Pulse of Fintech H1'24

• ­   Mature, stable markets attracting the largest fintech deals.
• ­   Investors continuing to shy away from the largest deals, with very few exceptions.
• ­   AI drawing significant interest, both as a means to improve operating efficiencies and as a means to reduce costs.
• ­   Regtech interest continuing to increase, particularly in the EMEA region.

With interest rate cuts taking longer to materialize than initially expected, the pick-up in investment activity predicted in H2’23 is taking longer than originally thought to come to fruition. Heading  into H2’24, fintech investment is expected to remain subdued—except, perhaps, when it comes to AI and generative AI—given the continued high cost of capital and geopolitical uncertainty. All eyes will likely be on interest rates and on the US presidential election heading into H2’24. 

Whether you’re the CEO of a large financial institution or the founder of an emerging fintech, it’s critical to consider how your company can become more efficient and profitable given the cost of capital will likely remain high for some time. As you read this edition of Pulse of Fintech, ask yourself: How can we position our organization to be more competitive and sustainable both now and in the future?

The EMEA region saw total fintech investment drop considerably in the first half of 2024 (H1’24), falling from USD 19.1 billion in H2’23 to just USD 11.4 billion in H1’24 amid continued geopolitical uncertainty and a high interest rate environment that kept interest in large deals quite muted.

The UK saw the largest share of fintech funding in the region during H1’24, attracting USD 7.3 billion in investment, including the USD 4 billion buyout of financial software company IRIS Software Group by Leonard Green, a USD 999 million VC round by small business focused marketplace platform Abound, and a USD 621 million raise by neobank Monzo.

The largest deals outside of the UK included the buyout of payments firm Banco BPM Gruppo for USD 652 million and the acquisition of Switzerland based e-invoicing company Pagero by Thomson Reuters.^[1]
 

In the Benelux region, Dutch challenger banks, bunq and Finom,^[2] raised extra financing of USD 31 million and USD 54 million respectively, but the largest funding round was held by DataSnipper, an AI-based platform in the Netherlands for auditors. In Belgium we noted the extra funding of USD 13 million for unbox,^[3] an infrastructure provider for programmable tokens, spearheaded by HSBC Asset Management and SFPIM, as well as the acquisition of payment company Digital by Norwegian merchant payments player, Aera.^[4]

VC funding shows some resilience: Compared to other regions, fintech-focused VC investment in the EMEA region showed resilience in H1’24, with USD 5.4 billion in investment. This resilience was likely helped by small increases in VC investment in the UK, Germany, Nordics region, and Ireland. The region saw increasing interest in early-stage deals as investors showed more optimism than they have in recent months.

Regulations remain key focus in EMEA, particularly in the EU: The EMEA region continued to see the regulatory environment evolve in H1’24, particularly in the EU. The EU Parliament approved landmark legislation with the AI Act in March 2024^,[5] the new regulation will apply later in 2026, with some exceptions for specific provisions. Crypto was a particular focus, given the EU’s Markets in Crypto Assets (MiCA) regulation, which came into effect in June 2024.^[6] MiCA requires that crypto companies—such as exchanges, wallet providers, and coin issuers—obtain a license to operate in the EU. The regulatory environment could drive renewed interest into the blockchain and crypto space because of growing regulatory confidence.

B2B focused fintechs attracting attention in EMEA: During H1’24, B2B focused fintech companies were of particular interest to fintech investors across EMEA, likely in part driven by their ability to produce recurring revenues. Deals in the space ranged quite broadly, with a number attracting international investors. In the Netherlands, DataSnipper raised USD 100 million to further grow its AI-based platform for auditors to other verticals in a funding round led by Index Ventures.^[7] France-based accounting software firm Pennylane raised USD 43 million in VC funding from investors including Sequoia Capital and DST Global;² the raise also earned the company unicorn status.

UK-based fintechs taking different approaches to international growth: Several mature fintechs in the UK have targeted international expansion to drive growth. However, these activities have been relatively hit-or-miss, given the unique differences in banking practices in various target countries. This has led some mature fintechs, including Starling Bank and Oak North, to pursue other avenues for international expansion, including selling their technology internationally as banking SaaS platform plays. 

• Large financial institutions and fintechs looking to leverage AI to drive operational efficiencies and cost reductions.
• Growing focus on AI-driven regtech and cybersecurity solutions, including in areas like KYC and AML and fraud prevention.
• An increasing focus on open banking and open finance in the UK.
• Attention to implementing the new EU regulation on instant payments^[8] that is to come into force in 2025. The verification of payee obligation puts pressure on financial institutions since international interoperability is currently one of the key concerns.
• Account-to-account payments, also for retail payments, will come more on the radar when instant payments are adopted more widely.
• Potential increase in IPO activity, although any major rebound will likely hold off until 2025.
• Growing interest in blockchain and crypto as startups mature and evolving regulatory environment provides more confidence to investors.