Examining the impact of COVID-19 on the European fintech industry

Examining the impact of COVID-19 on the European fintech industry

Below, you can find the slightly updated section on the impact of the coronavirus impact on the (European) fintech scene that I wrote as a prologue to our recent report on the State of Fintech in Europe launched in close collaboration with Oleg Boyko's international investment group Finstar, which you can download for free here.

Tomorrow (Wednesday 10 February) at 11AM CET, we are organising an online event where we'll present more data - an update to 2020 in particular - and host a discussion with a number of European fintech executives and investors.

You can sign up for the free event right here!

How has COVID-19 affected the (European) fintech sector?

Arguably, it’s still too early to truly understand what the impact of the coronavirus pandemic will be on the technology startup and innovation industry as a whole, but as part of our research we’ve looked into some of the trends that pertain to the fintech sector in particular.

As a response to the raging pandemic, entire countries have gone into (different types of) lockdown and resorted to school closures and curfews, travel was banned all across the world, companies of all sizes have experienced near-instant financial woes, and governments have needed to look for rapid ways of providing support to scores of individuals and businesses - borrowers and lenders alike - as the uncertainty remains a huge factor.

In such an unprecedented environment, seismic shifts are inevitable - and some irreversible.

There are fewer things to spend on in lockdown mode, which means savings rates spike, while demand for mortgage loans decreases. Meanwhile, the amount of people shopping, paying, (both personal and business) banking, trading stocks and loaning money online unavoidably increases. So does the interest grow in cryptocurrencies, and blockchain-based assets in general, but also the pressure on insurers and their underwriters.

Meanwhile, large-scale digitization efforts are kickstarted or accelerated across the financial services value chain as the industry reacts to the sudden new reality, and Europe’s overall rather fintech-friendly regulatory initiatives - which in this case tend to create opportunities for newcomers and challenges for incumbents.

With some obvious exceptions - imagine the impact of COVID-19 on providers of in-store payment terminals, for example, or those specifically targeting business travelers with their services - it is evident that the above trends are generally positive for innovators in the fintech industry. This is especially the case when coupled with an accelerated move to a cashless future and rapid advancements in infrastructure and connectivity, open banking services, security, hyper-personalisation, big data, artificial intelligence and robo-advice technologies.

It's safe to say that these trends were already underway, but the coronavirus pandemic has undoubtedly expedited many of them.

Needless to say, the current situation can generally be described as a boon for a slew of tech companies that can e.g. process online payments, provide a ‘Buy Now, Pay Later’ solution or quick working capital for SMEs, run a credit or loan marketplace, help financial industry behemoths with their ‘digital transformation’ and rid of their aging IT systems, assist smaller firms with cash-flow management, offer user-friendly apps for personal or business banking, or built a way for users to cut costs on things like transferring money online, raising funds and other types of transactions. All in all, it's fertile ground for companies scaling up in such fields.

This is - at least partly - the reason why companies like Klarna, TransferWise, Bitpanda, Checkout, auxmoney, TrueLayer, N26, Revolut, Alma, solarisBank, Numbrs, SME Finance, Thought Machine and many others are actually thriving in the midst of this global crisis, and are bound to continue growing post-COVID-19 - and also why it remains interesting for the global investment community to scout for the next innovators in European fintech scene.

For data and insights on the European fintech scene, download the full report here.

Also read:

- A new frontier for fintech in 2021 (Finextra)

- A close look at how Peter Thiel has been doubling down on European fintech

- Inside Logic Founders’ new fintech-focused startup studio

- Insurtech in Europe: 2020 in review

- Embedded finance: The future of banks is behind the scenes

Featured image credit: Gerd Altmann / Pixabay

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