Fintech Report | Oct 16, 2024

Image: State of European Fintech 2024 (Finch Capital)

Finch Capital’s 2024 report reveals a shift in Euopean fintech towards profitability, sustainable growth, and strategic M&A

European fintech in 2024 is about consistent financial gains over rapid expansion. Fintech Capital released the 9th edition of the “State of European Fintech 2024” (37 page PDF) lifting the veil on recent market developments and adjustments to investment thesis’ that are influencing this sector, such as the dominance of the UK, the role of AI and digital currencies, and the resurgence of digital banks.  This post looks to highlight the key trends and insights that matter to fintechs and investors.

1. Current State of Fintech in Europe (2024)

• European fintech funding fell 25% in 2024 compared to last year.
• Despite challenges there are signs of recovery especially in mid-sized mergers and acquisitions (M&A).
• Companies are focusing more on more consistent profits instead of fast growth.
• Sustainable business models are preferred now instead of chasing high valuations.
• The UK leads the market, receiving 65% of the total fintech funding.
• Other regions like the Nordics and the Netherlands are maintaining stability despite the overall downturn.

2. Funding and Market Insights

• In the first half of 2024, total fintech investments reached €2.9 billion across 443 deals, down from €3.8 billion and 548 deals in the same period of 2023.
• Investors are being more selective, prioritizing companies with clear paths to profitability.
• Large late-stage investments have decreased while smaller more sustainable rounds are rising.
• Higher interest rates have boosted challenger bank profits, and fintechs with deposits.
• There’s early stage interest for crypto and digital assets (especially stablecoins) as they challenge traditional banking models although the market continues to be volatile.

See:  DLA Piper’s Tech Index 2024 – Highlights for Fintechs

• Insurers have embraced AI to streamline operations, with over 80% utilizing AI in underwriting and risk assessment. This insurtech trend points to increased efficiency and reduced operational costs.
• Deals in the mid-sized segment (under €500 million) have increased, making up 32% of the global market for such deals. This is similar to the U.S. in terms of volume but smaller for larger transactions.
• Companies with higher profit margins (EBITDA) are valued more with some seeing valuations over 10 times their earnings.
• The payments sector is seeing more mergers aimed at boosting efficiency. Buy Now, Pay Later (BNPL) is making a comeback, thanks to better risk management powered by AI.

3. Geographic Insights

• The UK is attracting 65% of Europe’s fintech investment and has a strong M&A market driven by a focus on profitability.
• Nordics and Netherlands remain steady despite economic challenges, with consistent funding and a focus on profitable, mature companies.

See:  How Fintechs Are Unlocking Value in Private Markets 2024

• Government support in Ireland and Germany is nurturing tech startups, so possible growth rebound in 2025.
• Poland has a vibrant early-stage investment scene but lacks the follow-up funding needed for companies to scale up in later stages (Series A and B).

Key Takeaways

• The mid-sized M&A market in Europe offers stable returns, so an interesting time for Canadian venture funds to explore deals in the UK and Nordics?
• Increasing use of AI in insurance and banking creates opportunities for Canadian fintechs with AI expertise to enter the European market.
• The focus on sustainable business models and B2B solutions aligns well with a longer term investment approach. Germany and the Netherlands have strong government support, which may be attractive for Canadian investors.

European Fintech Outlook in 2024

European fintech in 2024 is all about stability and consistent growth. Finch Capital’s latest report shows that the focus has shifted from grow at all costs expansion to more sustainable models and profits.  For more perspective, check out Chris Skinner’s post here.

See:  Global Fintech Funding Sees a Boost in Q2 2024

Although the UK remains the leader (65% of investments), government support in the Nordics and Germany may create a good time to explore AI and mid market M&A in Europe for Canadian investors.

The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada’s Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

Email marketing is as old as digital marketing. It’s the oldest and one of the most effective digital marketing channels for all contexts, be it, B2C or B2B. At the internet mailing giants’ behest, let’s try to understand the new bulk emailing guidelines that are effective starting 1-Feb 2024, by starting with a step back and looking at it from first principles.

Who are the stakeholders and what do they want?

• Marketers (of sellers/businesses/brands): Want the consumers of their products and services to be up to date with purchases, upsold and cross-sold to new products and other offerings, and informed on their new launches. For eg. Nike’s Brand Management Team.

• Consumers: Customers of businesses and brands who rely on email and other channels for important order-specific as well as marketing updates. For example, you 🙂 

• Email Client: The software application that allows one to create, access, send, and manage Email messages over the internet infrastructure. For eg. Gmail and Yahoo Mail.

• Email Service Provider: Software companies that make it easier for marketers to run their mass email campaigns with advanced capabilities, monitor performance, and engage their Consumers with their brand’s websites and resources. For example, Netcore.

• Marketing Automation Tool: A software that helps marketers orchestrate omnichannel marketing campaigns on top of their Consumer audiences. For example, Lemnisk’s Marketing Automation suite.

How do the above stakeholders co-exist in the realm of email marketing?

Marketers, with the help of an Email Provider run their email marketing campaigns where they have to adhere to global, regional, and Email Client-established marketing regulations to ensure diligent and honest email marketing practices, such that the consumers are informed, not spammed, and their business identity is resolved; not spoofed for malicious and deceptive email fraudsters. 

A CDP-led Marketing Automation Tool provides the marketer with the one-stop driving seat to have the clearest view of their consumer base and insight into the right channels to organize their multi-channel marketing strategy with the real-time reports and analytics module to monitor and improve their campaigns.Click here to know more.

What is the new guideline from Gmail and Yahoo Mail (Email Clients)?

Gmail and Yahoo Mail strengthened their email sender identity and subscription guidelines to ensure the marketer’s identity is dignified and the consumer’s inbox only receives the emails that they should.
 

• Reduce Spamming: It is not uncommon for Consumers to be spammed with over-the-top email frequency from a business.

• Ensure untampered Business Identity: Email marketing is not devoid of fraudsters. “Spoofing” is when an email sender is disguising an identity that they are not. Business marketing teams often have a hard time battling the commonplace fraudsters that reach out to their audiences for various malicious agendas – trying to phish their personal data, monetary cybercrime, etc.

 
Trivia: Gmail and Yahoo combined have about 34% share in the Email Clients market.

Detailed guidelines

Gmail and Yahoo have categorized “Bulk Senders” as any business entity that communicates via e-mail, to an audience of over 5000 recipients per day. In practicality, that is typically going to be any brand/company/e-commerce or an influencing entity with a sizable market presence.

Here is a checklist of extant guidelines for sender verification. Starting 1 Feb 2024, “bulk senders” are now required to follow these additional steps regarding their email sender Identity and subscription management:

1. 1. Publish a DMARC record for your domain: Domain-based Message Authentication, Reporting, and Conformance (DMARC) tells the recipient’s email servers what to do if the sender domain doesn’t pass SPF or DKIM specified by you.

       

      1. A Sender Protection Framework (SPF) record of your sender domain defines the servers as well as domains that are authorized senders of your business. (businesses do have multiple sender domains, for eg. @nikeshop.co, @nikestore.com, @nikeglobal.com, note that these may not be actual domains belonging to Nike, but they help convey the point).

       

      2. A DomainKeys Identified Mail (DKIM)key against your domain is how the recipient server identifies and resolves your business email identity.

       

      3. Either of the above is required for you as a mass email marketer to ensure your marketing emails don’t land up in spam and keep spoofing at bay. Email fraudsters attempting to spoof your identity will be flagged at DMARC authentication (they will not have the same SPF/DKIM certificate as yours).

       

   2. A One-click unsubscribe methodology

      is to be followed for promotional and subscribed emails: Email clients are ensuring you don’t give your audiences a hard time trying to unsubscribe from your mailing list. This not only backs your consumers with responsible marketing but also ensures your email delivery and click rates are not inflated by an unwilling audience.

    

   What will happen if I don’t comply with the new guidelines?

   If your business senders are provided by Gmail and/or Yahoo mail and you don’t ensure the additional steps are covered, soon your outbound emails will be rejected or directed to the recipient’s spam.

    

   How shall I go about taking the required actions?

   Both Gmail support and Yahoo Mail support have provided crisp and step-by-step guides on how to go about taking forward the additional actions. Here’s a link to Gmail and Yahoo Mail’s master directions article. Additionally, you may reach out to your Email Service Provider for prompt personal assistance.

    

   By Karansingh Bisht | Associate Product Manager at Lemnisk

    

   References

   1. Google Product Update 

   2. Yahoo Product Update

   3. Master Directions from Email Clients: 

      1. Gmail Guidelines and Tools

      2. Yahoo Guidelines

   4. Preventing Spoofing and Spam with DKIM

   5. Email Clients Market Share

A new report detailing the payment habits of consumers in the Nordic countries has been published by Nets, part of the European paytech, Nexi Group. It has revealed that while card payments dominate the payment landscape, mobile payments are on the rise.

The new research surveyed 4,000 consumers and 2,000 merchants, exploring the different attitudes towards the payments market. Merchants are much more confident about the future, with around 33 per cent forecasting a positive business outlook. Meanwhile, 9 in 10 consumers are expecting to spend the same or less.

Breaking down payment preferences, Nets found that 76 per cent of Nordic consumers use some form of mobile payment in physical sales locations. Furthermore, 12 per cent of Nordic consumers state that they only pay with their mobile phone, citing no need for a physical wallet at all. Interestingly, 30 per cent of Nordic consumers never use cash. This rises to almost half of consumers in Norway and Sweden, despite Norwegian legislation requiring businesses to accept cash payments.

In 2022, mobile payments pushed cash payments into third place among Nordic consumers’ most preferred payment methods. This has evolved into a battle between global tech giants Apple and Google, card schemes including Mastercard and Visa, and local, bank-backed brands such as Dankort, Vipps MobilePay and Swish. A joint bank agreement to allow Nordic cross-border local mobile payments is set to fuel this growth further.

In Denmark, Apple Pay is now more popular than Mobilepay; and in Sweden it is almost on par with local mobile payment option, Swish.

Lars Erik Tellmann, chief regional officer for the Nordics at Nets commented: “Although rising inflation and interest rates have affected the economy, we can now see that consumer purchasing behaviour has begun to normalise. In physical stores, use of mobile wallets and cards is steadily increasing, reflecting a global shift towards cashless transactions. Countries like Sweden are leading the change, with a strong push to eliminate cash entirely from daily commerce.”

Payment options are important

Nordic consumers have indicated that choice matters: 63 per cent said they have cancelled a purchase due to a merchant not accepting their preferred payment method. However, 54 per cent of all Nordic merchants said that they do not currently accept local mobile payment methods. This indicates a disconnect between consumer demand and merchant provision.

“We are also seeing significant advancements in payment authentication, digital receipts, and loyalty solutions,” explained Tellmann, “with demand for innovative approaches steadily increasing. While full implementation is still ongoing, many businesses are recognising the benefits of digital receipts in enhancing customer convenience and reducing environmental impact.

“Loyalty solutions have also seen substantial progress, with 9 in 10 Nordic consumers enrolled in at least one loyalty program. These loyalty programs are now often linked directly to payment cards, simplifying the user experience, and ensuring rewards are seamlessly earned.”