Fintech concerns for Brexit mask potential benefits of easier global access to talent
London, Paris and Berlin have long been at the forefront of European efforts to create a startup community that can compete on a level with Silicon Valley. In terms of headcount, at least, they are nearly there. Recent data suggests that there are more than 515,000 software engineers spread between the three cities, not far off the Bay Area’s 564,000.
If you add into the mix Madrid and Barcelona - according to the Mobile World Capital report, Spain is the only European country to have two cities in the top ten list of EU startup hub countries - then you even surpass Silicon Valley’s figure.
The surging number of tech startups within these hubs has helped to attract some of the world’s best minds, as well as incubating many home-grown success stories.
It’s not surprising that European talent has gravitated towards these top ten cities - London, Paris, Berlin, Dublin, Barcelona, Madrid, Amsterdam, Stockholm, Helsinki and Copenhagen. Indeed, a combination of pre-existing expertise in technology and the policies of governments especially engaged in fostering startup communities, with changes to regulation and plenty of funding, made it inevitable to some extent.
They may, however, have created something of an uneven playing field, to the disadvantage of innovative startups in cities, regions, and countries that struggle to compete economically with global metropolitan powerhouses.
A recent BBVA Research report found that the fintech sector has been particularly affected by this imbalance. In the hope of addressing some of the above, one of the European Commission’s main policy goals is to continue lowering barriers to entry for fintech startups across the continent.
One of the biggest of those barriers for any startup hoping to gain traction and achieve scale is identifying and securing the best talent. With startups in London, Paris, and Berlin attracting the lion’s share of venture capital money (a sign of both a sound business and deep pockets), and with their globally attractive locations, they are more often than not in pole position to hire top talent from other burgeoning tech hubs around Europe.
It was therefore interesting to see concerns raised recently about the possibility of a fintech “talent drain” out of London as a result of uncertainty over Brexit. A number of companies have expressed fears that a new generation of European engineers, coders, and tech entrepreneurs is now ‘shunning’ the city - either moving back home to continental Europe or choosing to remain there rather than relocate to London in the first place.
The fears may be justified, with the number of EU migrants into Britain already down by 47,000 since last year. And it’s not just that the inbound talent stream is drying up — the UK is seeing more European citizens leaving the country than at any point since the 2008 financial crisis. This ‘brain drain’ may be contributing to London losing its sparkle for fintech business leaders, with a number of startups deciding to open offices in alternative European fintech hotspots such as Amsterdam, Berlin, and Paris.
Yet this focus overlooks the many benefits that a more even distribution of talent could bring to the wider fintech ecosystem.
Talent being drawn to a small number of “megahubs” might be good for those cities, but it is potentially damaging to fintech as a whole if it means that startups from places with less well-established tech ecosystems face higher barriers to scale. The statu quo has meant talent has become more expensive and less accessible as a result of either moving to London or being tied up by London-based businesses. Fintechs from smaller countries have been cut off from this talent pipeline, at risk of stalling in their development as big fish that are never quite capable of growing out of their small ponds.
It’s not just talent. A knock-on effect is that investors’ attention has been inextricably drawn to a small number of high-profile cities at the expense of high-quality innovation in other less well-developed communities.
Whatever your view on the rights and wrongs of Brexit, its impact has the potential to massively democratize access to the fintech talent pool. More talent staying in their native markets, or relocating to other nascent fintech hubs, will make them more accessible and affordable to fintechs in those locations and help to cultivate a more genuinely global ecosystem that is less dominated by a small number of other ‘megahubs'.
This global outlook is expected to help more local centres of innovation to thrive and, in turn, feed back into the global fintech ecosystem. Inspiring, enabling, and supporting innovation from “unexpected” places is an effective way of adding to the cast of fintechs that could become the next major player, with different people working on solutions to diverse challenges.
BBVA Open Talent competition is just one example of how BBVA is bringing together a community of startups from all over the world — including from markets that don’t have anything like the kind of established ecosystem infrastructure that London and other big hubs benefit from — to help them access global networks for collaboration, investment, and other support.
Last year, for example, the competition attracted entries from 72 countries, and more than 200 global towns and cities. These ideas come from people determined to help reshape and redesign the future of banking services, and are a great example of how fintech development can be fostered and supported in far more locations than just the global hubs.
As the world moves increasingly digital, as channels of communication widen and improve, and as data becomes as important an asset as simple money, so does the ability for innovation to spring up from almost anywhere.
For BBVA, it means being open to new ideas and ways of working, partnering with new people and ensuring as a business the bank doesn’t become one of the blocks to innovation because of sheer incumbency. . .something BBVA is determined not to do.
To find out more about the competition, visit BBVA Open Talent.