The Growth of Fintech in Europe: Founding, Funding, and Scaling

The deteriorating macroeconomic environment in both Europe and the world has hit fintechs hard, with valuations declining and access to financing becoming more difficult. Despite this, European fintechs continue to gain strength and relevance for customers and the economy. In each of the seven largest European economies, at least one fintech ranks among the top five banking institutions.

Fintechs offer customers greater choice and convenience, and the competition they bring to banking systems is already helping modernize the financial sector ecosystem in several European countries. In this article, we focus on three key aspects of Europe's fintech sector: founding, funding, and scaling - that is, fintechs' ability to set up in the first place, the ease with which they can access capital, and how well they can grow and thrive.

Our analysis highlights growing fintech activity in every European country, but there is a wide divergence of maturity and performance among fintech ecosystems by country, with substantial gaps between the top one-third and the rest. The United Kingdom and Sweden stand out for their superior fintech ecosystem performance.

If fintech ecosystems in all European countries were able to attain the same level of performance as the best in the region, the upside could be substantial. The number of fintech jobs in Europe would grow, the volume of funding would more than double, and valuations would grow by a factor of 2.3 to almost €1 trillion.

Europe's fintech sector has quickly moved from the fringes of the financial landscape in Europe to its core. For customers, fintechs create value with superior service at lower costs. For example, international transfers and the end-customer price of stock trades through fintechs can cost just 10% of the rates charged by traditional banking services institutions.

Fintechs are a catalyst for disruptive innovation and growth in the financial ecosystem. With their agility and speed, fintechs are well equipped to accommodate many new trends in the financial sector and they tend to launch new products and services much faster than incumbent banks. Today, many leading European banks rely on fintech partnerships across a wide range of areas.