Why two German fintech startups chose to expand to London despite Brexit

The English writer and poet Samuel Johnson was of the opinion: “He who has grown tired of London is tired of life; for London is all that life has to offer”. – as far back as the 18th century. In the last decade, the technology and financial sectors have helped London and the UK economy boom. Despite uncertainty surrounding Brexit and the impacts of a global pandemic, the UK capital continues to be a leading financial centre and a global hub for fintech.

Fintech is one of London’s tech sector’s biggest successes. A recent study by London & Partners and Dealroom.co revealed the UK capital dominates the European fintech investment landscape. London fintechs also demonstrated their resilience as they adapted and innovated to the changing demands brought about by the pandemic. In 2020, VC investments into London‘s fintech companies was $4.3 billion, putting London in second place globally – behind San Francisco and ahead of New York. The study also shows that US fintech investors are increasingly looking to London for investment opportunities. In 2020, US investors accounted for 61% of total VC investment into London-based fintechs – up on 2019 investment levels.

Fintech companies are seizing the moment: recent data from Mastercard shows that contactless payments are growing rapidly in the UK and digital adoption has accelerated. British fintech service providers are benefiting from an increase in customers. Critics may argue that London’s fintech scene is being overtaken by other hubs such as Singapore, Zurich or cities in the US. But there is no denying that London remains a global leader in the sector.

Access to venture capital, tech savvy customerrs and a thriving fintech market is attracting international companies to look to London for their expansion. This is the case for two Germany fintechs – Getsafe and Idnow. But how did the two startups make it to London and why was this the right move for them despite the pandemic and Brexit?

IDnow’s successful expansion into London:

IDnow is one of the leading providers of Identity Verification as a Service solutions. Founded in March 2014, the Munich-based startup has won over 250 corporate customers – including Commerzbank, car rental company Sixt and smartphone bank N26. In 2019, US financial investor Corsair Capital joined the fintech for 36 million euros. The company then expanded to London. The demand for IDnow solutions was already high and the UK capital was an important strategic location for the company to be successful internationally.

German technologies are generally in great demand in the UK because they are considered trustworthy and particularly secure. Roger Tyrzyk, Head of Sales UK/I at IDnow and a long-standing industry expert, has driven the local market entry and heads the sales, service and marketing team in London. Currently, the team consists of ten people in the UK with offices in Canary Wharf and Manchester.

“For the companies here, our experience with the strict regulations of BaFin in Germany and the AI technology developed in Germany is a great advantage. For us, building a team on the ground is the logical step to provide the best possible service to these clients,” says Roger Tyrzyk, Head of Sales UK at IDnow.

The IDnow data centre is located in Nuremberg, so it operates according to German security standards and is subject to one of the strictest data protection regulations in the world. Compliance is particularly strict in Germany and IDnow meets these standards, one of the reason companies around the world choose to work with them.

Customers welcome IDnow with open arms in London:

According to IDnow, the advantages of being in London were obvious and UK customers welcomed their expansion. In no other location do so many fintechs, banks, and talent congregate in one place than in London. There is access to highly skilled talent ready to join the team as well as thousands of other fintechs – competition stimulates business – and companies as potential new customers. London is also an ideal location for further expansion – be it to Paris, Manchester, Munich or even outside Europe. After all, the capital is very international, with connections to the Asia-Pacific region, Singapore, the United States and South America. Being in London makes it easier to get in touch with non-European companies.

After launching in Germany, start-ups are well prepared for London expansion:

For IDnow, it was comparatively easy to set up a UK Limited company in London. To set up a company in Germany is full of complexity and bureacracy. To establish themselves in London they had to set up communication channels in the new office and build up their brand.

“In the British market, for example, so-called eKYC checks are very popular. That is why we have integrated this function into our platform. It should be noted, however, that IDnow AutoIdent is significantly more secure than the tech standard in the UK,” explains Roger Tyrzyk, Head of Sales UK/I at IDnow.

The exit from the EU, which was already considered possible at the time, had no impact on IDnow’s decision to expand. The company factored both scenarios into its corporate strategy in advance and was prepared accordingly. Brexit does not have a major impact on IDnow, as its solutions comply with the standards in the EU and the German BaFin. In fact, the company even has a competitive advantage over UK-based companies, as data transfer from a third country to the EU is complicated.

Roger Tyrzyk explains: “As the world’s leading financial centre, London was at all times an important strategic location for us, even in a possible Brexit scenario.”

Although the entire UK team has always worked from home, IDNow also had to deal with lockdown issues: clients, business partners and colleagues could not meet in person. IHowever, the pandemic has accelerated digitalisation and given the business an additional boost: The lockdown has made digital verification more necessary and accepted. IDnow was able to profit from the operational business, but is also looking forward to a return to more normality.

“Of course, no one could have expected a pandemic in 2019. Despite the personal limitations, it was more of an accelerator for the IDnow business and our product,” Tyrzyk recalls.

Think global with Getsafe Insurance:

Like IDnow, Getsafe also recently expanded to London. Getsafe was founded in 2015 to make insurance attractive again – with the help of the first digital insurance manager. Users manage all contracts consistently via smartphone app – a key factor that differentiates the start-up from other competitors on the German market. One year later, the insurance manager becomes a provider. In 2019, Getsafe receives a €15 million Series A financing, which enables its European expansion. Their business model is focused on young professionals who want to build up insurance cover and the strategic goal is to become a full insurer.

Right now, Getsafe is still working with different risk carriers in the background in order to offer further insurance products, especially in the pension area, such as life insurance and occupational disability insurance. A year ago, the time had come: the digital insurance provider launched a new digital household insurance product in the UK. Managing director and founder Christian Wiens was responsible for the expansion step and initially decided to organise everything from Germany.

London as the ideal starting point for European business:

London provided the ideal starting point for the company’s pan-European business strategy. Christian Wiens, CEO and Co-Founder of Getsafe explains: “Getsafe is an attempt to think insurance globally. In the coming months and years, we want to continue the expansion of the company and be active in all major European markets.”

For Getsafe, the move to London was an important decision. London is Europe’s biggest financial centre. It also provided the insurtech company with the customers they wanted to target: a tech-savvy, digital and young generation. The task now is to win them over as new customers. Another advantage is the favourable competitive environment: there is hardly any competition on the market. Moreover, the medium-term goal for Getsafe is to conquer the European market from London.

“London, as Europe’s fintech and VC hub, is the ideal starting point for European expansion,” adds Christian Wiens.

The benefits outweigh the challenges:

The core of Getsafe is its platform and infrastructure. Both make it very easy to transfer products to other countries. The insurance offerings themselves are different in each market, but the infrastructure is the same. For this reason, there are currently no global insurers. The UX, i.e. the app and functionalities are the same everywhere. The language is easier to adapt, the customer service for the UK is centrally located in Germany. The contract terms vary depending on the market, but the effort required for expansion was generally relatively low for Getsafe. It took the start-up only three months to roll out its first insurance product in the UK market.

Getsafe based themselves in a co-working space in London. For specific questions, the start-up received support from service providers, such as London & Partners, to hold initial talks on site – according to Getsafe, a very good platform for networking.

“We have not received any financial or similar support. However, we have worked with service providers on specific challenges, such as legal issues. That helped us a lot,” Christian Wiens recalls.

Unexpected challenges can be overcome very Britishly:

The circumstances surrounding the EU exit were challenging and the ongoing uncertainty meant that expansion had to be postponed twice. As an insurer, you are regulated, you need a licence, so it was very important for Getsafe to know if and also how exactly Brexit would take place. The solution for the start-up was to found its own company in London – in other words, to establish a detached business model – in order to operate completely independently of political decisions:

“Political difficulties should not prevent us from turning our plan to expand into the UK into reality. The advantages of the mark simply outweigh the disadvantages. For us, the motto was rather: ‘Now more than ever! There is a solution for everything,” says Wiens.

After setting up an independent subsidiary in London and the market launch, Getsafe had to deal with the challenges posed by coronavirus. Thus, a local team had to be set up quickly, as the German team was no longer able to travel. In addition, business appointments and agreements have been delayed over time and Christian Wiens is grateful that this is now being handled by a local team. Coronavirus did upset the UK schedule for Getsafe and a lot of things took longer. In Germany, however, Covid-19 was more conducive to business. For Getsafe, the traditional insurance sector suffered and digital adoption accelerated. During the pandemic growth in the UK was delayed, but Getsafe is now catching up.

Christian Wiens explains: “Expanding to the UK is not difficult in itself. The real challenge is to establish your own product in the market and to gain a foothold there with it, because in every new country you have to start from scratch at this point.”

The success of this approach is reflected in the results: in December 2020, the start-up closed a Series B funding round of 30 million US dollars, making it one of the best-funded insurtechs in Europe.

Both examples show: As a German company, expanding to London has been extremely beneficial for their businesses. Despite Brexit and coronavirus, IDnow and Getsafe are happy with the decision to choose London as their new location and recommend that any other fintech thinking of expanding internationally, should consider London.

Miriam Ducke, Director of Europe at London & Partners said: “The UK capital offers international fintech companies the opportunity to attract new customers, find emerging talent, access investors, network with other fintechs in the industry and use the city as a springboard to the global market. The latest investment figures show that London is a well-established global fintech capital and I am confident that we will continue to see growth in London‘s largest tech sector.”