The State of European Fintech 2024 report has been released and the UK is doing really well as a leader in the region. The report shows UK funding for the finch increased by 3%, taking its value to £2.2bn, a big increase from £1.9bn in the first half of the year last. There does, however, appear to be a general decline in fintech funding in Europe.
Aman Ghei, partner at Finch Capital, said: “The challenges fintech faced in 2023 were necessary for the sector to mature and become more sustainable. Even though funding is down overall and the hunt for unicorns has slowed, there are plenty of opportunities for companies that use their capital efficiently and have a clear path to profit.
How is AI helping the European Fintech sector?
The report shows that AI is becoming a fundamental part of the fintech sector, particularly in the insurance sector. Over the next few years, many industry leaders plan to invest heavily in AI, to make operations easier and tasks more efficient.
Ghei commented: “With AI transforming the industry and a significant amount of dry powder still available, the next 12 to 18 months will be a turning point. for financial technology in Europe. The next wave of fintech success stories will likely rely on strong financial data rather than rapid revenue growth alone.
How is the Fintech startup scene in the UK?
The UK fintech startup scene is expected to see significant growth in the coming years. With the rise of neobanks and investors, the sector will begin to see a trend. The success of Mondo and Revolut demonstrates the possibilities available to startups in the country.
The experts have put together some very sound advice on what to consider when running a fintech startup:
Our experts:
- Matt FordCo-Founder and CEO, Sidekick Money
- Tiago VeigaCEO, Aurum Solutions
- James ToledanoCOO, Unity Wallet
- Hayden Smithhead of venture capital and private debt, Fuse Capital
- Kyrillos Akritidesco-founder and managing director, Schwarzwald Capital
- Eyal Moldovanco-founder and CEO, 40Seas
Matt Ford, Co-Founder and CEO, Sidekick Money
“Understanding your customers is essential. Focus on how technology can solve your users’ real-world financial problems. Creating a product that truly simplifies personal finance through transparency and data-driven insights is the key to success.
“Regulations are not just obstacles: they are opportunities. Compliance with financial regulations is non-negotiable, but view them as a positive: a surefire way to build trust and create a safer, more reliable service for your customers.
“Simplicity always wins. In a crowded fintech landscape, try to eliminate complexity, making financial tools easy to use, especially for the everyday person who may not be an expert in finance.
Tiago Veiga, CEO, Aurum Solutions
“Above all, people are everything. In order to provide your customers with the best and most innovative solutions, you need to ensure that your team is happy and working at optimal levels. There’s no science behind it, but taking the time to truly understand what people need to be productive – whether it’s automation support or flexibility – and ultimately , to feel valued, is very useful. Anyone running a fintech company knows that staff retention typically correlates with low customer churn. If you take care of your employees, then customers take care of themselves.
” Moreover operational side things, it is important to evolve in a sustainable way. Fintechs often try to run before they can walk; many are so focused on delivering a cutting-edge customer experience and new, innovative features that this can come at the expense of proactive, sustainable investment in the back office. This can be problematic for fintechs, particularly where back-office infrastructure is critical to meeting regulatory requirements. Since these back-office systems are responsible for functions such as protecting customer money and preventing fraud, it is essential that they are developed in tandem with front-end technologies to meet the evolving regulatory requirements.
“Finally, fintechs must have a clear value proposition if they want to succeed in the long term. Sometimes fintechs fall into the trap of trying to solve too many problems at once, which can blur the reality of the proposition. Being able to fill an obvious gap in the market with laser-focused expertise and having the ability to communicate it to potential customers is generally more beneficial.
James Toledano, COO, Unity Wallet
“Focus on letting the market dictate what your product should be, that is, providing users with truly useful features and tools that address user problems and improve their user experience. Fintech companies must create products that are highly intuitive, secure and personal.
“We also need to be careful not to simply exploit emerging technologies like AI just for the sake of it. We should always use user-centered thinking and ask ourselves “does this really benefit our users?”
“We also need to be transparent about data security and privacy to maintain user trust. Fintech companies can stand out by prioritizing financial inclusion and offering innovative products that fill gaps in accessibility and convenience.
How can fintech founders effectively manage risk, both in terms of technology and market exposure?
“They must prioritize robust cybersecurity practices, regulatory compliance and regular systems audits to mitigate technological threats. It’s also important to educate users about the threats posed by bad actors, who are typically the first line of defense short of a direct attack on the business.
“Diversifying product offerings and revenue streams, closely monitoring market trends, and performing thorough due diligence can reduce market exposure risks. In the case of fintechs and centralized exchanges, maintaining strong liquidity reserves should be the top priority to avoid FTX-like scenarios.
Hayden Smith, Head of Venture Capital and Private Debt, Fuse Capital
“In today’s (highly) saturated Fintech market, true innovation is the key to standing out. Successful founders must identify the real problems in the financial industry that large institutions have overlooked or are too slow to solve. Focus on developing proprietary technologies or unique business models that solve these problems in ways that are difficult to replicate.
“Build strategic partnerships with established financial institutions, but avoid becoming simply an outsourced development arm. Instead, leverage these relationships to evolve your solution while preserving your independence and intellectual property rights. Ultimately, these partnerships will likely be your way out!
Kyrillos Akritides, co-founder and managing director, Schwarzwald Capital
“Fintech startups need to think about how their product fits into the infrastructure of the industry it is created for and understand the needs of their customers. For example, in the creator economy, fintech startups should consider the following:
“Flexibility in revenue models and monetization options. Fintech solutions in the creator economy should integrate with the various social media channels where creators monetize their content. There are many platforms, and each has its own characteristics. This includes offering different revenue models and monetization options.
“Adaptability to emerging technologies. The sector is growing very quickly and, to remain competitive, fintechs will therefore have to adapt. In some cases this may involve flexibility in payment methods. For example, integrating emerging payment options like crypto.
“Fraud prevention. Startups need to focus on how to adapt banking services to the specifics of the public or improve the security of financial transactions, because the sector is still young and prone to fraud: the sector processes a wide range of small and frequent, which makes him vulnerable. .
“Global reach but with localization. In the case of the creator economy, preference is given to global solutions rather than local solutions since creators work on the international scene. Solutions should aim for international scalability, but don’t forget to include localization where necessary – take into account different languages and market conditions.
“Consider the particularities of the audience. It is obvious that the fintech tool intended for creators must differentiate itself from standard tools not only on a functional level, but also in terms of interface and language, so that it is understandable by a young audience, many of whom are faced with for the first time faced financial problems.
Eyal Moldave, co-founder and CEO, 40Seas
“When speaking to ambitious fintech founders, I always emphasize the importance of continuous learning and growth. Before embarking on a new entrepreneurial adventure, it is essential to seek advice from more experienced peers in your network who have charted their own successful growth trajectory in the fintech space.
“Don’t be afraid to put yourself in environments where you’re not the smartest person in the room. Knowledge gained from experienced colleagues can provide critical insight, helping young founders navigate the hyper-competitive fintech field in which there is a universal truth: either evolve or get left behind.
“It is essential to stay informed of the latest industry trendsregulatory frameworks, emerging technologies and high-potential opportunities. Adaptability is the key to success and longevity in fintech. Many founders can launch a fintech product, but being scalable and profitable is far from a guarantee.
“Scalability is critical to the success of a fintech company because it determines the platform’s ability to meet growing demand, expand into new markets, and innovate quickly. Founders should strive to establish a clear roadmap that will also resonate with investors.
“Additionally, the importance of fostering a strong company culture is often overlooked in the search for market fit. Early-stage fintechs tend to focus heavily on product development, sometimes neglecting the imperative to build a motivated, unified team around a clear, overarching vision.