The Fintech Scenario in Europe 2022-23

Fintechs are quickly moving into the space serviced by traditional European banks. Data as per the latest McKinsey report shows that as of June 2022, from a value creation perspective, fintechs in Europe represent a total valuation of almost €430 billion. That is more than the combined market capitalization of Europe’s seven largest listed banks as of June 2022. Fintechs have also created approximately 134,000 jobs across start-up hubs such as Amsterdam, Berlin, London, Lisbon, Madrid, and Paris that also attract international talent.

Fintech companies have a wide dimension. These include payment companies, insure tech companies, Regulatory tech companies, challenger banks etc. In Europe, Fintech performance varies widely. The McKinsey report highlights a huge variance across European fintech ecosystems. For example, the United Kingdom and Sweden significantly outperform their European peers across all critical performance areas.  The growth rate in recent years of fintech funding in some countries—such as Germany, Greece, and Ireland—has slowed or even decreased in comparison with markets such as the Netherlands and France. The United Kingdom is the top country in both early-stage (seed and series A) and late-stage (series B+) per capita funding. The United Kingdom led the European market with a total volume of approximately €1.3 billion for early-stage funding and €8.3 billion for late-stage funding in 2021. That performance compares favorably with other countries, including the United States: while US GDP is about ten times larger than the United Kingdom’s, US spending on funding is only four times larger.

We had done an extensive research on Fintech companies in Europe covering more than 500+ companies. These included companies across the Fintech spectrum. For eg. Brolly a London-based tech company building digital insurance products that was acquired by Direct Line Group, InsuredMine, Qover and hundreds of others. What we have seen during our research period in 2018-19 and now is that many of these companies have been taken over, some have closed down and few have scaled-up to become large players. This is typical of any nascent industry that matures over time. Let us see some of the funding traits that have happened in the recent past.

The countries in Europe that perform the best have among the highest funding per capita. In countries that perform less well, including Greece, Poland, and Romania, per capita funding is significantly lower. While some countries have managed to increase per capita funding by as much as a factor of six in the past three years, Hungary, Italy, Poland, and Portugal still lag behind their peers significantly because the total volume of funding is still low.

As per Savills Research, Universities have a pivotal role in nurturing fintech growth by both courses and providing accelerator environments for early-stage growth companies. According to the Times Higher Education, 35 of the world’s top 100 computer science degrees are based in Europe’s universities. The cities of London, Paris and Munich each accounted for three of the top ranked computer science courses, as fintech employers increasingly seeking workers with advanced programming and coding skills. However, access to experienced finance professionals with an established contact base is also essential for fintech growth. 

Germany remains the innovation capital of Europe with over 25,000 patents granted during 2020, according to the European Patent Office (EPO). France (10,544 patents granted) and Netherlands (6,375 patents granted) boost the cities of Berlin, Munich, Frankfurt, Lyon, Paris and Amsterdam. Sweden ranked in the top five for patents granted, lifting Stockholm in the overall rankings.

Early-stage fintechs require venture capital investment as the next step for expansion. European fintechs raised over €20bn of venture capital funding in 2021, almost three times the previous record of €7.5bn in 2020. We are also observing more later stage funding across more fintech companies, indicating a higher number of unicorn fintechs emerging.

However, London-headquartered fintech companies received over €18bn of venture capital investment over the past five years, far in excess of any other European city. Berlin (€4.8bn), Stockholm (€4.3bn), Paris (€2.5bn) all marked record years of investment in 2021 represented the most heavily invested European markets. We have also observed more cases of series B/C venture capital funding in recent weeks, as well as more of the fintech capital targeting insur-tech and reg-tech companies.

Existing fintech clusters, proximity to likeminded companies and industry networking events are essential in developing fintech growth, which is reflected in the number of fintech companies located in each country, according to data from Crunchbase. The UK leads the way in Europe with 454 fintech companies and appeared second on a global basis behind the US. Spain (100), Germany (90) and France (64) feature as countries with more established fintech companies. Fintech companies benefit from consumer bases with high proportions of online banking, which is led by the Nordic markets. Eurostat data indicates that Norway (93%), Denmark (89%), Netherlands (89%), Finland (89%) and Sweden (89%) have the highest online banking penetration rates across Europe. Northern European consumers have adopted online banking most actively, whereas rates are lower in Central Eastern European (CEE) and Southern European economies.

If you want to undertake a detailed market study of Fintechs or research of individual fintech companies please connect with us at info@intelligentq.co.in.