The European FinTech Ecosystem
Navigating Covid-19
September 2020
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Executive Summary
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Investment in the first half of 2020 is below 2019 levels, but still higher than 2018 in almost all the hubs. London dominates investments into
European FinTechs, claiming 57% of capital invested in 2020 H1.
The pandemic will have a variable impact across FinTech sectors in the short term. The current crisis has accelerated investment into startups
developing Technology and Support solutions for financial institutions, corporates and SMEs.
Series A/B rounds rose in Q2 as investors focused on their existing portfolios, whilst seed investments dropped and later stage VC remains
steady.
A generation of world-leading EU FinTech scaleups were born during the last financial crisis. The agile business models many
FinTechs adopt allow them to innovate, adapt & pivot to changing demands, enabling them to take advantage of new
opportunities that will arise from the Covid-19 crisis.
FinTech attracts the largest share of equity investments in Europe, receiving more than €30B of venture capital investment since 2014.
Methodology and definitions
1535
FinTech startup
with total funding
above €1M
12 european selected hubs
London, Paris, Berlin, Stockholm, Barcelona,
Amsterdam, Madrid, Zurich, Munich,
Hamburg, Vilnius, Dublin
Corporate Banking
FinTech firms apply technology to offer innovative lending, payments & liquidity
management solutions to the corporate banking sector
Insurance
InsurTech firms are innovating across the insurance value-chain developing
technology solutions in P&C, Health, Multi-line and life insurance
Retail Banking
FinTechs offer technology driven digital accounts, lending and payments solutions
for retail customers
SME Banking
Firms look to re-imagine accounting, payments and lending for SMEs across the
globe
Support
Firms work to enabling FIs, Corporates & SMEs by improving compliance, HR,
process automation, CRM and risk management processes
Technology
FinTechs are enabling FIs by developing data analytics, data mgmt., digital
identity, infrastructure and security solutions
Wealth Management
Firms provide digital investment management, focusing on robo & traditional
advisors, along with trading & brokerage platforms for retail customers
Capital Markets Enabling the capital markets value-chain, through pre-trade, trade execution and
post-trade. Market analytics, e-exchanges & clearing/settlement are a focus
Initial data set
11K European FinTech startups
4605 fintech startups
FinTech & InsurTech are global ecosystems of firms that innovatively apply technology to
transform & enhance financial services. Through game changing business models these firms
look to disrupt the status quo, capturing customers, or enable existing processes across the
financial sector.
The European FinTech Ecosystem Navigating Covid-19
Source: Dealroom.co, BCG/Expand FinTech Control Tower
Page / 6
FinTech is Europe’s largest investment category. It received more than €30B
of venture capital investment since 2014.
Investment in Europe per sector
(2014-2020 YTD)
Funding rounds above $2M in Europe per sector
(2014-2020 YTD)
€30B
FinTech
Health
Enterprise Software
Transportation
Food
Marketing
Energy
Travel
€29B
€27B
€12B
€10B
€10B
€9B
€6B
2916
Enterprise Software
Health
FinTech
Marketing
Transportation
Energy
Food
Travel
2422
2411
1262
1029
877
860
555
2016
2017
2018
2019
The European FinTech Ecosystem Navigating Covid-19
Page / 7
Source: BCG/Expand FinTech Control Tower, Dealroom.co. Based on startups & scaleups from the European hubs mentioned in page 5
Investment into European FinTech startups
(Pre-covid 19)
Until 2019, FinTech investment was up across almost all its sectors. Retail and SME
banking grew by 5x compared to 2016 figures.
Retail
Banking
SME
Banking
Insurance
Technology
Corporate
Banking
Capital
Markets
Wealth
Management
Support
€2.8B
€2.5B
€0.8B
€0.3B
€0.7B
€0.3B
€0.3B
€0.2B
Page / 8

“Financial institutions are under enormous pressure
to cut costs and closing branches would serve
towards that goal. In the absence of a physical
customer touch point financial institutions have to
step up their game when it comes to digital customer
acquisition,
digital
product
offerings
and
engagement. These are just some of the reasons
driving the interest in FinTech infrastructure plays.
Beyond that we are seeing a large number of
non-financial institutions entering the financial space
on top of said FinTech infrastructure players and that
in itself should serve as a catalyst to a lot more
innovation in the coming years.”
The European FinTech Ecosystem Navigating Covid-19
Source: BCG/Expand FinTech Control Tower, Dealroom.co. Based on startups & scaleups from the European hubs mentioned in page 5
Investment into European FinTech startups
(Post-Covid 19)
The current crisis has accelerated investment in startups developing technology
and support solutions for financial institutions.
H1 2018
H1 2019
H1 2020
Retail
Banking Technology
SME
Banking
Support
Insurance
Corporate
Banking
Wealth
Management
Capital
Markets
€1.5B
€0.4B
€0.4B
€0.2B
€0.3B
€0.2B
€0.3B
€0.1B
Barbod Namini
Partner HV Ventures
Page / 9
The European FinTech Ecosystem Navigating Covid-19
How can you describe the European VC market in Q2 2020? What has changed in
your investment thesis since then?

“In Q2 this year, I think it’s safe to say that almost all
VCs were zoning in on how they could support their
existing portfolio companies, meaning there was far
less bandwidth to do as much proactive outreach for
new deals. We’ve been focusing more than ever before
on
internal rounds and naturally we’ve been
supporting our portfolio operationally as closely as
possible. Any new investments we considered in this
time were companies that could demonstrate how
they had quickly adapted – and could take
advantage of - the new market conditions. ”
Matus Maar
Partner Talis Capital

“The current environment has undeniably impacted
early stage investments. Most of the deals we have
seen being announced in Q2 2020 have been based on
existing relationships and we expect that valuations
particularly at the later stage companies have been
impacted either due underperformance on budgets,
inability to raise an external round or macro-risks.
Particularly at the beginning of the quarter, we saw
venture funds shift focus from ‘new’ deals towards
deploying capital
in the existing portfolio.
Substantial early stage deals that have been
announced lately were positioned as an answer to the
current crisis, whether that be remote working
solutions, online event hosting or solutions helping
financial institutions bringing their customers online.”
Aman Ghei
Partner Finch Capital

“April was quiet as VCs focussed on their portfolios.
Since mid-May it has been picking up and
July-August were the busiest I have seen in Europe
since I first started at Balderton in 2009. Great
companies are raising competitive rounds at high
valuations. On the flip-side medium-good companies
with mixed metrics may be finding it harder as they
might have raised from sources which are less active
(corporate VC or family offices) and/or they aren't
given the chance to fully make their case as they could
in person”
Rob Moffat
Partner Balderton
Capital
Source: BCG/Expand FinTech Control Tower, dealroom.co.
Percentages are based on the number of VC-backed FinTech startups & scaleups from the European hubs mentioned in page 5 .
Page / 10
Last year, all FinTech sectors demonstrated
increased levels of maturity, characterised by
lower frequency but higher value and larger
round activity. Although Covid-19 has changed
the outlook, its implications have differed across
FinTech sectors.
Retail Banking has experienced a relatively muted
impact with consumer activity being at an
unprecedented low level (reducing payment
activity) albeit with high growth in online
payments. This places the segment in a strong
position for the medium to long term.
SME Banking has been shown to be particularly
vulnerable to the impacts of Covid-19 due to
difficulties being faced by SMEs whom are having
to counter the business impacts from the crisis.
Capital Markets have also been notably affected
by Covid-19, with a large drop in funding in the
trading & investments spheres.
Technology, Support and Insurance companies
have proven somewhat resilient. As incumbents
are pushed to digitize their operations, these
three sectors are likely to experience a positive
uplift.
The European FinTech Ecosystem Navigating Covid-19
Net positive
29%
Technology
Support
Insurance
Defensible
42%
Retail Banking
Wealth Management
Corporate Banking
Under pressure
29%
SME Banking
Capital Markets
The pandemic has impacted each FinTech sector
differently in the short term.
Page / 11
The European FinTech Ecosystem Navigating Covid-19
Taking into account the current crisis, what do you think the next big thing in
FinTech will be?

“I think companies that provide infrastructure to
the ecommerce and payments space are going to
continue doing really well. These companies – like
Klarna, for example, have already seen years of
linear growth, and with increased uptake of mobile
commerce in this time, they’ve become critical
components in shaping how people shop online.
Tech providers who ensure safer payments and
provide fraud detection to retailers for online
transactions are also increasingly critical. Equally, I
think we’ll be seeing more FinTechs that provide
infrastructure to retailers that cater to the
Millennial and Gen Z mindset of renting and
leasing goods over buying.
Matus Maar
Partner Talis Capital

“While we believe there are many areas of FinTech
that will be positively impacted such as AML/KYC,
AI enabled solutions for front to back office
efficiencies, payment Infrastructure simplification,
we’ve had our eye on the push towards remote
working
that offers new challenges
for
managing distributed teams. Taxes, payrolling,
pensions and other benefits will
become
increasingly complex to handle
in different
jurisdictions. Technology startups can help solve
this issue by building a one-stop-shop solution
where companies can outsource all of the
employee related matters.”
Aman Ghei
Partner Finch Capital

“I have been saying the same thing on the 'next
big thing' for the last 5 years: InsurTech.
Hopefully the successful Lemonade IPO will inspire
more great founders to start InsurTech businesses.
Beyond this I believe there is increasing investor
interest in capital markets software and data.”
Rob Moffat
Partner Balderton
The European FinTech Ecosystem Navigating Covid-19
Source: Dealroom.co, BCG/Expand FinTech Control Tower
Page / 12
Investment in the first half of 2020 is below last year level, but still higher than
2018 in almost all the hubs.
Investment into European FinTech startups
Per hub in H1 2020
Investment growth per hub in H1 2020
Compared to the same period in 2018 and 2019
Hub
H1 2018
H1 2019
London
3.0x
0.6x
Berlin
1.0x
0.5x
Paris
1.7x
0.9x
Stockholm
5.5x
0.9x
Dublin
1.3x
7.3x
Zurich
1.2x
0.3x
Hub
H1 2018
H1 2019
Amsterdam
1.0x
1.1x
Munich
1.5x
4.3x
Barcelona
1.1x
0.8x
Madrid
0.5x
0.1x
Vilnius
21x
39x
Hamburg
6.5x
0.2x
€1,737M
€366M
€351M
€323M
€102M
€48M
Berlin
London
Paris
Dublin
Stockholm
Zurich
Munich
Amsterdam
Barcelona
Vilnius
Madrid
Hamburg
€43M
€32M
€14M
€13M
€11M
€7M
Seed stage FinTech companies saw fewer rounds
in Q2 2020 as investors opt to double down on
larger, more mature winners through follow on
Series A & B rounds, while late stage investment
remain at the same level.
During the last few years, a decrease in the
proportion of capital allocated to early-stage
investment (seed) has been observed. It is
expected that this shift will be accelerated in the
coming months and that investors will bet on
more established and mature companies.
There is often a delay between when a venture
capital deal is closed and when it’s publicly
reported, as such this number may not yet reflect
the complete funding landscape during the
observed time period.
Page / 13
The European FinTech Ecosystem Navigating Covid-19
Source: Dealroom.co, BCG/Expand FinTech Control Tower. Based on FinTech startups & scaleups from the European hubs mentioned in page 5.
Seed rounds are susceptible to reporting lag.
Quarterly evolution of number of rounds
Per round type
Despite challenging macro conditions, the number
of Series A/B rounds is increasing.
Page / 14
The European FinTech Ecosystem Navigating Covid-19
Do you believe there will be a lack of late-stage capital for European FinTech
companies in the future?

“I think we’ll see an increase in later stage
capital as a result of the mature FinTech
ecosystem we have here in the UK. This year
alone we’ve seen two of our FinTech portfolio
companies, Pricefx and Onfido, raise $65m and
$100m respectively, both from leading later-stage
US investors. The UK FinTech market has matured
to now be widely-acknowledged as the global
leader in the space, and with increasingly more US
VCs opening offices on the ground in the UK, I think
we’ll see a significant increase in capital available
for later-stage FinTech rounds.”
Matus Maar
Partner Talis Capital

“We have seen a number of large funds being
raised over the last year so in general we do not
believe there will be a lack of capital in the near
future. That said, investing cross-continent could
slow down due to the physical barriers in the
current environment. Another, more generic
dynamic, at the later stage is investors seeking
strong unit economics and a clear path to
profitability, which has had a less prominent role in
the last couple of years. So we expect later stage
investors to get more selective, which might
result in longer lead times to fund for instance.”
Aman Ghei
Partner Finch Capital

“It’s fair to say that current geopolitical tensions
might have a lasting impact on specific pockets of
capital being deployed in Europe. Said that capital
is global and mobile and tends to chase yield.
From today’s perspective there is no reason to
believe that there will be a lack of capital for
strong late stage FinTechs in the future (beyond
the usual temporary disruptions in the capital
markets that might be caused by economic
cycles).”
Barbod Namini
Partner HV Ventures
Pauline Wray
Managing Director
pauline.wray@expandresearch.com
Aaron Block
Project Leader
aaron.block@expandresearch.com
Selin Suntay
Lead Analyst
selin.suntay@expandresearch.com
Thomas Lloyd
Analyst
thomas.lloyd@expandresearch.com
Lotf Belych
Head of FinTech Research
lotf@dealroom.co
Orla Browne
Head of Content
Orla@dealroom.co