A Beginner's Guide to FinTech in Europe

FinTech is one of the most notable emerging industries in Europe. At EuroDev, we’ve noticed an increasing amount of requests from FinTech companies as well. In this blog, a short overview of FinTech in Europe is given. What is FinTech? What factors have accelerated the FinTech Developments in Europe?

What is FinTech and why is it hot in Europe?

What is FinTech? FinTech, short for Financial Technology, is a term applied to describe technological and innovative solutions developed to improve various financial service areas. Examples include online banking and mobile payments. A lot of people have not yet heard of FinTech even though they certainly use some of the services and products provided by FinTech companies, like internet payment services, mobile payments and online banking.

Why is FinTech hot in Europe? Europe offers a business environment that is characterized by stability, innovation and technological developments. Thanks to having a well-educated population, most people being bilingual and being the home for multiple financial and tech hubs, it offers businesses access to a lot of talent. With several European countries - such as the Netherlands, Sweden, Denmark and Switzerland - leading the 2020 Global Innovation Index, Europe is an interesting market for FinTech businesses to conduct business. Europe is currently home to many FinTech success stories. Later in this blog, an overview is given on the most important factors that have accelerated FinTech developments in Europe.

Currently, Europe makes up 27% of the global cumulative valuation of the FinTech industry. By receiving 20% of all venture capital investments, Fintech is also the largest Venture Capital (VC) investment category in Europe; a higher percentage than in Asia and the United States. British and American investment firms were the most active backers of European fintech companies.

The rise of FinTech in Europe

Traditionally, banks have been a necessity in the global financial system. However, recent advancements in digital technology, changes in consumer preferences, decreasing trust in the banking system, accessibility to venture capital funding and favourable regulations, have allowed FinTech companies become increasingly important. The cost of starting a FinTech company has decreased significantly, leading to an increase in the number of FinTech start-ups.

Will traditional banks prevail through the disruption by fintech? The main question is whether old banks will be adopting new technologies and successfully changing enough to shake off most of the new competitors. It is, however, quite difficult for traditional and big banks to adjust quickly. The rising number of investments by traditional banks and their adoption of FinTech technology shows that traditional banks are aware of the risks and opportunities provided by these new developments.

Factors that have accelerated FinTech Developments in Europe

  1. Brexit

    1. Brexit caused a lot of uncertainty for the FinTech industry in the United Kingdom. Prior to the Brexit, the United Kingdom was an extremely dominant European FinTech leader with London as the most important Fintech Hub. Brexit, however, gave other countries and cities the opportunity take advantage of the situation. Many FinTech companies who were based in the U.K, or were thinking to set up in the U.K., decided to set up shop on the continent – in mainland Europe – to establish connections with the rest of the European market. Countries such as Malta, Lithuania, Germany and the Netherlands benefitted from the situation, but were not able to knock London off the throne. The Brexit, however, has shone light on the strengths of the European mainland Fintech Industry.

  2. The advent of Payment Services Directive 2.0 (PSD2)

    1. Historically, Europe has been less successful for growing a tech venture than the United States and Asia. Why is that changing? One of the factors of this change is the advent of the Payment Services Directive 2.0. The PSD2 will be, and already is, an important accelerator for FinTech innovation and development in Europe. PSD2 was created for 2 reasons. One; to improve competition, thus lowering the cost of financial services and benefitting the consumer. Two; to create open access to the financial data of banks to foster fintech innovation. The PSD2 is a great initiative to create an open banking environment and the perfect sign of the EU to stimulate FinTech development.

  3. The COVID-19 Effect

    1. COVID-19 caused significant challenges for traditional banks and other brick and mortar operations as consumers were not able to visit the physical locations. As a result, they were forced to quickly digitize operations which can be hard – especially for traditional banks/institutions. FinTech companies, who are known to adapt quickly with their strong technological and digital capabilities took advantage of the situation by giving the consumer the quick, easy, and low-cost financial services.

  4. High digitalization and (FinTech) adoption rate in Europe

    1. The high level of digitalization and the ease of adopting to FinTech services/products has been an important factor in making Europe an interesting market for FinTech companies. Europe, especially Western Europe, is identified as an innovative region that adopts to new technologies and developments quickly. This is also visible by the fact that online banking has become one of the most popular payment methods in Europe. Which European countries have the highest percentage of digitally active people who used at least two fintech services in the last six months? As can be seen in the graph below, Russia, the Netherlands and Ireland were the fastest adopters.

FinTech Adoption Rate in Europe

Figure 1: FinTech Adoption Rates in European Countries 2019 - Source: Statista

The future of FinTech in Europe looks bright. National governments are stimulating FinTech companies to come and grow, European citizens are adopting FinTech at a high rate and Europe is acknowledge as a FinTech hub. In case you would like to receive more information on FinTech in Europe, please do not hesitate to contact one of our experts. Interested in hiring, recruiting or employing FinTech talent into Europe? We’d love to assist.

 

Explore your chances in Europe

About EuroDev

EuroDev, established in 1996 with offices in The Netherlands and France, has a single, defined purpose to help mid-sized North American companies expand their business in Europe. We have created a proven, successful business development model and since our founding, have partnered with over 300 companies to help them define and meet their European business goals. Services provided include Sales Outsourcing, HR Outsourcing and Digital Marketing.

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