Dutch landscape attracts fintech exploration

In 2019, the Netherlands had more than 450 companies active in financial technology. The country’s “polder model”, in which new and traditional companies work closely together, offers many opportunities for fintechs

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The Dutch have a natural preference for cooperation and sharing risks and profits. They also value fair trade, trust and liquidity, so it is no surprise that the Netherlands offers a good environment for financial technology (fintech) companies, which has attracted interest since the UK began the process of leaving the European Union (EU).

The Netherlands government takes proactive steps to ensure that fintech entrepreneurs, startups and the rest of the financial sector have access to all available knowledge in order to be successful and compliant. To this end, the Dutch Central Bank and the Netherlands Authority for the Financial Market set up then InnovationHub, where companies can ask the organisations questions in an informal setting.

Stephan Punt, head of risk and compliance at Dutch fintech Floryn, said the Netherlands is an attractive country for fintech companies. “We have a central location in Europe and a lot of talent, both technologically and financially, through the country’s high-quality education,” he said.

Punt pointed out that Brexit has further strengthened the position of the Netherlands, and Amsterdam in particular, as a base to serve the European market.

The Netherlands’ 17 million inhabitants embrace digital services. For example, the country has an adoption rate of 65% for mobile banking and payments, and 89% for online banking and payments. “Traditionally, the Netherlands is good at trade and that is reflected in this market,” said Jeroen de Bel, founder of fintech strategy consulting company Fincog.

“At the beginning of this century, banks and retailers were already sitting around the table together to launch PIN payments in shops. In the Netherlands, we are well on our way with online banking. The costs are low, the experience and efficiency are good.”

It is no surprise, then, that one of the largest online payment companies, Adyen, is of Dutch origin.

But the Netherlands does not lead the way in every area of the fintech market. The PSD2 regulations, for example, were slow to get under way in the country, so open banking is an area where the Netherlands can still learn much from other European countries. According to De Bel, opportunities lie mainly in niche products such as mortgages and wealth management. “What is more, we are missing a truly innovative, international bank in the Netherlands that can compete with Revolut, for example,” he said.

Floryn’s Punt mainly sees opportunities in the field of law and regulations technology (regtech). “Many financial institutions are struggling with compliance and customer due diligence,” he said. “When a fintech knows how to solve that with technology, I think you can be can be ahead of the pack in the Dutch market.”

Read more about regional fintech hubs

The biggest challenge for fintechs in the Netherlands is to stand out from the rest of the market. Especially in the area of online payments, the market is becoming saturated, said Punt. “Then it is a challenge for a new players to enter the market,” he added.

De Bel said it doesn’t help that almost every organisation that does something with money nowadays calls itself “fintech”. “Even old banks dare to call themselves fintech,” he said, “but my definition of fintech is the use of new technology to create better financial services. Think of a better customer experience, efficient handling at the back end, but also creating a more inclusive financial landscape. Fintechs are, in my opinion, new parties with innovative technology that offer new services.”

And the Netherlands has hundreds of them, but it is unrealistic to expect all of these companies to make it to the market, said De Bel. “What you do see a lot is that fintechs that first offered a service themselves, but couldn’t realise growth, are now offering their innovative platform as a white label or SaaS [software as a service] solution to other parties, especially the old-fashioned banks,” he said.

De Bel said there are great opportunities here, because the incumbent banks often have large, complex IT systems that make it difficult to switch quickly and innovatively. “You then see that they market their innovative services as a separate company, for example Moneyou from ABN Amro,” he added.

Both Punt and De Bel expect consolidation in the Dutch fintech market in the coming years. “"Over the past five to 10 years, countless fintech companies have quickly emerged, but there is no raison d'être for all of them,” said Punt. “Only those that continue to stand out and have software development at their core will survive.”

De Bel said those organisations that are unable to provide traction will merge into other companies or may suffer a silent death.

No financial Uber

Fintechs shake up the traditional financial world, yet in the Netherlands there is no single fintech that is disrupting the market. “We don’t have any financial Uber in the Netherlands,” said De Bel. “What you do see, however, is that newcomers in a very specific segment, such as Binck bank does in the area of brokerage, have a major impact. They offer certain services for free, overturning the earnings model of the traditional banks.”

It is about fintechs making small gains against the banking superpowers, with their combined efforts making an impact, he added.

The big Dutch banks currently have the task of ensuring that the gap between them and fintech developments does not become too big, said De Bel. “Banks such as Rabobank, ING and ABN Amro are still in a good position by ensuring they can offer more or less the same services as fintechs, for the simple reason that people do not switch banks easily,” he said.

There are many examples of banks looking to collaborate with fintechs, said De Bel, which is sensible development because the DNA of a traditional bank differs enormously from that of a fintech. But banks should be careful not to copy fintechs because they themselves are not fintechs, he added. “You can decide that everyone should wear sneakers in your organisation, but that doesn’t suddenly change your corporate culture.”

The Netherlands is not only attractive for fintechs to get established, but financial and technical talent from all over the world knows how to find the country. For example, the Netherlands ranked sixth in the IMD World Talent Ranking 2017 and ninth in the Global Talent Competitive Index.

The quality of life in the country is high, there is a liberal culture and a high level of education. Also, the Dutch capital markets are strong, with relatively high private equity and venture capital investments in startups and scaleups.

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