Europe, Middle East and Africa

Investors increasingly interested in SME short-term financing solutions

Within Europe, particularly the UK, there’s been a strong growth in the uptake of buy now, pay later solutions, with growing acceptance of the multiple payments business model. While many of these solutions have been focused on the B2C space, investors have increasingly shown interest in solutions aimed at providing SMEs with more flexible short-term financing solutions and their own BNPL products and services.

Continuing efforts to support open banking and finance

During 2023, the EU proposed a number of new rules focused on improving the digital financial services landscape and safeguards for consumers, including a new Payment Services Directive (PSD3) and a new framework for financial data (FIDA).¹

The European parliament also approved plans to make instant payments a requirement across the EU.² The legislators also agreed to amend the Settlement Finality Directive (SFD) to grant access for payment institutions to payment systems. These activities will likely enhance opportunities related to open finance over time and open doors to new innovations and new players in the space.

Alternative assets gaining traction within wealthtech space

Within the wealth management space, 2023 saw increasing interest in the EMEA region for solutions focused on alternative assets. The largest deal in this space was a $149 million raise by Germany-based Moonfare in H1’23 — a startup focused on opening up private market investing to individual investors not considered to be ultra-rich. Partnerships focused on providing the customers of financial institutions with access to alternative investment platforms were also on the rise in EMEA.

Regtech seen as a growing priority

Regulators in the EMEA region emphasized the importance of fraud and financial crime prevention in 2023, taking a much stricter approach with fintechs and other institutions in terms of their AML and KYC processes — with the FCA in the UK in particular handing out a number of penalties, including restricting activities, such as the onboarding of customers.³ Despite a slowdown in funding in 2023, the constantly evolving regulatory environment is expected to keep regtech interest quite high, particularly with respect to AML/KYC solutions.

• AI solutions working to transform aspects of the fintech market, particularly around fraud prevention and customer services.
• Growing focus on embedded finance and banking offerings.
• Traditional banks adopting the BNPL model.
• Increasing focus on asset tokenization, including digital assets and stable coins.
• Consolidation within the BNPL space as big players get larger and smaller startups fall away.