When Sifted spoke to fintech experts last year to find out what they expected to see in fintech 2024, the sector had just come out of a particularly difficult year.
In 2023, funding for European fintech fell from $24bn the year prior to $8.4bn — a 65% drop in total funding for the sector. At the time, our experts gave a sombre outlook for the year ahead, including suggesting fintech regulation will become stricter and crypto won’t make its return.
But 2024 has seen fintech start to make a steady recovery. Most of Europe’s brand-name neobanks are now profitable, Revolut finally secured its long-awaited banking licence and crypto did indeed make a comeback. And at the tail end of 2024, Swedish buy now, pay later giant Klarna finally confirmed its plan to go public next year.
Funding for the sector is also slowly bouncing back. Fintech startups have raised $8.8bn from investors in 2024, a $400m increase since last year according to Dealroom. There’s also been action in the secondary market with fintechs such as Revolut, Monzo and Moneybox conducting employee share sales.
But what will next year hold for fintech? Sifted asked the experts to find out.
A return to “everything is fintech”
Judith Vogel, senior associate at CommerzVentures
We’re predicting the rise of more vertical fintech solutions integrated into end-to-end offerings for traditional industries — manufacturing, logistics etc — that were untouched by the wave of tech-driven disruption across financial services this last decade.
Historically these areas lacked the technological infrastructure necessary for sophisticated trading, pricing, or transaction mechanisms. Now digitalisation advances have finally reached these sectors, new fintech opportunities are emerging. This means unlocking task-based pricing models and pay-per-use systems for machine manufacturers, as well as innovative billing methods for logistics and transportation infrastructure.
The big shift will come as these developments move these traditionally capital expenditure-heavy industries towards more flexible, operating expenditure-focused models. This creates huge potential for bold fintech entrepreneurs targeting these largely untapped industries.
Changes to the regulator will streamline innovation
Stefano Vaccino, CEO and founder at Yapily
Regulation has hindered innovation in 2024, as highlighted in the UK government’s recently published National Payments Vision. But recommendations made in the report make us hopeful for what’s to come in 2025. Bringing open banking regulation — a system that enables the sharing of financial data between third parties and banks — solely under the Financial Conduct Authority (FCA) should fix some of the regulatory gridlock we’ve experienced in the past.
It should also provide a clearer path for open banking and its evolution into open finance, an iteration of open banking that covers areas beyond traditional banking such as investments and mortgages.
The new normal of high interest rates is here to stay
Michelle He, cofounder and chief operating officer at Abound
In 2025, fintechs face a potentially sobering reality: structurally higher interest rates are here to stay, and the era of cheap money is over. High taxes and sluggish growth continue to weigh on the economy. Investors, cautious since 2022, will remain unwilling to fund growth at any cost and will demand a swift path to sustainable profitability.
But this isn’t the death of innovation — far from it. The demand for tech that is cost cautious, boosts productivity and drives growth has never been greater. Overlooked and often stagnant sectors like lending, insurance and payments are ripe for disruption.
The fintechs that thrive in 2025 will be those that focus on lean operations and sustainable growth. Big ideas still matter — but they must make financial sense.
The fintech focus on B2B will continue
Morgan O’hana, cofounder at Defacto
Fintech is heating up again with Klarna’s IPO and Revolut’s secondary sale making waves. But the real action is in B2B fintech. Unlike consumer markets, B2B players enjoy stronger pricing power as businesses pay for value. Market tailwinds like e-invoicing, open finance and AI-driven scalable personalisation are unlocking opportunities to grow, generate cash flow and maintain lean operations. Crucially, as financial providers, fintech companies have a defensible position — AI can enhance processes but can’t replace the core offering, making the sector even hotter. With even B2C giants like Revolut doubling down into B2B, investors are likely to follow suit.
Fintech will return to the public market — but not in Europe
Thomas Vita, partner at Norton Rose Fulbright
With some closely followed European and other fintech IPOs in the pipeline, 2025 will hopefully see a repeat of the rush of fintech IPOs that occurred in 2021 and 2022. While the aftermarket performance of that cohort of fintech IPOs varied, it will no doubt inform the reception of the current group of expected IPO candidates.
For European businesses, the promise of higher valuations and greater liquidity, along with the prospect of greater research analyst coverage, the prospect of a New York IPO is more attractive than one in Europe. However, as we saw during and since the dot-com bubble of 2000, while some of the most international European businesses did well with their New York listings, many other successful businesses had trouble attracting investor and analyst interest in a large and crowded market.
Consequently, while we expect to see some of the most compelling European issuers successfully conducting their IPOs in New York in 2025 or thereafter, other more domestically or regionally-focused businesses may instead seek an initial listing in London or another European market, perhaps once the aftermarket performance of some of the current high-profile IPO candidates is known.
Where crypto could go in 2025
Ash Arora, partner at LocalGlobe
In 2025, we see blockchain evolving across three key verticals. First, stablecoin rails being used in cross-border payments will underpin the evolution of financial services, making traditional finance more efficient and accessible. Second, self-sovereign identity will be a driver of KYC, KYB, credit history, legal processes, immigration etc. This would provide verifiable proof of personhood while preserving individual privacy and control. Finally, real-world asset tokenisation will unlock liquidity and accessibility for a wide range of assets especially traditionally illiquid securities to global pools of capital seeking diversification.
Political stability will lead to progress in fintech regulation
Janine Hirt, CEO of Innovate Finance
The prospect of political change always triggers a degree of economic uncertainty, with businesses often holding out on making big decisions until there’s greater clarity about the scope of regulatory change. This is something that’s been keenly felt here in the UK, with a new government ushering in a period of stability not seen since before the pandemic. This stability is likely to lead to further progress for the fintech sector in 2025, with the final months of 2024 bringing a focus on implementing regulation in areas such as buy now, pay later and crypto — interventions that the sector has been calling on for years.
The return of fintech M&A
Olena Sokolowska, managing director at Moelis London
The animal spirits are coming back in M&A, and this is expected to be true for the fintech sector in 2025. While primary funding rounds continue to be few and far between, the valuation gap in the secondary market continues to narrow. Over the last two years, many fintechs have focused on shifting away from growth at all costs to profitability, creating a larger pool of assets that are attractive to both strategic as well as PE investors. Whilst large platforms are eagerly awaiting the IPO markets to fully open up, mid-market activity will drive increased M&A volumes across the majority of sub-sectors of fintech.
Read the orginal article: https://sifted.eu/articles/whats-next-for-european-fintech-eight-predictions-for-2025/
