16 . 11 . 2023

FINTECH Transformations and challenges: European fintech in 2023

16 . 11 . 2023

The European fintech ecosystem, once characterised by rapid growth and numerous investments, has experienced significant changes and challenges in 2023. Where does the sector currently stand? What impact is the investment environment having? What are the visible trends?


Fintech, or financial technology, is a sector that uses innovative technological solutions to transform and improve traditional financial services. Fintech is a broad spectrum of activities covering areas such as online payments, peer-to-peer lending, robo-advice financial services, blockchain and cryptocurrencies. Through the use of advanced tools such as AI, data analytics and mobile technology, fintech enables more efficient, accessible and personalised financial services, thus changing the way consumers, businesses and financial institutions manage their finances.

Funding environment and investment trends

Finch Capital’s 8th report reveals that European Fintech companies raised €4.6bn in capital in the first half of 2023, a significant decrease of 70% compared to the €15.3bn raised during the same period in 2022. It is worth noting that the top 20 funding rounds, which used to account for 50% of the market, now account for more than 60% of total deal volume, even if their size has shrunk. This has reduced the long tail of deals outside the top 20, and companies at every stage of funding have felt the impact of this transformation. Payments, a traditionally strong and stable category, has experienced a surprising decline in investment, while the cryptocurrency sector has flourished.

The UK has countered this trend by increasing its share of total funding to 50%, up from 45%. US-based investors, who were previously active in these markets, have also slowed down. In 2021, for example, there were three US-based companies in the top five investors in the UK, compared to none in 2023. Valuations in both public and private markets have returned to 2019 levels after a period of extraordinary growth in the pandemic years – 2020-2021.

Hope on the horizon

Despite the challenges, there is hope for the European fintech ecosystem, as valuations have started to stabilise in the first half of 2023, after their December 2022 lows. Exit markets remain relatively resilient, with M&A activity down only 5%. Public markets remained closed due to the lowest valuations, but there is hope that 2024 may bring new exit opportunities for the highest valued European companies. Government and EU programmes are supporting innovation in the fintech sector, making Europe an attractive place for entrepreneurs and startups.

The struggle for profitability and changing trends

The struggle for profitability became a major theme last year, leading to the announcement of more than 3,000 layoffs across the sector. However, despite these challenges, the fintech industry continued to hire, particularly among the top ten fastest-growing companies globally. This reflects a shift towards a more competitive landscape, with some companies prioritising lower-level positions while laying off senior sales staff.

Key European and B2B Fintech markets

A review of key European countries showed varying degrees of resilience in the face of declining funding. In particular, the UK stood out, accounting for more than 50% of total funding in Europe. Other regions, such as the Nordic countries, Poland and France, fared quite well with significant rounds of cryptocurrency funding. However, the reliance on local early-stage investors became more pronounced, resulting in longer time to secure funding.

The German Fintech industry, on the other hand, witnessed a decline in funding, especially in the lending subsector. Experienced companies took centre stage, and the Crypto-Blockchain subsector was the most active, accounting for 27% of all deals. This indicates a shift in focus towards more innovative and disruptive areas of the fintech space.

Shifting from consumer to B2B fintech

A significant trend is the continuing shift from consumer-focused fintech to B2B solutions. Regulatory technology, driven by KYC and AML requirements, is gaining momentum in the B2B sector. This shift signifies a move towards a more mature and sustainable fintech ecosystem that prioritises long-term sustainability over short-term profits.

In summary, the European fintech landscape is undergoing a transformation in 2023, marked by changes in funding, a shift to B2B solutions and a focus on profitability. Despite the challenges, the industry remains dynamic and there is hope for a more sustainable and resilient ecosystem in the future. The way forward for European fintech is likely to involve consolidation and a more competitive but mature investment landscape.

Numbers source:
“State of European FinTech 2023: The Return of Funding discipline resulted in a Flight to Quality and Profitability to Survive”, Finch Capital

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For years, he has been involved in the "more creative" side of marketing. At Fordata, in addition to executing marketing strategies, he collaborates on industry reports and webinars with international experts. Privately, he is a music producer and DJ.

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