2023 was, according to some measures, far from a good year for the fintech sector in Europe. After a
record-breaking post-pandemic period, 2023 saw a correction,
leading to drops in valuations. The European fintech market experienced significant challenges due to factors outside of its control. The global economic environment was tumultuous, and overall investor sentiment was negative, with investment dropping to
a five-year low.
It would be understandable that going into 2024, many fintechs leaders were fairly gloomy about the sector’s prospects, but there have been signs of improvement, bringing hope to struggling firms. While fintech executives were cautious in the early months,
remembering the lessons of 2022-2023, they’re beginning to feel more positive about what the future may hold.
A wary return to confidence among fintech leaders
Going into 2024, many fintech leaders were likely to be in survival mode, looking to protect their businesses against the worst of the issues affecting the market. Six months into the year and there is a change.
How do we know European fintech leaders feel this way? We asked them.
Money20/20 Europe is one of the biggest events in the fintech calendar, where leaders convene to discuss the industry’s hot topics and better understand the state of the sector. There is no better barometer of fintech leaders’ temperament than the mood of
the event’s attendees. Surveying a sample of Money20/20 Europe’s fintech attendants, Rabobank spoke to fintech leaders, service providers, investors and technologists to gauge their perceptions of the state of the fintech market.
The survey’s results are encouraging, with the majority of respondents positive about the industry’s future. More than a quarter believed the market was booming when compared to last year. Only 13% believed nothing had changed from 2023 to 2024, and a mere
3% believed things had gotten worse.
Despite ongoing economic and geopolitical turmoil, the uncertainty of the last couple of years may be giving way to confidence—at least in the European fintech sector.
What will drive growth?
One reason behind this shift in mood is the strong growth and profitability reported by several of the sector’s biggest players in recent months. Despite 2023’s downturn, forecasted industry expansion in coming years means that the global fintech market
is expected to
reach a value of $644.6bn by 2029, up from $209.7bn in 2024.
Recent investment news may seem less positive than we might hope, but increased confidence has meant the response has been to see this as the market "bottoming out" with change is on the way.
According to our survey, the biggest effect on the market right now is consolidation (26%), ahead of access to funding (17%), AI (13%), and interest rates (13%). While interest rates and access to funding would undoubtedly have been top of the list last
year, it’s no longer quite the same concern it was. However, consolidation is. Seeking a lifeline post-2023, many firms repositioned themselves as open to the prospect of acquisition, with several larger players capitalising by merging with or acquiring companies
that they may have partnered with in the past. Consolidation can be seen as part of dealing with a market correction, a strategic option to become more resilient or build for a better future.
Where will the growth come from that will create this better future? One key way, according to respondents, is in embedded finance. More than a quarter of respondents believed that embedded finance would be a major driver of growth, with the most promising
areas being payments, lending, and identity and authentication. Meanwhile, the most overhyped technology was AI, and the most underhyped technologies were digital wallets and APIs.
Down to earth
These responses reflect an air of pragmatism at Money 20/20. According to our survey, fintech has endured a market correction and is slowly emerging from the other side. As such, it is more interested in technologies that will drive sustainable growth rather
than moonshots that are not guaranteed to do so. Approaches such as embedded finance, which will mean banks and fintechs working together to provide services through an API, have already proven their worth and will continue to grow.
This pragmatism was also reflected in predictions for the future. The most popular prediction for the next three years was that “big banks will become digital first”, followed by “banks, fintechs and others will fully embrace the platform economy”. This
growth of banks as platforms is part of this future of sustainable growth, as banks and fintechs collaborate to embed services where they are needed. The fintech sector will continue to do what it is doing, but better and for more customers.
The atmosphere of Money 20/20 was best described as “optimistic”, as we start to put the worst of 2023 behind us and start to see positive news of profitability, growth and perhaps even funding. Key to this will be technologies such as embedded finance that
offer a way to build on this optimism in a sustainable way.