London is turning into a major payments and financial services technology innovation hub, luring venture capital and talent from the U.S. and other parts of Europe.

"We are seeing a very large number of fintech startups set up in London," said Sir Edward Lister, chief of staff for the mayor of London, Boris Johnson, and deputy mayor for policy and planning. More than half the members of the FinTech 50, a listing of leading European companies, are based in the U.K.

Tech hubs are popping up all over the city, including in Brixton, Soho, Tottenham, Shoreditch and Canary Wharf.

"Companies are setting up here in droves to be a part of a tech-cool environment and a vibrant multicultural social scene," Lister said.

Last year, investment in the fintech sector throughout Europe grew 215%, to $148 billion, according to an Accenture report. The U.K. accounted for the largest share of that investment, with London itself taking 53% of the funding in that region. Venture-backed technology companies in the U.K. raised $781 million on 69 deals in the first quarter of 2015, according to CB Insights, a venture capital database. The amount of money raised was up 111% from the same quarter last year.

"The big shift in the last two to three years, U.S. investors are looking at investing in U.K.-based companies... instead of demanding they move to the U.S. to invest," said Gerald Brady, head of U.K. relationship banking at Silicon Valley Bank, a California-based institution that is active in London. "It's not just the research and development in the U.K. anymore, but management as well."

The Canary Wharf area has been attracting many of the fintech startups because the area specializes in fintech.

"There's benefit in niching," said Ben Goldsmith, the former head of content at Level39, during a tour of the facility.

And Canary Wharf has the connections to entice startups. XWare42, a transaction data provider initially moved to London to be a part of Accenture's FinTech Innovation Lab, a 12-month mentorship program held in New York, Hong Kong and London each year. "But we decided to stay because it's the hotspot for fintech companies," said David Lais, co-founder and CEO of the Munich-born startup.

The Accenture accelerator has been especially helpful for getting in front of the person "who has the checkbook" at banks, said Lais. This was echoed by Christian Nentwich, CEO of Duco, a self-service reconciliation provider that was part of Accenture's accelerator.

London's history as a metropolis for banks is especially appealing for the new rash of fintech startups that are trying to sell into financial institutions. While banks are starting to engage with the developer and startup community by sponsoring accelerators and hosting hackathons, these two communities are still very different.

In an effort to bring startups and financial institutions together, Level39 launched in the spring of 2013. The accelerator now houses 173 startups and spans three floors within a 50-story skyscraper in Canary Wharf, said Adizah Tejani, head of ecosystem development at Level39. About 70% of the startups at Level39 are focused on fintech, she said.

Within this sector, 42 companies are developing data and analytics services, 25 are working on payments, 14 on banking solutions, 25 startups are working on crowdfunding, nine are building trading services and eight are focused on the foreign exchange market. Since its launch, Level39 has received more than 1,004 membership applications.

Canary Wharf differs greatly from London's other financial center, the City (the 1.12 square-mile heart of London) in that modern glass buildings sprouted up from what was once one of the busiest docks in the world.

While the startups working out of Level39 put in a lot of time in the area, not many of the entrepreneurs actually live there; the area has a high cost of living.

In comparison, the City was the first financial center and its tech scene grew along the outskirts of The Square Mile organically. It's taken over Shoreditch, a grungier side of London full of cafes with young people in jeans working on laptops. After long hours, young entrepreneurs visit a watering hole near their co-working space, and on the weekends, they socialize in this area as well, which is less true of Canary Wharf.

"It's not fun to be in a bar with investment bankers," said Ben Brown, CEO and founder of Shopwave, an iPad point of sale platform provider based. Canary Wharf is predicated on the corporate sectors of large, international banks, while Shoreditch is more in tune with startup culture, he said.

Shopwave has been based in Shoreditch for some time, but is in the process of moving to Tottenham Court because it has struggled to get the Internet speeds Brown needs to work. This was a complaint reiterated by several startups in basement co-working spaces in the area.

Brown's real dream is to move to Mountain View, Calif. He recently spent some time in Silicon Valley to raise money from investors.

In the U.S. there's more of a market for consumer and retail plays, he said, whereas in the U.K., most of the attention gets paid to startups in the banking and trading sector.

During early February, when PaymentsSource spoke with the companies that were part of the Accenture lab, Nentwich said he presented to executives at large banks 35 times in one week. Without being a part of the Accenture lab within the Level39 community, it would have taken three to four years to get that many meetings, he said.

But just because the meetings are taking place doesn't mean deals are being inked. Many wonder whether banks have a sincere desire to innovate or whether bank-run accelerators are simply vanity projects.

Lais also mentioned the nearly daily fintech events that happen around the city. There's Cake & Hackers, combining baking and fintech; NewFinance, monthly open mic nights where a handful of startups have three minutes to pitch their business model; Coinscrum, a digital currency-specific meetup; plus many traditional conferences.

Like xWare42, a majority of the startups working in the fintech space in London are focused on enterprise-grade products and services for legacy financial institutions. By contrast, in the U.S., many startups focus on the consumer or small merchant before pivoting to a model that serves larger clients.

This big-business focal point is likely influenced by the environment in London. People seem to be less skeptical of the banks in the U.K. than in the U.S. London is also the largest foreign exchange market in the world, spawning companies such as TransferWise and Currency Cloud.

"What is most interesting for London is that, as a city, we are leading on the development of specific subsectors that build on London's historical strengths as a financial services hub," said Lister.

Throughout London, more than 44,000 people work in the fintech sector, more than New York and Silicon Valley, said Lister.

But while there's competition among the fintech capitals, most is friendly. Boris Johnson visited New York City in March with 22 London-based fintech companies to promote collaboration between the two financial centers.

"Both cities have rapidly growing tech sectors and we are now beginning to see the seeds of collaboration with New York companies expanding to London and vice versa," Lister said.

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