Barely halfway through 2021, Europe has already broken the record for annual investment into fintechs. So far this year, European fintechs have raised €10.4bn, trumping the €9.3bn raised across the whole of 2019 — the previous highest year on record according to Dealroom data. 

It’s also a marked recovery from 2020 when, in the midst of Covid-19, European fintechs raised a total of €8.4bn. The fintech sector looked vulnerable at the start of last year, hitting a three year low as governments shut down and investors took stock. Now, the sector appears to have bounced back, buoyed by a shift to digital as well as banks’ growing interest in fresh infrastructure. With six months of the year still to go, it’s looking like a bonanza 2021 for fintech.

European Fintechs have been gaining eyeballs from across the world, and thus year they have also shelled out capital from both US and Chinese investors. Fintech as a sector has gained major grounds in the continent and continues to be the most funded sector in European tech.

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For the first six months of 2021, the fintech funding has been dominated by mega-rounds by Klarna, Trade Republic and SaltPay. Currently, there are more than 30 fintech unicorns in Europe, and many more are aiming to cross the $1B milestone. 

What’s happened in the Fintech sector across the world in the second quarter of 2021

Payments: The companies offering payment services have raised over $8B in the second quarter of 2021. The Quarter on Quarter increase was clocked in at 25%.

Banking: Banking companies had a record-breaking quarter. Deal activity grew 59% QoQ and funding grew 43%. There were 16 mega-rounds, which accounted for 68% of total funding.

Digital lending: Funding and deal activity to digital lending companies exploded to nearly $7B across 126 deals, representing QoQ growth of 76% and 19%, respectively. Mega-rounds doubled this quarter to 16 from Q1’21.

Wealth management: Funding fell by 21% QoQ to $4.4B, while deal activity grew slightly. Wealth tech saw 12 mega-rounds — a new record — making up 77% of total funding in the quarter.

Insurance: Insurtech funding surged by 79% in the quarter while deals remained flat, as mega-round activity bolstered funding growth. Mega-rounds represented 66% of total funding in the quarter.

Capital markets: Capital markets deal activity fell 10% QoQ, marking the third straight quarter of decline. After a record Q1’21, funding fell by 82% to $5.1B.

SMB: Fintechs focused on SMBs had a strong quarter. Funding grew 37% to $5.9B. SMB deal activity was the strongest it’s been in 5 quarters, increasing 47% QoQ to 85 deals.

Real estate: Despite a 20% decrease in deals, late-stage mega-rounds pushed funding to a 5-quarter high. Real estate fintech funding increased 25% QoQ to $3.2B. 

Thinking to convert your fintech startup idea to reality

Open Banking gains ground with new partnerships

Tink’s latest valuation: $2.2B (up from $825M)

In the month of June, Visa published a press release mentioning that it has acquired Tink, a European open banking platform. Financial institutions, merchants, and fintechs gain insights through financial data available to them via open banking. Tink helps them to build customized financial management products and services based on the insights to cater to the European customers and businesses. 

After abandoning its acquisition of Plaid due to regulatory challenges, and determined to enter the open banking space, Visa acquired Tink. The API platform integrates with more than 3,400 banks and financial institutions, reaches 250M bank customers across 18 markets, and is used by over 10,000 developers.

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