UK strengthens its role in the European fintech sector, report says

A new Finch Capital report has revealed that the UK has solidified its position in Europe’s fintech industry, accounting for around two-thirds of the total deals made in the region.

The findings suggest that investment and merger and acquisition (M&A) activity are expected to increase into 2025, despite broader funding challenges across Europe. The 2024 edition of the ‘State of European Fintech’ report highlights that the UK continues to lead in fintech, even as overall funding in the sector across the continent has declined. 

The primary factors driving this trend include higher interest rates, a focus on cost control, and greater scrutiny on the sustainability of business models, all of which contributed to the UK securing approximately 65% of fintech deals in Europe during the first half of the year. 

In terms of funding, the UK fintech sector saw a 3% year-over-year increase, with total funding rising to GBP 2.2 billion in the first half of 2024, compared to GBP 1.9 billion during the same period last year. Monzo, a UK-based challenger bank, secured the largest deal in Europe, raising GBP 500 million in equity financing.

The European fintech landscape

The report, produced by growth capital firm Finch Capital, presents a mixed outlook for European fintech. While the overall environment remains challenging, there are signs of potential recovery. Countries such as the Netherlands have shown resilience, with stable investment volumes, while Ireland, Germany, and France have introduced significant government-backed initiatives aimed at stimulating fintech growth through 2025. 

Despite a reduction in funding across Europe, some fintech sub-sectors are showing signs of profitability, particularly challenger banks such as Revolut and Monzo. These institutions have benefited from higher interest rates and are beginning to report profitable growth. 

European fintech funding overall declined by 25% year-over-year, dropping from GBP 3.2 billion in the first half of 2023 to GBP 2.4 billion in 2024. However, profitability in sectors like banking has driven larger funding rounds, with leading challenger banks reporting nearly GBP 600 million in profits in 2024, compared to a GBP 125 million loss in 2023. This shift underscores the UK’s emergence as a hub for profitable fintech growth, while other European countries are adapting to these trends.