Christmas Greetings from Frankfurt Main Finance

Dear Friends and Members,

As 2016 draws to a close, it is prudent to reflect on the past year, our accomplishments, and the challenges we have met. In doing so, one can be quite content with the strides that Frankfurt Main Finance has made in promoting our Financial Centre within Germany and across the globe. We continued to grow and nurture our international partnerships, sending several delegations to financial centres in Asia and Eastern Europe. At our Financial Centre Breakfasts we enjoyed discussions with Arundhati Bhattacharya, CEO of the State Bank of India, and François Villeroy de Galhau, Gouverneur of the Banque de France. Both of these leaders gave us great insight into some of the challenges facing financial institutions in their countries, in particular digitalization.

This year’s Frankfurt Finance Summit focused on this current trend of digitalization in the financial sector and how major actors address the challenges it presents. We were honored to have Günther Oettinger, European Commissioner for Digital Economy and Society, deliver a keynote on the European unified strategy for digitalization. In his keynote, Germany’s Minister of Finance, Dr. Wolfgang Schäuble, expressed his views on where the financial industry is heading, challenging businesses to find new, innovative models that fit into our new world.

At the time of the Summit, the results of the United Kingdom’s referendum on EU membership seemed almost unthinkable. Six months later, we can surely say this was just the first of many surprises in 2016. However, Brexit has presented the Financial Centre Frankfurt with an opportunity to become a facilitator, to grow and welcome more institutions into our city. For Frankfurt Main Finance, Brexit thrust our initiative into the international spotlight. Between hundreds of interviews with international press outlets, speeches and panel discussions, and delegation trips, Frankfurt Main Finance has been hard at work spreading the word about our Financial Centre and our cooperative approach to building a new “London Bridge.”

Winning large institutions for Frankfurt is certainly important, but many of our efforts over the past year have been dedicated to the smallest actors. In the beginning of 2016, Frankfurt Main Finance was hard at work with the Dialogue Forum FinTech Frankfurt Rhine-Main to promote our region as a top destination for Financial Technology start-ups. The past year brought with it an explosion in activity in the FinTech ecosystem and culminated in the opening of Frankfurt’s FinTech Hub, Tech Quartier.

As we enter the quiet days around Christmas and the New Year, we can rest satisfied in our diligent work in 2016 advancing our Financial Centre. We are optimistic in our trajectory and look forward to the opportunities and challenges that 2017 will bring. But until they are here, we wish you and your families a very Merry Christmas and a happy New Year. May your holidays be rejuvenating, inspiring and filled with joy!

 

Warmest Regards,

Your Frankfurt Main Finance Team

Delegation to Japan & Korea

On behalf of Frankfurt Main Finance, Jochen Biedermann took part in a delegation visit of the state of Hessen to Tokyo and Seoul, led by Tarek Al-Wazir, Minister for Ministry of Economics, Energy, Transport and Regional Development. The high ranking Hessian delegation met political leaders, various ministries, financial service providers and FinTech companies in both countries, Japan and South Korea.

Not only Japanese and Korean banks, but also government officials of both countries were keen to learn more about the German view on “Brexit” and about the advantages of Frankfurt as a potential headquarter for the European operations of Japanese and Korean financial service providers.

Furthermore, an initial contact was established to “FinTech Japan”, the Japanese FinTech association. There is a strong mutual interest in jointly organizing FinTech matchmaking events in course of 2017. With South Korea, already a close partner to Frankfurt in FinTech and beyond, next cooperation steps were discussed, in particular in the area of Blockchain. The FinTech community in South Korea is looking forward to the visit of a German FinTech delegation mid of January 2017, which is organized by Frankfurt Main Finance.

Introduction of the China Competence Center

The China Competence Center (CCC) of the Frankfurt and Darmstadt Chamber of Commerce and Industry is a platform for the Hesse-China economic exchange. It supports its member companies in all questions regarding China business, be it in the import/export, founding of a company, recruitment or other topics. At the same time, the China Competence Center acts as a contact point for the more than 550 Chinese member companies in the Frankfurt Rhine Main area. Each year, the CCC organizes some 30 events; releases publications and sends out a monthly newsletter. Website:http://www.frankfurt-main.ihk.de/international/china_competence_center/de/

Money Museum

Bundesbank’s new Money Museum opens its doors

For a little over two years, the Bundesbank’s Money Museum has been closed to visitors. Following extensive renovation and expansion, it has now reopened. At a ceremony on 16 December 2016, invited guests were able to view first-hand the completely redesigned – and now considerably larger – exhibition. The Money Museum opened its doors to the public on 17 December 2016.

Visitors walking around the museum will visit four themed areas in turn: cash, book money, monetary policy and global money. The cash area will explain payments, discuss the role of banks and give an insight into the new world of banking supervision. Financial stability, which will be presented in the global money section, is another new topic area. One of the highlights of this area will be the “banknote swarm,” a glass wall several square metres in size in which a host of different banknotes from all over the world will be displayed. Visitors will also be able to touch a genuine bar of gold.

The monetary policy area will focus mainly on monetary stability. The showpieces of the Bank’s coin collection will take pride of place in a special money cabinet. Other cabinets branching off from the route of the tour will take visitors on a trip through the history of money. The visitors will learn all about how banking came into being, experience the hyperinflation of the 1920s and delve into the history of central banking in Germany.

In order to convey abstract central banking themes, the exhibition will address visitors’ real-life concerns and relate its artefacts to specific everyday affairs (ATM machine, bank branch, supermarket). Some glass display cases will showcase money-related themes in a manner designed specifically for children (eg a model cash-in-transit vehicle, banknotes with fairy-tale motifs). Interactive media stations (quizzes, memory games, puzzles) convey information about the exhibits in an entertaining way. Experts and interested parties will find more in-depth information at the media stations.

Not only the exhibition rooms are larger

The four themed areas – cash, book money, monetary policy and global money – are arranged around a 360° cinema. The new Money Museum has a total of 1,000 square metres of floor space. It has not only a more spacious vestibule with an information counter but also additional rooms for museum education experiences and special exhibitions. The new coffee shop with an integrated museum shop is much larger as well.

Frankfurt FinTech Report #4

Joint Deutsche Bundesbank and Deutsche Börse blockchain prototype

Deutsche Bundesbank and Deutsche Börse jointly presented a functional prototype for the blockchain technology-based settlement of securities. The innovative prototype is designed to provide the technical functionality for the settlement of securities in delivery-versus-payment mode for centrally-issued digital coins, as well as the pure transfer of either digital coins or digital securities alone. In addition, it is capable of settling basic corporate actions such as coupon payments on securities and the redemption of maturing securities.

The Deutsche Bundesbank and Deutsche Börse plan to develop the prototype further over the next few months, and this product will then be used to analyse the technical performance and the scalability of this kind of blockchain-based application.

“Along with the Deutsche Bundesbank we are innovatively and creatively addressing potentially radical technological opportunities for the financial sector. We will continue to do our utmost to leverage blockchain’s efficiency potential and to better understand and minimise the associated risks of this technology,” added Carsten Kengeter, CEO of Deutsche Börse AG.

DVFA Offers Fit & Proper Training for FinTechs

DVFA has introduced a new training course, designed specifically for FinTechs. The “Fit & Proper” training aims to provide employees and managers in FinTech companies with sufficient experience and competence in the eyes of regulators. Topics covered include Financial Markets, Regulation, Governance and Controlling, and Strategic Management. The course is completely digital, lasts about 25 hours and will kick-off on January 27, 2017. Following the completion of the course work and a 90-minute exam, participants will receive a Certificate in Financial Markets Competence.

Frankfurt’s Tech Quartier Opens

On November 17, the Frankfurt FinTech community celebrated the opening of its new FinTech hub, Tech Quartier, which will soon be home to some of the area’s most innovative start-ups. The current space in the Pollux high-rise has 120 workplaces and an expansion onto a second floor is already planned. At the official opening, Tech Quartier’s Managing Director Dr. Sebastian Schäfer explained, “For the first time, Frankfurt now offers foreign FinTechs and Start-ups an attractive place to start their business in Germany and prepare for their entry to the European market.” The opening of Tech Quartier marks the culmination of nearly a year’s work from the Hessen Ministry for Economics and the FinTech Dialogue Forum, which was initiated by Frankfurt Main Finance. Financial support for Tech Quartier has come from a broad base of large banks and consulting firms. Platinum Sponsors include Commerzbank, Deutsche Bank, Deutsche Börse, DZ Bank, Helaba and ING-DiBa. Gold Sponsors are Sparda-Bank Hessen, Allen & Overy, EY, KPMG and PWC.

FinTech Matchmaking

FinTech Matchmaking with Holland FinTech

After a successful round in Amsterdam, Holland FinTech and Frankfurt Main Finance joined forces again in Frankfurt for their second FinTech Matchmaking event. Both the Netherlands and Frankfurt boast a vibrant FinTech scene which makes for an ideal partnership in this international exchange between close neighbors. One of the main challenges for young start-ups is gaining exposure and expanding outside of their domestic markets. The successful Matchmaking event did not only facilitate exchange between participating entrepreneurs but also provided them with an introduction to potential cooperation partners and investors.

On November 25, 2016, more than eighty participants met at the Frankfurt offices of ING-DiBa, who also sponsored the event, to hear pitches from eighteen Dutch and German FinTechs. “Innovations arise when the best and most creative come together and learn from each other. That is why we are happy to support the event and look forward to the exchange,” says Željko Kaurin, Board Member at ING-DiBa. Also supporting the FinTech Matchmaking event was Hessen Trade & Invest. In between the two pitch sessions, the group was also given a tour of Frankfurt’s newly opened FinTech hub, Tech Quartier, and met with the hub’s director Dr. Sebastian Schäfer. The Tech Quartier is an important development for the FinTech ecosystem in Frankfurt and hopes to draw more FinTechs from abroad to the Financial Centre.

Pitching for the Frankfurt robo-advisor Vaamo, Co-Founder and Co-CEO Oliver Vins was quick to recognize the importance of these events for the local FinTech ecosystem. He explained after the event that, “it is always great to see the possibilities Frankfurt has to offer for FinTech companies as well as making international contacts. This is one of the many reasons why Frankfurt is such an ideal location for FinTechs.” Vins is happy to see Frankfurt’s ecosystem increasingly strengthening and attracting more cooperation with other countries. “Events like this help to steadily advance this exchange and always provide engaging contributions. We’re really happy to see more and more of these type of events being organized and to be able to take part as well.”

Based on the overwhelmingly positive feedback from all involved, Frankfurt Main Finance and Holland FinTech already have plans to continue the event series in 2017. Frankfurt Main Finance has a strong focus on creating partnerships and cooperating with other financial centres and joint FinTech events have begun to play a major role in these. To this end, Dr. Lutz Raettig, President of Frankfurt Main Finance, stated, “Many German FinTech companies have successfully established their business models in Germany and are ready to take steps to expand internationally. Through our partnerships with leading financial centres around the world, we are able to support these efforts and work to position the Financial Centre Frankfurt as an attractive destination for foreign FinTech companies. Fintech Matchmaking events like these are a great platform for these young start-ups.”

Participating FinTechs


Financial Centre Focus: “Brexit – Let’s go Frankfurt”

Financial Centre Frankfurt the preferred destination for Brexit-induced job relocation

In a comparison of European financial centres, Frankfurt clearly ranks in second place behind London. With numerous qualities in its favour, the German banking centre is an attractive location for domestic and international players in the financial sector and has the potential of becoming the preferred destination for Brexit-related job relocations. The following assets that Frankfurt possesses are of particular benefit: The stability and strength of the German economy, the headquarters of the ECB in its dual function, a transportation hub with a good level of infrastructure, relatively low office rents as well as a high quality of life. This is the conclusion that Helaba’s economists arrived at in their Financial Centre Study “Brexit – Let’s go Frankfurt”. But it has serious competition in the shape of Paris, Dublin, Luxemburg or even Amsterdam.

Dr. Gertrud Traud, Helaba’s Chief Economist and Head of Research, stresses: “If Frankfurt really is to become the principal winner of Brexit, it will require a concerted effort on regional, national and European levels as well as a more self-confident approach.”

Forecast for banking sector employment 2018: Stable at around 62,000 jobs

In addition, a further improvement in the conditions offered by the city is essential to ensure its success. In view of Frankfurt’s excellent position in the framework of European financial centres, demonstrated by various studies, Helaba’s economists believe that it has good chances of picking up at least half the jobs in the financial sector that will be shifted from London to Frankfurt in a restructuring process lasting many years. Thus, Frankfurt now faces the task of putting the necessary prerequisites in place, e.g. in the housing market. Based on very cautious assumptions, a total of at least 8,000 employees would come to Frankfurt over a multi-year period. Since companies cannot wait for the outcome of negotiations, more than 2,000 jobs are expected to be relocated by as early as the end of 2018 already.

“This Brexit-induced effect on the labour market will act as a counterbalance to consolidation in local banks”, says the author of the study, Ulrike Bischoff. Both effects should, more or less, cancel each other out within the forecasting window. By the end of 2018, the study anticipates a total of just over 62,000 bank employees in the German financial centre.

The complete Helaba study is available for download here.

Digital Hub Initiative

German Government Appoints Financial Centre Frankfurt Digital Hub for FinTech

At the German National IT Summit on November 17, 2016, Germany’s Federal Minister for Economic Affairs and Energy Sigmar Gabriel and Bitkom President Thorsten Dirks introduced Germany’s first five Digital Hubs. The Financial Centre Frankfurt has been appointed as the Digital Hub for Financial Services and FinTech. Hessian Economics Minister and Frankfurt Main Finance Executive Committee member Tarek Al-Wazir praised the initiative at the opening of Frankfurt’s new FinTech Hub, Tech Quartier. Explaining the importance of FinTech for the region, he stated, “the continent’s leading Financial Centre must also take the lead in the highly innovative FinTech sector.” The opening of Tech Quartier marks the culmination of nearly a year’s work from the Hessen Ministry for Economics and the FinTech Dialogue Forum, which was initiated by Frankfurt Main Finance.

The Digital Hubs Initiative, dubbed de:hub and set forth by the Federal Ministry for Economic Affairs and Energy, aims to promote Germany’s strengths as a leading industrial nation and position it as an attractive destination for entrepreneurs, investors, and highly specialised workers from around the world. Bitkom President Thorsten Dirks explained about the hubs, “In the future, executives from established companies will be able to learn from start-ups in these hubs instead of needing to fly to California.” Other Digital Hubs are Dortmund and Hamburg for logistics, Munich for mobility and Berlin with a focus on the Internet of Things.

Even in the digital age, cooperation between start-ups and established businesses and academics functions better in close proximity and promotes innovation. Using Silicon Valley as a touchstone, the Federal Ministry for Economic Affairs and Energy seeks to create digital hubs in Germany where people from all over the world can meet to develop innovative ideas and products. Crucial for a Digital Hub is its existing infrastructure, namely global relevance in the appropriate sector branch, leading academic and research institutions, and a network of supporters ranging from mentors to VC investors.

The Frankfurt FinTech ecosystem has continued to grow over the past years. In 2016, the number of FinTech companies in the Frankfurt region has grown by 45% to 81. Frankfurt is now a close second to Berlin which is home to 87 FinTech companies. Investment in German FinTech is also on the rise. In 2015, German FinTechs drew 524 million euros in funding. Despite a global decrease in FinTech funding, Germany still saw an increase in the second quarter attracting $186 million in funding, placing Germany ahead of the UK. While the Frankfurt FinTech ecosystem is still very much becoming established, a broad base of institutional support and incubators have surfaced in the past years. In addition to the newly opened Tech Quartier, Frankfurt is also home to several other incubators and accelerators, including Deutsche Börse’s FinTech Hub, Goethe University’s Unibator, Accelerator Frankfurt, Main Incubator, FinTech Headquarter and Deutsche Bank’s Digital Factory. Frankfurt Main Finance continues to actively support and promote the Frankfurt FinTech ecosystem and applauds the Federal Ministry for Economic Affairs and Energy for naming Frankfurt the Digital Hub for FinTech as part of the Digital Hubs initiative. Finally, Frankfurt Main Finance’s newly created FinTech membership should help to further promote local FinTechs and help connect them with established players in the Financial Centre.

Crumbs or Pie? How much will Frankfurt’s property market benefit from Brexit?

A recent study from Deutsche Bank Research has just been released which outlines the potential effects of Brexit on Frankfurt’s property market. The study examines the Financial Centre Frankfurt’s office and residential markets, current and future pricing trends, as well as trends in demand and availability. Furthermore, the analysis from Deutsche Bank compares several European financial centres, showing that Frankfurt is in several ways an obvious and affordable choice for financial services relocated from the United Kingdom.

Executive Summary

“In view of the high level of political uncertainty surrounding the United Kingdom’s decision to leave the European Union, it will be some years until the size of the Brexit pie, i.e. the relocation of companies and employees, can be determined fully. Regardless of the final outcome of the negotiations between the UK and the EU, the city of Frankfurt is likely to benefit.

Frankfurt is already continental Europe’s main financial hub, and compared to other European cities, it can boast a range of additional advantages such as low rents and residential property prices, good infrastructure and a highly dynamic economy. However, considering the strengths of its European and also non-European competitors, Frankfurt will end up with only a piece of the Brexit pie.

Frankfurt’s property market would gain considerable momentum even if only a relatively small number of British companies and employees moved here. Growth in employment in the wake of Brexit should stimulate demand for office space, thus contributing to a reduction in vacancies and rising rents in the office market close to the city centre. Following the referendum on Brexit, we have raised our average rent increase expectations in the top segment to over 2% per year by 2020 (double what had previously been anticipated for the 2018-2020 period).

Bottlenecks have existed in the housing market for some years. A large demand overhang – the shortage of housing runs to several tens of thousands of homes – and a lack of undeveloped land are the main reasons why prices have risen by around 25% since 2009. An additional Brexit effect could drive prices up significantly. The rule of thumb in this context is the price per square metre increases by EUR 25 for every 1,000 missing homes. Assuming additional demand for 5,000 homes, residential property prices will increase by EUR 125 or around 4% compared to current levels.”

The complete study from Deutsche Bank Research can be downloaded here.

Holland Fintech and Frankfurt Main Finance e.V. continue successful FinTech Matchmaking

Following their successful start in Amsterdam, Holland Fintech and Frankfurt Main Finance, continued their joint FinTech matchmaking on November 25, 2016. For financial services technology companies, access to foreign markets is of considerable importance. Frankfurt acts as a gateway for German FinTechs into the global financial world. This is also shown by the results of a recent EY study on the German FinTech industry, which shows how quickly Germany is catching up internationally and Frankfurt nationally.

With regards to Frankfurt and the entire Frankfurt Rhein-Main region, there is now a very positive climate for FinTech. With the launch of the Accelerator Frankfurt, the opening of the TechQuartier, the designation of Frankfurt as one of five German digital hubs and the awarding of the FinTechGermany Awards, the Financial Centre Frankfurt has impressively demonstrated its innovative power. The proximity to banks and regulators proves to be a locational strength for Frankfurt. Amsterdam is one of the most agile locations where innovations are adopted early. The event was proudly sponsored by ING DiBa and supported by Hessen Trade & Invest GmbH.

“Innovations arise when the best and most creative come together and learn from each other. That is why we are happy to support the event and look forward to the exchange,” says Željko Kaurin, Board Member at ING-DiBa.
Dr. Lutz Raettig, President of Frankfurt Main Finance, elaborated further, “Many German FinTech companies have successfully established their business models in Germany and are ready to take steps to expand internationally. Through our partnerships with leading financial centres around the world, we are able to support these efforts and work to position the Financial Centre Frankfurt as an attractive destination for foreign FinTech companies. Fintech Matchmaking events like these are a great platform for these young start-ups.”

About Holland FinTech

Holland FinTech brings together people and organisations, who believe that creating a level playing field in the financial ecosystem will drive innovation. And that connecting mature players to innovative start-ups across borders, will accelerate financial innovation to its full potential. Leaning on the strengths and strategic position of the Netherlands towards continental Europe, Holland FinTech will is building a technology based market place in global financial innovation.

 

About Frankfurt Main Finance e.V.

Frankfurt Main Finance is the Financial Centre initiative for Frankfurt am Main, the leading financial centre in Germany and the euro zone. The initiative has more than 40 members including the State of Hesse, the cities of Frankfurt and Eschborn, and dozens of prominent actors in the finance sector. Frankfurt Rhine-Main region offers young FinTechs attractive working and living conditions. The proximity to the established banks is also advantageous for these young start-ups.