How Europe Became the Stage for a Fintech Revolution
The three 'decacorns' that have been built on European shores come in the form of Klarna, Revolut, and Checkout.
At the beginning of 2021, Europe had one decacorn, a startup that's gained a valuation at $10 billion or higher. Now it has three — and it seems as though the ongoing fintech frenzy sweeping the continent will leave plenty more decacorns in its wake.
The three decacorns that have been built on European shores come in the form of Klarna, Revolut and Checkout — all of which are fintech companies, and according to Crunchbase data, they're closely followed by 19 new fintech arrivals to unicorn status this year.
This significant rise in the number of highly valued fintech companies in Europe shows the key role that the continent is playing in disrupting key fiscal sectors like payments, banking, insurance, loans, trading and eCommerce.
As the data shows, 2021 has already been a record-breaking year for venture capital exits for European fintech companies — illustrating what's clearly a maturing industry.
Overall, fintech exits banked VCs $70 billion between January and July worldwide, concentrated in major public listings like that of cryptocurrency exchange Coinbase. European exits accounted for around 20 percent of the total figure.
This has also been a record year for startups across all sectors in Europe, with more businesses reaching the coveted unicorn status of $1 billion valuations than ever before. At the time of writing, there are now 125 private company unicorns with headquarters situated in Europe.
Furthermore, almost one-third of those companies, 39 in total, are based in the financial services sector, making the fintech industry one of the most significant creators of unicorns across the continent.
Building on prosperity between the UK and EU.
Despite the uncertain relationship between the European Union and United Kingdom, the growth of UK fintechs has been a very welcome addition to Europe's financial infrastructure.
The UK and London in particular, has worked tirelessly to attract fintechs despite the threat of Brexit's ramifications looming over the country. As a result, the United Kingdom has led the way in terms of fintech funding rounds between 2017 and the first half of 2020 - more than doubling the second-placed nation on the list, Germany.
One recent example of the UK's relationship with the EU being maintained throughout the fintech sector can be found in the case of TrueLayer, a London-based fintech that reached unicorn status in September 2021 following a $130 fundraising round from investment firm Tiger Global Management and payments giants Stripe.
The company has undergone some 400 percent growth in monthly payment volume in 2021 so far, having strategically expanded across 14 European countries — taking advantage of the EU and UK's open banking rules which requires lenders to open their data up to other companies in order to better tailor products to customers.
The lure of Europe.
TrueLayer has made a concentrated effort to capitalize on opportunities across the European Union. Like many other UK-based fintechs, TrueLayers has aimed to reach European audiences via cities like Dublin as a means of staying connected to both markets in a post-Brexit landscape.
Building a bridge to Europe, TrueLayer elected to create a European HQ in the Republic of Ireland capital as a means of tapping into the city's thriving technology landscape and skilled pool of talent.
Overseeing the success of the European HQ is former WhatsApp and Facebook executive, Joe Morley - who intends to use his experience to aid TrueLayer's growth across the continent.
"Ireland has become the EU's fintech centre of choice with the likes of Coinbase, Stripe, Remitly, Square, and our clients, including Paysafe and Payoneer being based here," Morley explained. "We are excited to be joining them, making Dublin our home from which to accelerate our European expansion and deliver our market-leading open banking services to banks, fintech firms, and e-commerce platforms across the continent."
The lure of European business has become so strong for fintechs that we're seeing major U.S. players looking to offer new services across the continent.
"PayPal is also expanding its presence in Europe in two ways," notes Maxim Manturov, head of investment research at Freedom Finance Europe. "Its business debit partnership with Mastercard has expanded to four more European countries: Belgium, Finland, the Netherlands, and Portugal, and Euronet Worldwide epay will use the PayPal QR code as a selling solution at its points of sale.
The PayPal Business Debit Mastercard, introduced in the U.S. in 2003, is now available in 11 European countries. According to the company, PayPal business customers can now spend money in their PayPal accounts at over 52 million Mastercard locations worldwide."
The Covid-19 pandemic has acted as a major catalyst for digital transformation across the financial services sector. As more businesses move online to continue winning custom in a post-pandemic environment, their reliance on leveraging cross-border transactions across Europe has been essential in staying afloat.
Now, despite the challenges of both the health crisis itself and Brexit, 2021 data so far shows that Europe's fintech ecosystem is thriving. With venture capital firms expanding their profit margins by betting on European finance technology and U.S. firms looking to tap into EU prosperity, it appears that we may be on the cusp of a golden age for fintech in Europe.