FinovateEurope is just weeks away, so we’ve been paying closer attention to European fintech. The sector not only achieved a banner year for innovation, but also scored a record amount of VC investments.
To gauge the temperature of fintech innovation in Europe, we looked at Finovate alums in different regions: Aire.io in the United Kingdom, Bitbond in Germany, and Ledger in France.
United Kingdom
In an article titled, Britain’s Booming Fintech Scene, Ayondo reports that the region’s fintech sector brought in a record amount of venture capital funding in 2015, 63% of which was raised by London-based companies. Of that London total, a quarter went to fintech companies. The article also notes that venture capital investment rose from £34 million in 2010 to £312 million in the first six months of 2015.
In the summer of 2015, British Chancellor George Osborne appointed Eileen Burbidge as an ambassador for fintech, to establish a governmental voice for fintech and to position the U.K.’s industry for growth. London & Partners anticipates an additional 8% of the U.K.-based online population will start using fintech products in 2016.
Aire.io, a startup committed to help thin-credit-file users build a credit score, is headquartered in the Silicon Roundabout. Founded in 2014, the company’s CEO Aneesh Varma talked with us about its London roots.
“I have been in the London startup scene for almost 10 years now, and it’s been really amazing to witness the transformation,” says Varma. “The people, the events, the universities, and players like Techstars and the Google Campus, have really helped create that virtuous circle we needed.”
According to Varma, the environment has helped foster the startup’s growth: “We ourselves just moved into larger offices to create space as we are actively hiring to grow our team. Being in Shoreditch has been enlightening, as it feels like we are the outsiders who are rethinking how to fix up the cracks of the financial district next door.”
Additionally, Varma noted the active role Aire plays in the startup scene by giving back to the fintech community: “We are also gearing up to host events to help create an opportunity for banks and lenders to meet the very people we are trying to help—we call them Citizens of Aire.” Varma says the moves will showcase why Aire matters to the “wider fintech ecosystem.”
*Read the rest of the interview in the addendum at the bottom of this post.
Germany
In Germany banks are beginning to invest in fintech. Commerzbank, the country’s second-largest bank, invested in five fintech companies through its investment arm, CommerzVentures. Deusche Bank, Germany’s largest lender, is entering the mix by opening innovation hubs in London, Berlin, and Silicon Valley.
Peer-to-peer bitcoin lending platform Bitbond is based in Berlin. Earlier this week we spoke with the startup’s co-founder and CEO Radoslav Albrecht who described the city’s attitudes toward fintech. Albrecht says fintech activity is somewhat centralized in Berlin, recently ranked the fastest growing startup hub in the world by Compass.co. Albrecht notes that one of the contributing factors is the much-lower living expenses in Berlin compared with other large German cities.
Bitbond, which debuted its Autoinvest feature at FinovateEurope 2015, has been doing well over the past year, shifting its focus from consumer loans to SMB loans. Almost 40% of Bitbond lenders have deployed around $100,000 of capital through the Autoinvest tool, which enables investors to define investment preferences, and invests automatically on their behalf.
Additionally, Bitbond is working on creating an investment vehicle that will allow users to invest in loans on its platform without having to purchase bitcoins or set up a bitcoin wallet. Because traditional currency is not involved, fees are much lower.
France
There are fewer fintech startups in France, but that is about to change. In November 2015, NewAlpha became the first French VC fund dedicated to early stage fintech financing.
At FinovateEurope this year, Paris-based Ledger will debut Ledger Blue, a personal device that secures payments and smart contracts for bitcoin- and blockchain-based applications.
If you’re eager to see more in the European fintech scene, check out FinovateEurope on 9/10 February at the Old Billingsgate Market Hall in London. Learn more about the 71 presenting companies and register now to join us.
*Here is the full interview with Aneesh Varma, Aire.io CEO:
Finovate: What is Aire doing that its competitors are not?
Varma: At Aire, we don’t focus on competitors. We instead are focused on building the best product based on our core principles of what we would like to see in the world.
One such core principle at Aire is to go beyond just the data, and understand the story of the applicant. Many companies these days get carried away by big data, throwing 20,000 data-points at the problem. But in reality it can lead to situations such as Ben Bernanke not being able to re-mortgage when he changed jobs. The ‘data’ was changing jobs; however, the ‘story’ was that he still had a strong income.
At Aire our research has focused on leveraging artificial intelligence and the cognitive sciences to evaluate more meaningful and deeper data. Understanding the individuality of each applicant and not relying on population-based statistics.
All of our personal data comes directly from the user, via our virtual interview, done in an adaptive interface. It’s like having a human underwriter interview every applicant, but is automated so we can run it at scale with real-time scoring.
This is really powerful, as the Aire process can score anyone without any dependency on external data. This is especially important as we expand out to new geographies.
Finovate: What is the biggest challenge Aire faces in achieving its goal of offering fair access to finance?
Varma: The work we are doing at Aire is really personal to us. In many ways we have ourselves been victims of the cracks in the current system of credit scores. We know what it means to be financially excluded. It’s really tough.
Our work is to onboard more lenders who share the same ethos as Aire about ensuring people aren’t getting marginalized just because they don’t fit into the standard boxes.
We know the Aire product works. Over the last few months we have been able to observe empirical evidence—data on our performance—and it is really phenomenal how we can boost acceptance up to 14% while still ensuring over 90% of the candidates get through our process.
It’s a changing world. More and more of us are going to be self-employed, become freelancers and or migrate to other countries. We shouldn’t be left out.
Finovate: How do you engage with developers?
Varma: Ours is a startup with a purpose. We are solving a real problem; in fact, a really hard problem. There is no hype to our work. It is pure performance which is why we have to carefully leverage technology, research and human emotions to build a great product.
This attracts a very particular type of person who genuinely cares about making an impact with their work, [to become] part of the DNA of our company.
For most of us in the team, this is our second or even third startup. We constantly try to optimize on everything we have done in the past. Most importantly, we focus on culture and hiring the right people.
We have a very rigorous hiring process over six stages. Once someone gets through that, we provide one of the most exciting work environments in London. You are surrounded by leading experts in each field and get to learn from them. And even teach them a few tricks! Perhaps a reason why we are attracting some great minds to join us on this journey (and a place on the European breakout list via Scott Sage).
Finovate: What’s on the horizon for Aire in 2016?
Varma: The biggest push now is to take our product to more people, in more markets. North America is next on the horizon and we are launching there shortly. The emerging markets are also relevant, and we are starting to prepare the groundwork there.
Naturally, ongoing research is very important to improve our product. We continue to invest in research across the various fields that will enhance our offering for new markets, including fellowships with our partner universities. Ultimately, there are going to be multiple versions of how we end up delivering our scoring product to consumers.
And other than that, it’s about focusing on hiring great people. This problem we set out to solve requires not just engineers and scientists, but people across various disciplines. We have baked that into our culture as a company. So a major part of my role ends up looking at how to bring together various people to collaborate as we invent new dimensions to our product.
A look at the companies demoing live to 1,500+ fintech professionals on 8/9 September 2016. 
Presenters
Jaroslaw Nowotka, CTO
Germany
Ireland
The Netherlands
United Kingdom