Europe Fintech Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

Europe Fintech Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

Europe is the cradle of fintech since it is a global leader in the growth of both financial institutions and financial markets. Fintech companies in Europe are worth twice as much as any other tech sector on the continent. The region, which leads the rest of the world in terms of energy and internet access, provides ideal conditions for fintech growth. Furthermore, by 2025, further technological infrastructure will deliver 5G network coverage to 75% of the region's population. With several European countries (e.g., Switzerland, the Netherlands, and the Nordic countries) dominating the 2020 Global Innovation Index, Europe provides a corporate environment suitable for innovation and technology development.

COVID-19 scenarios show European economies contracting by 11% in 2020 and have adversely affected the fintech ecosystem. Fintech agreements have decreased as investors prefer to invest in mature companies rather than early-stage deals. Experts from the Emerging Payments Association found a significant contraction in the market, with fintech funding in Q1 2020 already down by USD 2 billion from Q4 2019. As governments shut down and investors took stock, the industry appeared vulnerable at the start of 2020, hitting a three-year low. In 2020, European fintech raised a total of USD 9.01 billion during COVID-19. The industry looks to have recovered, aided by a transition to digital and banks' increased interest in new infrastructure. Until June 2021, European fintech has raised USD 11.16 billion, trumping the USD 9.98 billion raised across the whole of 2019 — the previous highest year on record.

New venture capital fintech investments in Europe have been growing rapidly since the emergence of the COVID-19 pandemic. Fintech also looks set to maintain its position as the most funded area in European tech. European fintech has attracted an influx of cash from both United States and Chinese investors, drawn in by the mounting success of the first-generation fintech. That also had a knock-on effect on valuations, meaning there are now more than 30 fintech unicorns in Europe, and several more are soon slated to reach the USD 1 billion milestones. Europe makes up 17% of the global cumulative valuation of fintech (around USD 2.26 trillion), its largest venture capital investment category receiving 20% of all venture capital in Europe: a higher percentage than in Asia and United States.

In Europe, regulatory tailwinds have helped transform the continent into a hotbed of fintech activity. Open banking and PSD2 have enabled the rise of challenger banks and middleware data players and have also been leading to market consolidation. Open banking, payments, and transaction banking are the top three areas of development in the European Fintech ecosystem.

Over the last few years, the European fintech scene has seen significant expansion. Open banking is one of the main drivers of this expansion. As a result, financial institutions and fintech are collaborating to provide consumers across Europe with more creative, user-friendly products. According to EY's Global FinTech Adoption Index, European customers are receptive to the idea of non-financial players selling financial solutions. Fintech adoption across Europe, particularly in nations like the Netherlands, United Kingdom, Germany, Sweden, and Switzerland, is significantly above the global average of 64%, according to the survey.

Hometrack, a provider of insight and intelligence to the United Kingdom mortgage market, appointed Moneyhub, the Open Finance data, intelligence, and payments platform for customer-centric organizations, as its preferred Open Banking partner. The integration of FinTech Moneyhub's Open Banking technology into Hometrack's Credit Risk Hub will facilitate streamlined mortgage journeys for lenders, brokers, and consumers alike.

United Kingdom has long dominated fintech funding in Europe and globally. It is second only to United States in terms of investment in space, with its fintech getting another small boost from the country's Government's Future Fund scheme.

Nonetheless, the United Kingdom's lead in Europe narrowed last year. Germany, Sweden, and France have all seen a record year so far and are now gaining on the United Kingdom, according to Dealroom data. All three countries saw much larger increases in funding than the United Kingdom last year.

Moreover, United Kingdom made up 53% of Europe's fintech funding in 2019, with 41% until June 2021. United Kingdom's fintech share is valued at nearly USD 40 billion, followed by the Netherlands.

United Kingdom is expected to remain a key financial hub in Europe and an attractive platform for start-ups as it has a good trade relationship that it has with United States and other Asian fintech hubs. Fintech landscapes are likely to change, and the extent of this change will heavily depend on the outcome of the current negotiations.

The research examines the top companies in the fintech business in Europe. Digital payment schemes are expanding within countries, while cross-border and pan-euro region instruments are not yet common. Competition is forcing many traditional banks to adopt fintech instruments, either in-house or by acquisition. These developments could improve the efficiency and reach of financial intermediation while also adding to profitability pressures for some banks. Start-ups are pursuing platform-based approaches under minimal regulation. The current situation favors the companies which can provide a 'Buy Now, Pay Later' solution or quick working capital for SMEs, run a credit or loan marketplace, offer user-friendly apps for personal or business banking, or build a way for users to cut costs on things like transferring money online, raising funds and other types of transactions. Some of the major players dominating the market include Adyen, Nexi, Revolut, Klarna, N26, Oaknorth, Monzo, Rapyd, Transferwise, and Funding Circle.

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support