I'm writing this from Berlin, where I'm spending a few days exploring a city that's probably had the most dramatic financial history of any European capital. As someone who's lived in Bangladesh, Canada, and now the UK, I'm fascinated by how cities build and lose financial power. Berlin's story is unlike London or New York with their centuries of continuous dominance. This is a story of spectacular rise, catastrophic collapse, forced division, and surprising reinvention.

Walking through the city, you see layers of this history everywhere. The grand 19th-century banking buildings in Mitte. Bullet holes still visible on facades from WWII. Remaining sections of the Berlin Wall. And then, the modern glass towers of N26, Trade Republic, and dozens of other fintech unicorns that have made Berlin Europe's second-largest fintech hub.

What happened? How did a city that was Europe's third-largest financial center in 1914 end up losing everything, only to reinvent itself a century later as something completely different?

The Golden Age: When Berlin Challenged London and Paris (1871-1914)

Before World War I, Berlin wasn't just Germany's financial center. It was Europe's third financial capital, behind only London and Paris. In 1913, Berlin's major banks were massive by European standards: Deutsche Bank had capital of £112 million, Dresdner Bank held £72 million, and Disconto Gesellschaft had £58 million.

How did Berlin overtake Frankfurt, Germany's traditional banking center? Three factors transformed the city in the late 19th century. First, German unification in 1871 brought institutional integration with a single currency and the Reichsbank as the central bank in Berlin. Second, industrialization accelerated, and Berlin became a world leader in electrical equipment manufacturing. Third, innovation in finance followed: Berlin's big banks became listed companies, and the Berlin Stock Exchange dominated equity trading, ranking among the world's top markets by capitalization.

By 1900, everyone assumed Berlin's rise would continue. They were wrong.

The Weimar Catastrophe: When Money Became Worthless (1918-1924)

If you want to understand why Germany (and the ECB) remains obsessed with price stability, you need to understand what happened in Berlin between 1918 and 1924. By November 1923, one US dollar was worth 4,210,500,000,000 marks. A loaf of bread that cost 160 marks at the end of 1922 cost 200 billion marks by late 1923. An egg cost 80 million marks.

The roots go back to WWI. Germany financed the war through borrowing and printing, accumulating debts of 156 billion marks by 1918. The Treaty of Versailles added 50 billion marks in reparations. When France and Belgium occupied the Ruhr in 1923, the German government paid striking workers by printing money. By mid-1923, the government had outsourced printing to 133 companies. As banknotes flooded the economy, prices spiraled out of control.

Winners were people in debt (loans repaid with worthless currency) and exporters. Losers were catastrophic: anyone with savings, fixed-income earners, pensioners, civil servants. The middle class was devastated, with civil servants losing 67-71% of their spending power.

Finance Minister Hans Luther introduced the Rentenmark on November 15, 1923, backed not by gold (Germany had none) but by agricultural and industrial land. It worked. The normalization was called the "miracle of the Rentenmark." By August 1924, the crisis ended.

Here's why this matters today: according to historian Gerald Feldman, the hyperinflation left a "trauma burned into the collective memory" that still shapes German monetary policy a century later. When you hear about the Bundesbank's hawkish stance on inflation, you're hearing echoes of Berlin in 1923.

World War II and the Division: How Berlin Lost Everything (1933-1989)

The Nazi period destroyed what remained of Berlin's financial independence. In October 1933, the Reichsbank lost its independence, becoming a tool for rearmament. The Nazis forced Jewish businessmen to sell holdings, and Berlin lost enormous entrepreneurial talent. Then came physical destruction from WWII and Soviet expropriation of machinery as "war reparations."

But the Cold War division dealt the final blow. On August 13, 1961, East Germany erected what became a 155-kilometer fortified wall separating East and West Berlin. Why? By 1961, four million East Germans had fled west, hemorrhaging skilled workers from the communist state.

For 28 years, Berlin was two cities with two completely different economic systems. West Berlin received Western support and prospered as a capitalist showcase. East Berlin became the GDR capital with a state-controlled banking system. Most critically, Soviet restrictions on transport ended any hope that Berlin would resume its role as Germany's financial center.

Even after reunification in 1990, Berlin never reclaimed its financial status. Frankfurt had already won.

Why Frankfurt Won (And Keeps Winning)

When West Germany's central bank was formed in 1958, Frankfurt was chosen as home to the Bundesbank. Then in the 1990s, EU politicians chose Frankfurt for the new European Central Bank. Game over.

Today, Frankfurt accounts for 11% of German banking employment (around 66,200 people), plus ECB, insurance, and fund management employees. It's the only city in the world hosting two central banks: the ECB and the Bundesbank. It's also home to BaFin, EIOPA, and the Single Supervisory Mechanism.

Path dependence is powerful. Once financial infrastructure and regulatory institutions become established somewhere, they tend to stay there. Berlin lost its window during the division, and Frankfurt's position only strengthened.

So Berlin was finished, right? Not quite.

Berlin's Reinvention: Europe's Fintech Capital (1990-2025)

Unable to reclaim traditional banking, Berlin found a completely different path. Instead of competing with Frankfurt, it became Europe's fintech capital. Berlin now hosts over 400 fintech companies, Europe's second-largest hub after London. The top fintechs raised €1.5 billion in 2024.

The city has produced multiple unicorns. N26, valued at $9 billion, received its banking license in 2016 and now operates across Europe as a mobile-first digital bank. Trade Republic, valued at €5 billion, democratizes investing through commission-free trading with over 2 million customers. Mambu, valued at €4.9 billion, provides banking SaaS platforms for traditional banks and fintechs alike (including N26). Others include Solarisbank, Wefox, Raisin, and SumUp.

Why Berlin? Lower costs than London or Frankfurt matter for startups. The city's cultural scene attracts tech talent from across Europe. BaFin launched a FinTech Innovation Hub to support startups. Success bred more success through ecosystem effects. Most importantly, Berlin's culture is fundamentally different from Frankfurt. Frankfurt represents stability and regulation. Berlin represents disruption and innovation. As one founder put it: "Berlin's outstanding advantage is that wherever you look, you'll find senior fintech experts".

Berlin hasn't replaced Frankfurt. It created something entirely different. Frankfurt handles traditional banking, central banking, and regulation. Berlin builds the digital tools transforming how those services work.

What This Teaches Us About Finance and Cities

Berlin's century-long journey offers several crucial lessons:

Geopolitics trumps economics. Berlin had everything in 1913: capital, infrastructure, talent, market position. None of it mattered after the wars and division. The city's location in the Soviet zone permanently shifted Germany's financial center westward. This matters today when thinking about Hong Kong or other financial centers in politically unstable regions.

Historical trauma shapes policy for generations. The 1923 hyperinflation still influences ECB policy a century later. Understanding financial history explains why different countries approach the same problems differently.

Path dependence is powerful, but cities can reinvent themselves. Once Frankfurt secured the Bundesbank and ECB, Berlin couldn't reclaim traditional finance. But Berlin found a different niche: fintech. When you can't win the game everyone else is playing, change the game.

Financial innovation happens at the edges. Breakthrough innovation didn't come from established centers like Frankfurt or London. It came from Berlin, a city with nothing to lose from disruption. Throughout history, the Medici revolutionized banking from Florence, not Rome. Modern derivatives emerged in Chicago, not New York. Bitcoin came from an anonymous developer, not a major bank.

Final Thoughts

The city that was Europe's third financial capital in 1914 experienced catastrophic hyperinflation in 1923, Nazi militarization, near-total destruction in 1945, and division for 28 years. Any one of these would have permanently ended most cities' financial relevance. Berlin experienced all of them.

Instead of remaining a historical footnote, Berlin built something new: a fintech ecosystem now second only to London in Europe. The city that lost everything turned that into an advantage.

This resonates with me personally. Coming from Bangladesh, spending years in Canada, and now building my career in the UK, I've learned that direct paths are rare. The most interesting careers, like the most interesting cities, involve unexpected pivots and finding opportunity in places others have written off.

Berlin never became Frankfurt again. But perhaps that was its advantage. Freed from the weight of traditional banking and established hierarchies, it could pioneer something entirely new. The bullet holes are still visible on buildings. Sections of the Wall remain as monuments. But walk through the fintech district and you'll see a city that lost everything and figured out how to win a completely different game.

That's the story worth remembering.