Big Banks Flock To London’s Financial Start-up Hub

An article about the largest European fintech incubator hosting over 173 (!) companies. Major banks, for example, UBS, and technology vendors IBM and Microsoft collaborate with the incubator. Chinese e-commerce giant Alibaba has just moved into one building with Level39

Newsweek: Level39, a European incubator of financial technology companies has begun to attract the attention of major international banks, one of whom has even established an on site ‘innovation lab’, in order to be as close to the heart of the disruptive technologies as possible.

Eric van der Kleij, who heads the programme, has revealed that not only are western and eastern banks becoming increasingly interested in Level39’s work, but also that both Santander and UBS have visited them for innovation days, in order to bring their operations up to speed on the latest in financial technology, or fintech.

The incubator hosts over 173 companies, many of whom are at the forefront of disrupting the traditional banking and financial services industries, and with global investment in fintech ventures standing at $12bn in 2014, banks are taking notice.

“We have two types of company,” van der Kleij tells Newsweek. “Those companies that want to make financial services even better, more transparent and more efficient. And then the disruptors, those that want to be the bank, eat the bank.”

Level39 is Europe’s largest fintech accelerator space. Based in the iconic One Canada Square building in London’s Canary Wharf, it was first launched in March 2013 and has since expanded rapidly. It now runs over three floors of the building, taking up 75,000 sq ft of office space, and works with a range of companies: from early-stage start-ups to the more advanced businesses who occupy the ‘High Growth Space’ and who “must have serious growth aspirations”.

Van der Kleij was formally the first chief executive of the Tech City Investment Organisation, tasked with accelerating the growth of London’s Silicon Roundabout in Old Street by Prime Minister David Cameron.

“[Companies] are selecting Canary Wharf because the leading thinking globally lies here in the talent on these three floors,” he says.

“It’s also special because some of those experts come from financial services. So they understand how you would build a new bank using Blockchain [the transaction database found in cryptocurrencies], that would have to meet compliance, have to meet KYC (know your customer). That’s the real advantage you have being here.”

UBS’s involvement was announced last month, with the bank emphasising the symbiotic relationship they hope to achieve with the other companies in the programme. “We will explore new technologies in partnership with others and will be fully involved in the innovation ecosystem. UBS has extensive industry expertise to offer the community and can partner with fintech companies to analyse and develop potential applications for the industry,” the bank declared in a press release.

And although UBS were the first international bank to establish permanent workspaces in the heart of Level39, van der Kleij hints they will certainly not be the last.

“There are other major financial services players that have asked us to help with research projects, to figure out the impact of Blockchain [for example].”

As well as banks, the incubator is attracting attention from major commercial and technology businesses too. IBM and Microsoft both have teams based there, who work in close collaboration with other members of the “innovative ecosystem”, and Chinese e-commerce giant Alibaba has just moved into the building, having decided to base their European headquarters there.

However, van der Kleij acknowledges that hosting teams from the big banks alongside the smaller ‘challenger’ companies who are looking to directly compete with them, is a careful juggling act.

“We have to negotiate with [the banks],” he says. “We say, we did this ourselves to make sure that they were sincere because they have to contribute twice as much to the ecosystem as they take.