2020 has just kicked off. Despite legacy banks and financial institutions still controlling the majority of market share in the financial services industry, financial technology (FinTech) companies have become a thriving force — launching throughout the world and in various financial sectors, and growing to become trusted brands and unicorns in valuation. Certain geographic locations have become prime spots for fintech startups to rise and launch a new product or service. As the industry starts a new decade of accelerated growth and innovation, what is considered the top global fintech hub in the world?

Findexable, a company founded to build a Global FinTech Index, has taken on the challenge of answering “how would this title of #1 be determined?” They created a system to rate and rank the various fintech ecosystems around the world. Its report takes into account 65 countries, over 230 cities, and over 7000 companies in determining the FinTech’s industry #1 global hub. Standing at the top is San Francisco — the world’s leading hub for FinTech.

What goes into a FinTech ecosystem?

FinTech’s core purpose is to solve global challenges in financial services. In addressing this problem, it also has a responsibility to restructure the financial services industry as being all-inclusive, extremely diverse, and ethical.

To put it simply, the strength of a fintech hub is defined by the number of connections that it enables as an industry center for growth. Making these connections high-quality, paving paths of minimal resistance, and making transactions both easier and less costly is critical to industry innovation.

The key themes considered in becoming an influential center for FinTech focus on the following:

1. Where are the world’s best places to start or build a FinTech company?

2. Where are the emerging regions that Fintech entrepreneurs, investors and institutions need to be aware of?

3. What does it take to build a successful fintech hub?

While cities or areas known as hotbeds for start-ups seem logical starting points, this designation doesn’t directly translate to fintech. A fintech company IS often a start-up, with multiple fintech start-ups achieving global success — however, startup success is not synonymous with fintech success. Established global start-up centers (e.g. London, New York and San Francisco) retain or improve positions at the top – but others perform poorly. Among the top 40 fintech hubs tracked, about half are lower as a fintech hub compared to their global start-up ranking (see Top 25 in graphic below).

FinTech may offer a level playing field, but succeeding in the industry requires maneuvering government or national policy, activating local talent pools, and removing road-blocks.

Similarly, the link between the financial wealth and the commercial power of a city is no longer inherent. Smaller cities and regions with a pro-Fintech mindset can perform well above their size in creating comprehensive financial services hubs. A FinTech success story can easily transform a local economy, or help a nation redefine itself among its citizens and trading partners, in comparison to other industries.

By generating a mix of ecosystem indicators such as top industry events, FinTech incubator & accelerator programs, access to online payment services, or the number of local fintech unicorns — rankings can be formed on a well-rounded model:

Quantity — How many fintechs & ecosystem developers are there?

• Activity: After defining a company as a FinTech, the number of companies in a location are identified; these locations are then clustered to be considered local ecosystems of multiple cities and towns within the vicinity (e.g. San Francisco Bay Area or Boston);

• Attributes: Countries or cities may be missing due to the lack of companies (or a cluster) in the area;

• Assessment: Due to the benefits of ‘network effects’, there is also consideration of specific fintech co-working spaces, accelerators, industry events, and meetups. These opportunities and programs help facilitate the flow of data, connections, and capital within a marketplace.

Quality — How successful are fintechs within an ecosystem?

• Activity: The impact of individual companies in a location is gauged relative to one another — based on factors such as web presence and traffic, customer and account base, and overall valuation;

• Attributes: FinTech unicorns have a tremendous impact through their effects on venture capital and enhanced development of industry innovators;

• Assessment: The presence of major industry gatherings and ‘key note’ fintech events are vast contributors to quality scores.

Environment — How easy, how big?

• Activity: Evaluated on ease and attractiveness of specific locations, dependent on levels of local government policies and technology infrastructure;

• Attributes: Applicable only at the country level so cities get judged solely on the merits of their ecosystems;

• Assessment: Online censorship, or banning of key websites adds barriers to building top Fintech companies.

Why is the #1 FinTech hub in san francisco?

The cities at the very top of the list are the prime examples of what it takes to build and maintain a thriving FinTech hub. The combination of competitive landscape, enabling regulations, talent, and financial strength make them difficult to surpass. These gateway hubs help the countries and regions they anchor – giving way to market-shaping innovations, and inspiring the formation of other clusters in nearby towns and cities (as a ‘spillover’ effect).

After taking into account multiple qualitative, quantitative, and environmental assessments from FinTech ecosystems around the world — San Francisco Bay Area has emerged as the clear global leader in FinTech hubs, followed by London, New York, Singapore, and Sao Paulo. Here’s what has helped the diverse FinTech ecosystem of San Francisco earn its spot as #1:

• FinTech Deals in 2019: 80 (valuation over $80B);

• FinTech Strengths: Insurance, Lending, Payments, B2B fintech, RegTech, Wealth management;

• Unicorns: Stripe, Plaid, Chime, Brex, SoFi, Coinbase, Credit Karma, Affirm, Clover, Bill.com, Gusto, Tradeshift;

• Ones to Watch: Robinhood, Compass, Gusto;

• Industry Events: Blockchain Expo North America, FiNext, Finovate Spring Conference, Future of Fintech, CB Insights, Lendit Fintech USA;

• Accelerators & Incubators: Deutsche Bank Innovation Labs, Hitachi Financial Innovation Laboratory, San Francisco Innovation Centre - Visa, Mastercard Labs, Refinitiv Innovation Lab, SC Studios, Wells Fargo Digital Labs, Wells Fargo Startup Accelerator;

• Associations: City Innovate, Global Chamber San Francisco, Renaissance Entrepreneurship Center, San Francisco Chamber of Commerce, San Francisco Department of Technology, San Francisco Women’s Entrepreneurship Fund;

• FinTech friendly rules: California is reviewing amendments to the Consumer Privacy Act (2019) to include deeper focus on data aggregators;

• School of FinTech: ‘Opportunities and challenges of financial services’ (Fintech University); range of courses at The Fintech School.

The future of emerging global FinTech hubs

In the FinTech industry, small can be very beautiful — in particular with smaller countries and cities are performing well and creating a new stage for financial services. In Europe, countries like Luxembourg and Malta are showing how small areas can make a large difference. By combining national initiatives to promote the city or country with revisions to local rules, companies can be easily formed and external entrepreneurs incentivized to build. This is especially valuable when local talent and skills are in short supply.

Slowly on the rise are ‘Growth Hubs’ — cities climbing up the start-up ecosystem rankings and rapidly emerging as alternative fintech destinations. Covering each continent, they represent the dynamic global impact of the digital economy – talent & innovation with a fintech-friendly business environment is a great recipe for an emerging growth hub.

As 2020 starts a new decade for innovation in financial services, the world will be watching for what locations the next BIG product or service will come from. While there is no magic formula to building the next #1 FinTech hub overnight, the success of certain cities and countries over others (irrelevant of size or status) shows what the industry is truly capable of.

. . . . . . . . . . . . . . . . . . .

Thanks for reading! We really appreciate the continued support!

Be part of our FinTech community at FinTechtris for more industry content and discussions (including trends, deep dives on unicorns, and sector analysis) — signup for our newsletter and Slack channel access today!