Involving venture capital in fintech companies is a growing trend in Europe
The second half of the year, as previously expected, shows a steady growth of investments in the fintech sphere. According to research KPMG Venture pulse Q3 2021 in the third quarter of 2021 financial technology industry continues to be a promising area of investment on the European continent. The largest capital raising deals indicate the need for active development and profit generation to compete with traditional banking and insurance institutions. What prospects does the new trend bring for the fintech sector?
In recent years, and especially with the onset of the pandemic, the demand for digital and mobile financial services has been growing. This is visible in emerging markets, where fintech helps the economies of the states that sponsor this industry. The availability of digital financial payments increases funding for the fintech sector. This is why we can see a trend that digital payments are widely used in countries with more developed economies, while cash is prevalent in less successful states. The benefits of various electronic payments can improve the economic situation of countries and pave the way for new investments. Rapid digital lending, money transfers, online shopping, international payments, insurance, and many other financial technology tools can provide economic freedom.
From the providers’ point of view, fintech can provide a cheaper and faster implementation of services and products. Banks are interested in expanding investments in fintech since this sphere can eliminate system weaknesses and identify the recipient and sender of payment with greater accuracy. Investments in payment services will open up new business opportunities in e-commerce. Small credits and electronic loans help develop micro-businesses, both offline and online, which will stimulate economic growth by increasing consumer spending.
The long-term outlook for the industry shows the importance of investing in all key areas, from banks to telecom corporations. Among the leading companies that received additional investment in Q3 2021 are the UK’s Revolut — $800 million, MarketFinance — $413 million, Rapid — $300 million, Switzerland’s Quantus Holdings Strategies — $553 million, TradePlus24 — $225 million, and Germany’s Solarisbank — $224 million.
Such large rounds of investment show that European companies are interested in growth and scaling. During the same period, the aforementioned Solarisbank used raised financing to acquire a fintech company specializing in payments, Contis. This is not an isolated case, and we can assume that shortly we will see increased activity in the fintech sector in the area of mergers and acquisitions. I do not rule out the option of large-scale consolidation.
Most likely, the biggest investments will focus on payments, and with the increasing number of electronic transactions and the further growth of cybercrime — the solution in the field of Internet security will also be relevant to investors.