is still the fifth largest in Europe. The investments in Dutch fintech also reached €3.1 billion in 2014, funding 386 companies. €169 million of venture capital was invested in 226 startups, which ranked the country third in Europe for the total amount of venture capital deals for that year.
Traditional Dutch banks – ING, Rabobank and ABN AMRO – are clearly making an effort to digitise their businesses by investing in fintechs. Here’s how:
- Organises hackathons
- Has a partnership with ECE (Erasmus Centre for Entrepreneurship)
- ING Innovation Studio, the ING Lab in Amsterdam and FinTech Village
- Invested in Kabbage and WeLab
- Partner of the Dutch Fintech Hackathon, Startupbootcamp and Rockstart
- Rabobank Fintech Fund is managed by Catena Investments
- Invested in MyOrder, Facturis and Fundipal
- Has collaborated with 15+ startups
- A founding partner of innovation hub X, Startupbootcamp and Munt Square
- Has a €10 million Digital Impact Fund
The government is willing to support fintech, it’s just under development still. According to Forbes, policies include working with other EU states to launch a 28-nation European Startup Visa, as well as a StartUp in Residence program to attract entrepreneurs to the country. Mentoring networks to collaborate with Boston, Silicon Valley and New York will connect Dutch fintechs with Tier 1 Venture Capitalists and an initiative known as TekDelta is an organisation of representatives from knowledge institutions and international companies which hosts shareable lab facilities with startup companies.
So now, let’s check out the successes of Dutch fintech so far:
Accelerators & Incubators
Holland Fintech was founded in Amsterdam in 2014. It is comprised of 300 member companies (startups, FinServ giants and investors) across Europe, amounting to over 10,000 individuals. Its goal is to “unify Europe’s financial services ecosystem”, which certainly sounds like a familiar theme in this article. The accelerator works with regulators so that they understand the benefits of digital with FinServ, and was founded by such institutions as KPMG and the aforementioned Van Doorne.
Startup Delta names itself “the skyline of the Dutch startup ecosystem”, aiming to become a connection to “all layers” of government, corporations and innovation hubs so that startups can become fully integrated. It wishes to grow the pool of ‘smart funding’ in startups, lower barriers to help with launching them and granting them access to EU markets more easily, whilst attracting foreign venture capital and startups.
Brainport is the leading technological region in Eindhoven.
Orange Growth Capital was founded in 2013. It is a fintech investment firm, whose investments range from €250,000 to €10m across a startup’s lifespan. The company is made up of 8 professionals and 25 industry advisers based in Amsterdam and London, and also offers access to a platform for market input and provides access to potential customers.
Holland Private Equity was founded in 2008 and provides experience and institutional capital to leading technology companies and management teams to accelerate their growth.
Adyen – Founded in 2006 with its HQ in Amsterdam, Adyen is a tech company that provides businesses with a single solution and dashboard to accept and manage worldwide payments on mobile, in-store and online. Its esteemed clients include Netflix, Spotify and Uber. It was valued at $2.3b in 2015/6, making it a Dutch fintech unicorn.
Bunq – Also with its HQ in Amsterdam and founded in 2003, Bunq offers multiple financial services under a government-provided banking license. The user can manage bank accounts and multiple cards on one platform.
Five Degrees – A complete UX-centric banking tool for retail or private banks, dubbing itself as the solution for “universal banking”.
Flow Traders – This is a tech-enabled liquidity provider, particularly focused on Exchange-Traded Products (ETPs), founded in 2004 and based in Amsterdam.
GlobalCollect – Founded in 1994, with its HQ in Hoofddorp, just outside of Amsterdam, it is a payment service provider of local e-payment solutions; a single-interface online payment platform for local and international (200+ countries) payments. It also consults clients to expand their distribution and transaction volume.
Payvision – Payvision focuses on global card processing, and is an independent payment solution for the international e-commerce market. It was founded in 2002, also with its HQ in Amsterdam.
With its clear potential, it feels like Dutch fintech is bubbling under a surface that is about to explode, once the promised regulatory changes are put into place. When appropriate changes are made to benefit startups, it could burst into the stratosphere, and the European fintech scene will be even more lively than it is now.
If you have any thoughts about Dutch fintech, let us know in the comments below, or you can tweet us.
Check back soon for more instalments of The Fintech World Series!