Fintech
Fintech Market Rebounds as Confidence Rises
2023 was, by some measures, far from a good year for fintech in Europe. After a
Record-breaking post-pandemic period2023 saw a correction, leading to drops in ratings. The European fintech market faced significant challenges due to factors outside of its control. The global economic environment was turbulent and overall investor sentiment was negative, with investment falling to a five-year low.
It would be understandable for many fintech leaders to be somewhat pessimistic about the industry’s prospects at the start of 2024, but there have been signs of improvement, bringing hope to struggling companies. While fintech executives were cautious in the early months, recalling the lessons of 2022-2023, they are starting to feel more positive about what the future may hold.
A Cautious Return to Confidence Among Fintech Leaders
As we enter 2024, many fintech leaders are likely in survival mode, trying to protect their businesses from the worst of the market disruptions. Six months into the year, that’s changing.
How do we know that Europe’s fintech leaders think this way? We asked them.
Money20/20 Europe is one of the most important events in the fintech calendar, where leaders come together to discuss the industry’s hottest topics and better understand its state. There is no better barometer of the temperament of fintech leaders than the mood of event attendees. By interviewing a cross-section of fintech attendees at Money20/20 Europe, Rabobank spoke to fintech leaders, service providers, investors and technologists to gauge their perceptions of the state of the fintech market.
The survey results are encouraging, with the majority of respondents positive about the future of the sector. More than a quarter believe the market is booming compared to last year. Only 13% believe nothing has changed from 2023 to 2024, and a measly 3% believe things have gotten worse.
Despite the current economic and geopolitical turmoil, the uncertainty of the last two years may give way to confidence, at least in the European fintech sector.
What will drive growth?
One reason behind this change in sentiment is the strong growth and profitability reported by several of the industry’s major players in recent months. Despite the downturn in 2023, the industry’s expected expansion in the coming years means that the global fintech market should reach a value of $644.6 billion by 2029, up from $209.7 billion in 2024. Recent investment news may seem less positive than we might hopebut growing confidence has meant that the response has been to see this phenomenon as a “bottom out” of the market, with change on the way.
According to our survey, the biggest effect on the market right now is consolidation (26%), ahead of access to finance (17%), artificial intelligence (13%) and interest rates (13%). While interest rates and access to finance would have undoubtedly been at the top of the list last year, they are no longer quite the same concerns they once were. However, consolidation is. Looking for a way out after 2023, many companies have repositioned themselves as open to the prospect of acquisition, with several larger players capitalizing by merging with or acquiring companies they may have partnered with in the past. Consolidation can be seen as part of managing a market correction, a strategic option to become more resilient or build for a better future.
Where will the growth that creates this better future come from? One key way, according to respondents, is in embedded finance. More than a quarter of respondents believed embedded finance would be a major growth driver, with the most promising areas being payments, lending, identity, and authentication. Meanwhile, the most hyped technology was artificial intelligence, and the least hyped 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 been through a market correction and is slowly emerging on 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 like embedded finance, which will mean banks and fintechs working together to provide services via an API, have already proven their value 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 go 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 work together to embed services where they are needed. Fintech will continue to do what it is doing, but better and for more customers.
The mood of Money 20/20 has been best described as “optimistic,” as we begin to leave the worst of 2023 behind us and begin to see positive news of profitability, growth, and perhaps even funding. Key to this will be technologies like embedded finance that offer a way to build on this optimism in a sustainable way.