26/06/2015 12:48 BST | Updated 26/06/2016 06:59 BST

Is Fintech Too Hard for Silicon Valley?

There has been a real fear in The City (London) that the time may have come when Silicon Valley finally turns its attention to disrupting financial institutions. Why is this a cause for concern? The Valley has a habit of undermining the value of traditional industries and if this approach were to be applied to the financial institutions, the consequences could be dire.

Silicon Valley has a reputation for being able to do anything, solve any problem and make a tonne of money off the back of it. However, Valley investors tend to like simple concepts, created by small teams that scale fast; first to the immediate US audience of 300+ million people, then slowly on to the rest of the world. Instagram was a global platform sold for $1b USD with a team of 13 people. Whatsapp sold for $22b USD with a team of 50.

Don't get me wrong, many Valley companies become highly complex, especially as they try to monetise and many others go on to spend their billions solving complex problems (some of which are their own creation). It's not that there isn't the brain power and capability for FinTech, it just doesn't fit the mould.

Money is messy and complex. Cold hard cash is still prefered by many despite it's obvious drawbacks. The regulation of money and money services is highly complex and fragmented. The institutions of money are a deep and complex web structured around territorial banks and not open to traditional US monopolies. Additionally, the business model of FinTech companies also differ - as every transaction monetises the money.

It is no surprise then that the world's centres for Fintech revolve around the world's banking capitals. New York is certainly the US Fintech Capital, and is dominant in terms of investment. However the fastest growing region for deal-volume is the UK & Ireland where it has been growing at an annualized rate of 74% since 2008 vs 27% globally and 13% in the US. Furthermore, over ½ of all FinTech investment in Europe is in London. London is arguably the world's FinTech centre. Several British FinTech firms reached Unicorn status this year - with valuations of over $1B USD.

This isn't just a story about Fintech however. We are constantly hearing about how we should try and replicate Silicon Valley in our European tech clusters. But we shouldn't. Are there lessons we can take from the Valley? Absolutely, but there are many more things we can do better. In Europe we deal with complex, multi-national, multi-jurisdictional, multi-cultural issues out of necessity. The Monetary Union and Juncker's proposals for ever closer banking structures across the EU creates a unique banking market. As the old monolithic European banking structures creak, there is an opportunity for European Fintech to take off some of the weight.

Fintech - in particular British Fintech - is an ever developing success story which has real potential. The lighter regulatory regime, funding support and a new Payments Systems Regulator tasked with encouraging innovation, means that there is much for other European counterparts to learn. Rather than looking warily over their shoulders at US Fintech and trying to replicate Silicon Valley, the EU should focus on supporting innovation and spreading best practice to ensure that the next Fintech unicorns are European. As the rest of the world comes online European tech firms and startups have a potentially distinct structural and cultural advantage. Now if we can just get the EU to start looking more outwards rather than trying to raise the fortress walls...