The 2018 IFZ Global FinTech Rankings would do well to seriously evaluate the phenomenal fintech revolution taking place in Africa. A visit to Nigeria’s fintech firm, Paga, as well as Yabacon Valley and Co-Creation Hub, Lagos Nigeria; Silicon Savannah, Nairobi, Kenya (along with other tech hubs that have sprouted up in other Kenyan cities and towns, including Mombasa (SwahiliBox), Kisumu (LakeHub), Eldoret (Dlab Hub), Voi (Sote Hub), Machakos (Ubunifu), and Nyeri (Mt. Kenya Hub and DeHub); Silicon Cape, Cape Town, South Africa, Sheba Valley in Ethiopia (particularly Kifiya, a fintech company operating since 2010 whose partnership MasterCard International will help to capture and streamline some $2 billion–out of about $5 billion–annual Ethiopian diaspora remittances), and Rwanda would blow the ranking firm away. Across Africa over the last several years, the financial technology sector, or “FinTech”, is arguably receiving the greatest interest from innovators. Reports from Disrupt Africa and Partech Ventures estimate African fintech startups to have raised between approximately 19-24% of total funds raised across all sectors. Granted, merchants and the financial institutions which serve them are hamstrung because the digital payment ecosystem is heavily fragmented. Compared to the widespread card acceptance in developed markets, less than 1 percent of the $380 billion in non-cash payments in Africa are made through cards. In fact, Africa is a maze of more than 276 mobile wallets, more than 500 banks, and 12 card networks in 54 countries. Yet, Africa got something to say in every dimension of the fintech revolution!
Now, read on
New research by the Institute of Financial Services Zug (IFZ) evaluates the performance of FinTech ecosystem centers on a global scale by deriving a ranking of multiple FinTech hubs.
The ranking is led by Singapore, with its outstanding political and legal environment. However, the technological dimension is also an important driver of Singapore’s success. The two Swiss cities Zurich and Geneva rank two and three, respectively.
Toronto, New York City, San Francisco, Amsterdam, London, Hong Kong and Stockholm complete the top 10 of the overall hub ranking. The political and legal framework generally seems to be the dimension that manifests the greatest differences among the 27 cities, followed by the technological, economic and social aspects.
How the rankings are derived
FinTech Hub Ranking
The ranking methodology is based on the PESTapproach, which includes political/legal, economic, social and technological dimensions. In the new research, 68 factors are categorized into one of the four PEST-dimensions according to their affiliation, as listed below.
Classification of the indicators (bold factors on a city level)
Note that while the data for the eight indicators in bold font has been collected on a city level, the data for the 60 indicators in normal font has been collected on a countrywide level. All indicators adopt the form of a ranking of the included regions. Since not every in-scope region of this study is incorporated in every indicator, missing values occur. These missing values are replaced by the average indicator rank of the relevant region in the respective PEST-dimensions. In what follows, the three steps necessary to derive the overall hub ranking are explained and shows an overview of our methodology.
Hub ranking methodology
First, each indicator is transformed into a ranking of the in-scope regions based on their individual performance. Since this analysis includes 27 different cities, every indicator ends up as a ranking of the cities from 1 (worst performance) to 27 (best performance). This procedure corrects for the different number of considered regions across the original indicators.
Second, the four PEST-dimension scores of all cities are derived. This is achieved by averaging the ranks of the underlying indicators of the respective PEST-dimension for every city. As a consequence, dimensional scores again are bound between 1 and 27, with the higher the score, the better the performance. Due to this proceeding, the relative differences in the performance of the cities in the individual PEST-dimensions are retained.
Third, the overall hub ranking is created by aggregating the dimension scores for each in-scope region and sorting the resulting values in descending order. The region with the highest aggregated PEST-dimension score ranks first, the one with the lowest on the last position. Due to the derivation of the overall scores by aggregation, the four PEST-dimensions are equally weighted in the overall hub ranking.
How can the FinTech rankings be used?
In assessing the most attractive centers for locating FinTech businesses, factors may be of varying importance to different entrepreneurs and start-ups. For this reason Thomson Reuters has partnered with the IFZ research team to produce an interactive data tool which allows factor weightings to be adjusted according to individual specific criteria.
Meet the authors
|Thomas Ankenbrand holds a master’s degree from the University of St. Gallen and a Ph.D. from the University of Lausanne. He founded several companies and has broad experience as CEO and board member of various companies in the financial industry. Ankenbrand is currently engaged in FinTech research at the Lucerne University of Applied Sciences and Arts. In addition, he is a board member of different companies and lecturing at the University of Zurich.|
|Denis Bieri works as a scientific associate at the Institute of Financial Services Zug of the Lucerne University of Applied Sciences and Arts. In this position Bieri supports various courses and projects, especially in the field of financial services and with a specific focus on financial technology (FinTech). Simultaneously, he is pursuing a doctoral degree in economics at the University of Basel.|