Unexpected circumstances in recent years have brought challenges to many industries. After recovering from the economic downturn of 2007 to 2009, businesses are now tackling challenges stemming from the global Covid-19 pandemic and the long-awaited finalisation of Brexit, amongst other obstacles.
Some industries have neared collapse, many have had to readapt to new ways of working, and a few have prospered. Financial technology has continually been a growing, changing and innovative business. But what impact have recent years had on the state of fintech in Europe?
This blog will discuss what fintech is, the impact of recent events on the industry and the current state of fintech in Europe.
What is Fintech?
FinTech is short for Financial Technology, and refers to new technological advances used within the financial sector. Fintech was first developed in the 21st Century, starting relatively small and focusing on improving back-end financial services.
Fast forward to the current day, and fintech is spreading to cover sectors from cybersecurity to IT to the emerging popularity of cryptocurrencies. As it stands, the main growth area in fintech is improving, automating and simplifying consumer-oriented services relating to traditional banking.
The state of Fintech in Europe
Though Europe has flooded its funding towards the sector, there is no question that political changes such as the Covid-19 pandemic and Brexit could negatively affect the state of fintech in Europe. Thankfully it appears to be quite the opposite.
Covid-19 impact on Fintech in Europe
When the Covid-19 pandemic struck and lockdowns were implemented in hundreds of countries, economies ground to a halt. All over Europe – and the wider world – stores closed their doors, people lost their jobs, and property markets drastically slowed. Despite lockdowns causing financial crises for many individuals and businesses, the fintech sector experienced a surge in investments.
A report from TechEu stated that European fintech companies raised approximately 10 billion Euros in 2020 – an almost 2 billion increase on figures from 2019, despite the harsh and unexpected environment unfolding from the Covid-19 pandemic. Trends emerging from the impact of Covid-19 have indirectly had a positive effect on fintech in Europe.
Without traditional shopping available, many businesses that were wholly reliant on a front-facing store took the opportunity to move their business online. Online shopping trends skyrocketed as both consumers and companies embraced digital purchasing opportunities.
Additionally, many essential stores that were open throughout the lockdowns, and others once they were allowed to reopen, started promoting a “card payment only” rule following the concern over transmitting the Covid-19 virus through cash handling.
TechEu reported that many aspects of fintech experienced a boost as the world relied more on a digital approach. Online banking apps, loan marketplaces, cash flow management companies and online security are examples of fintech sectors that thrived.
Brexit and Fintech
Brexit naturally will affect the UK specifically more than the EU as a whole, and the UK’s reputation as a leading financial services hub could be in jeopardy. But according to Prodigy Finance, Brexit is not something the European fintech industry should fear. Instead, the industry should embrace Brexit as an opportunity for growth.
With its international abilities continually growing stronger, there is an opportunity for fintech to support the economy using its capabilities to transpire across borders. The global power of fintech will be relied on now more than ever.
The UK’s departure from the EU has affected other countries involved in the fintech sector. Bloomberg reported that several companies relocated their premises too, or opened a new secondary location in countries such as Lithuania in response to Brexit. While still under the EU marketplace, moves such as this could be an opportunity for more countries to become involved in the fintech space.
Fintech in Europe: Going forward
Fintech in Europe has always been strong, and it is evident this is not a growth pattern that is halting. Despite the Covid-19 pandemic having a harsh impact on economies, fintech has boomed in its wake, where online shopping and electronic banking has become a necessity for both consumers and businesses.
The UK’s move away from the EU has emphasised a need for borderless banking solutions and opened doors for more European countries to join the fintech sector. Going forward, fintech businesses will be looking at bigger goals and broader innovation as the demand for digital flourishes, keeping this booming, healthy state of fintech in Europe.
PayPugs is a growing online payment business within the fintech world, offering a personal service and international expertise. Get in touch with us to find out how we can help you and your business