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Singapore and Berlin as start-up, fintech havens

In the last few years, Germany has become a fintech powerhouse, and Berlin a start-up centre. Singapore has been going in the same direction. With German founders in Singapore, and a Singapore presence in German start-ups, there is a robust exchange of ideas.

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German aviation start-up Volocopter, which is planning air taxi trials in Singapore, has teamed up with UK-based global vertiport owner and operator Skyports to build the first air taxi VoloPort, as it is known, in Singapore for the trials.

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Mr Ramin Niroumand, founder and CEO of finleap, which hired a senior product designer from Singapore and is working with Ping An Insurance.

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Mr Claus Karthe, founder of German Entrepreneurship Asia, says 'Brand Germany' has positive associations in Singapore, giving German start-ups an advantage.

GERMANY'S capital Berlin has been dubbed a start-up centre, a title it has been steadily reinforcing since it started gaining traction some 10 years ago, as first reported by Germany's Spiegel Online in 2011.

Today, it is a "top tech environment", attracting reportedly some 40,000 people each year.

Tech giants such as Amazon have made their home in Berlin. Amazon, for instance, has office buildings in Berlin's central Mitte district, and also rents temporary and coworking spaces. This is due to the rapid growth of its Berlin-based staff; in 2018, Reuters reported this was more than 2,300.

According to Germany Trade & Invest (GTAI), the country's economic development agency, Germany is an important financial technology (fintech) market in Europe. In 2017, it was the fourth largest in the world.

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Like Berlin, Singapore is already known as a leading start-up hub in Asia and the world. In August 2019, it was reported that Singapore is the Asia-Pacific's third biggest fintech market by funds. Investments in Singapore nearly quadrupled to US$453 million (S$625 million) in the first half of 2019, up from US$118 million in the same period a year ago.

Mr Markus Gnirck, co-founder of tryb, a Singapore-based fintech consultancy, tells The Business Times: "The fintech scene was not active in Germany five years ago, and Singapore was in the same state. Now both have grown, but due to different issues.

"Germany deals more with issues regarding payment and consumer fintech. The problems are different from South-east Asia's. In Germany, there is an established finance system, legacy systems, banking infrastructure, and more or less everyone is banked.

"In South-east Asia, aside from Singapore which is the gateway, banks haven't used much technology and the region is just about to get into super apps such as Grab and Gojek. The difference between the banked and unbanked is also huge."

In Germany, "the biggest success stories in fintech are more on the business-to-business (B2B) side - Wirecard is a famous example".

In September 2018, Germany's second-largest lender, Commerzbank, lost its status as a German blue chip, dropping out of the prestigious Dax index of Germany's 30 leading listed companies after being on the index since its inception in 1988.

It was replaced by payments service provider Wirecard, a Munich-based fintech firm with 22.5 billion euros in market capitalisation in 2018, more than twice that of Commerzbank.

Mr Gnirck, who is German, says: "It was a big deal for Germany, that fintech has replaced a German bank on the stock index."

Mr Ramin Niroumand, founder and chief executive officer of finleap, has seen how finleap has grown along with Germany over the years, to become European's leading fintech ecosystem.

He says: "This year has been particularly indicative of growth within finleap, our portfolio and the German fintech scene as a whole. I was finleap's first employee back in 2014. Today, we have over 1,000 employees and more than 65 nationalities represented in the ecosystem.

"Just like finleap, the German fintech scene has grown exponentially over the past couple of years. Most notably, Germany's first mobile bank, N26, has in just a few short years, gained 3.5 million customers and reached start-up unicorn status."

finleap, which hired a senior product designer from Singapore, is also working with Ping An Insurance's fintech arm OneConnect, which launched in Singapore in 2019. OneConnect will offer its fintech software-as-a-service (SaaS) technology to the European market through finleap's business unit finleap connect, for instance.

Mr Gnirck adds that Berlin has also become a start-up centre because it "allows innovation to happen", and notes there is an increasing trend in fitness, health, agri and food tech start-ups. "It doesn't sit on one spot all the time, and worry about regulators. As a country, it's quite friendly towards start-ups. It's still inexpensive and has a good environment."

This is exactly how German accelerators and start-ups feel about Singapore.

Mr Claus Karthe, founder of German Entrepreneurship Asia, which oversees the Asian execution of the flagship programme German Accelerator, says: "With its extensive and vibrant start-up ecosystem, supportive government, and diverse and international talent pool, Singapore serves as a great entry point for German start-ups to access Asia.

"Singapore is also experiencing a wave of innovation where we have different deep technologies being combined to create new application layers, and this provides an opportunity for German companies who are strong in many of these technologies to come to Singapore and ride the wave."

He says "Brand Germany" has positive associations in Singapore - engineering excellence, technical precision and research-backed innovations - giving German start-ups an advantage in terms of credibility and trust.

This is why partnerships between start-ups and companies from both countries go well. For instance, RYTLE, an alumnus of German Accelerator South-east Asia, has worked with a few companies in Singapore to further develop and improve their products.

Mr Karthe says: "Of special interest is the Cold Chain Box, which was built in Singapore for RTYLE'S electric three-wheeled bike (the MoVR), which was a specific demand from Asia and Singapore (because of the climate)."

German start-ups in Singapore also bring along partners from other countries, exposing them to Singapore's offering as a gateway to South-east Asia.

German aviation start-up Volocopter, which is planning air taxi trials in Singapore, has teamed up with UK-based global vertiport owner and operator Skyports to build the first air taxi VoloPort, as it is known, in Singapore for the trials.

Mr Simon Whalley, Skyports regulatory and policy manager, says the VoloPort, the world's first full-scale vertiport prototype, will be unveiled and showcased at the Intelligent Transport Systems World Congress in Singapore, during the week of Oct 21- 25, 2019.

"Skyports is in the process of opening a Singapore branch and we have already identified a number of excellent candidates for our country manager role in Singapore."

While many companies have identified similarities between Germany and Singapore, which makes it easy for start-ups from either country to work in the other, the Singapore Embassy in Berlin notes: "Through our conversations with Singapore and German start-ups, we discovered that the ecosystems in both countries face similar challenges.

"While Singapore had a good foundation to support start-ups at seed stage (initial funding stage), there was generally less support as start-ups developed and grew. Similarly, promising German start-ups and scale-ups said one of the biggest challenges they faced was the lack of capital investment and government support beyond the seed stage. The German government is currently coming up with initiatives to overcome this gap."

Such gaps are not stopping Temasek and GIC, which have been investing in promising German start-ups. The Singapore Embassy in Berlin says: "Our key message has been the need for Singapore and German start-ups to scale internationally in this day and age of digitalisation, as well as highlighting the merits of using Singapore as a launchpad to South-east Asia."