First published in AMS business magazine. Author: Douglas Heingartner
The city consistently shines in international rankings
Since as far back as the Dutch East India Company’s introduction of tradable stocks in 1602, Amsterdam has been a pioneer in financial innovation. It was also the first European city to open an options market (the European Options Exchange in 1978), and Dutch banks were frontrunners in terms of online and mobile banking, as well as phasing out old payment methods such as cheques. That tradition is still thriving, as Amsterdam is quickly developing into one of the world’s leading hubs for financial technology, more commonly known as FinTech. The city is now home to about 350 companies and 15,000 employees working in the FinTech sector, developing novel solutions for everything from online payments and transfers, to high-speed trading and bitcoin.
A strong base that welcomes new players
There are many reasons why Amsterdam has become a FinTech capital, the most important perhaps being the city’s already strong financial sector. Major international banks such as ABN AMRO, Rabobank and ING are all based here, as are several large pension funds and insurance companies. In fact, the financial sector is the largest business sector in the Netherlands, employing 230,000 people in the Amsterdam Metropolitan Area alone. Perhaps just as important is Amsterdam’s flourishing start-up sector. The city consistently shines in international rankings; it was rated Europe’s second-best start-up city in Nesta’s European Digital City Index 2015, and 46 per cent of the country’s start-up job vacancies are in Amsterdam. Some of these financial start-ups have already hit the big time. The financial world took notice when Amsterdam-based Flow Traders raised almost €600 million in its July 2015 IPO. Along with Amsterdam companies like Optiver and IMC, they make the city a driving force in the world of electronic trading. Likewise, when the valuation of Amsterdam’s global payments start-up Adyen grew to US$1.5 billion in late 2014, it became Amsterdam’s first unicorn, firmly putting the city on the FinTech map.
Top talent and savvy customers
Another crucial factor is Amsterdam’s remarkable talent pool. Global technology employers such as Booking.com, Uber, Netflix, TomTom and Tesla can easily find highly-skilled workers who are drawn to Amsterdam’s exceptionally high quality of life, and English is a second language here, with 90 per cent of the city’s Dutch locals speaking it. With two large universities based in Amsterdam, there is also a boundless supply of world-class financial, commercial and technical talent here. FinTech companies in particular need staff who understand data, and that need is being met with the recently-opened Amsterdam School of Data Science, a collaboration between several local knowledge institutes that will train thousands of data specialists.
With its rapid adoption of new technologies, Amsterdam is also an ideal testing ground for new financial products. The Netherlands already has some of the lowest levels of cash payments in the world, and its mobile-banking penetration rate of 63 per cent is the highest in Europe. It’s convenient banking services such as these, which the FinTech companies enable, that are particularly sought-after by young people. Amsterdam’s Bunq, for example, which launched in 2015, is a new kind of bank that has been called the WhatsApp for payments.
Stable and reliable
The FinTech industry also depends on fast and reliable data connectivity, an area in which Amsterdam excels. The city’s AMS-IX Internet exchange is the largest in the world, and 11 of the 15 undersea cables that connect Europe to the Americas converge in the Netherlands. Just as important is a reliable and stable government, and the Dutch Authority for the Financial Markets (AFM) and the Dutch central bank DNB have proven enthusiastic when it comes to welcoming innovative fi nancial fi rms. A smooth and transparent visa system also makes it relatively easy for FinTech companies to bring in international experts (as so-called ‘knowledge migrants’), which speeds up the process and eliminates a lot of red tape.
In 2016, the Dutch government appointed the economist and former minister Willem Vermeend as the special envoy to the FinTech sector, and in the same year the AFM and DNB set up the InnovationHub to create room for innovation in the fi nancial sector. The ostensibly staid DNB has even been experimenting with blockchain technologies, and recently outlined a scenario of how its DNBcoin prototype might function in the distant year of 2140. For a central bank to be that keen to entertain the idea of change, it looks like the Amsterdam’s FinTech-friendly environment is in it for the long haul.