The popularity of consumer startups prospered zero interest rates during the era between 2008 and 2021 during which many central banks around the world maintained their interest rates close to zero to stimulate growth economic after the 2008 financial crisis. During this period, investors’ capital was more abundant because they were less expensive to access funds.
The “consumer startups” provide products or services sold to individual consumers. These companies generally rely on a strong brand image and marketing to attract and retain large user bases. The founders and investors adopted a mentality of “growth at all costs”, in which income and monetization were often secondary, while the expansion and the scale were priority. Most consumer startups have devoted their cash flows to the acquisition of customers, in particular by spending costly sums in paid advertising on social networks, hyper-targeted on good consumers and generally associated with aggressive incentives registration. However, the macroeconomic environment has changed in recent years, leading to a decline in the growth and financing of consumer startups.
In Europe, the mainstream Fintech startups have become among the most transformative consumer companies. These companies have revolutionized access to financial services and reinvented the way in which consumers interact with money, thereby improving financial access and inclusion. In this article, we will explore the boom in consumer finishes in Europe, will examine the challenges they have faced in recent years and highlight the potential opportunities available for the founders and fintech startups in Europe.
The rise of European public fintech
In Europe, some of the most remarkable consumer startup successes are those of fintechs. The first generation of Startups Fintech consumer public has democratized access to financial services, gaining popularity from the beginning of the 2010s until the early 2020s. Consumers did not particularly trust the historic financial services offered by banks . A 2018 survey (a decade after the 2008 global financial crisis and roughly when the neobanks were launched and increasingly widely adopted) revealed that 66 % of British adults do not trust banks work in the best interest of society. The experiences of banks users were awkward and with mediocre customer service. Neobanques like Monzo, N26 and Revolut were a breath of fresh air for consumers by changing the way they get involved and manage their daily banking operations. These digital focused banks have challenged traditional financial institutions; Offering user -friendly applications, minimal costs and a renewed approach to personal finances.
Beyond neobancs, other consumer fintechs have also opened access to services formerly reserved for financial services professionals. Free trade has made equity investment accessible to private investors. A simplified and judicious exchange system, allowing consumers to transfer money worldwide at low costs. The fintechs have taken advantage of an open regulation of financial services to create convincing products. In the United Kingdom, it was a favorable regulatory environment that encouraged the experimentation of financial innovation. The Financial Conduct Authority (FCA), the UK’s financial services regulatory body is known worldwide for launching a regulatory sandbox which has enabled companies to test new products and services without incurring regulatory costs. The FCA launched this concept in 2016; Since then, the concept has been adopted worldwide in 60 jurisdictions.
The opposite winds faced by consumer financial technologies
User acquisition challenges
After around 2021, while interest rates increased and economic prosperity collapsed, investors have changed their minds around “growth at all costs” and focused on monetization and profitability. At the same time, the use of the acquisition of paid customers has become more difficult. Not only has the cost of paid social advertisements increased considerably, but the technological changes made to Apple iOS 14 have made consumer targeting and monitoring more difficult. As the acquisition of customers became more complicated, it triggered a cooling of consumer startups. Many have declared the fall of the general public startups. Andrew Chen, general partner at A16z who previously directed growth at Uber and author of “The Cold Start Problem”, voiced “The end of appropriate horizontal consumer applications at rapid growth” and has cited “a lack of innovation and a high cost of acquisition of users”.
Evolution of the appetite of investors
The consumer fintechs face greater challenges in the European context. As a general rule, European investors who invest in the Fintech favor B2B proposals because they are considered to be “safer” bets. Nevertheless, 20 % of the share of fintech investments in the world goes to B2C companies according to Market room. While investors focus on the assessment of startups according to their monetization strategies, one of the biggest challenges that consumer startups are confronted is the acquisition of users and monetization; In particular to convert users into paid customers. Offering services for free often means that the consumer is THE Product in which companies sell user data or sell advertisements.
Monetization problems
Fintechs are relatively expensive companies to operate because they cause significant general costs because they are subject to complex technological challenges, risk management and regulatory compliance.
- As with any consumer startup, marketing and brand image must be well executed to gain user confidence. In the context of Fintech, the task is arduous when the reputation issues are high and consumer confidence is fragile, especially when fintech try to convince consumers to trust them for their finances.
- Invoking directly consumers is just as difficult: consumers are looking for fintech applications to help them save money rather than spending money. It is therefore much more difficult to sell fintechs by subscription or by paying model to consumers. An alternative route has emerged in the form of B2B2C proposals, in which financial technology companies sell their services to employers who, in turn, provide them with employees as part of a wellness program.
For example, Bippit offers its employees professional financial coaching services as a social-their service is used by Boeing, Sony and the NHS in the United Kingdom. Swile digitizes the awards and benefits of employees and allows employees to claim good and rewards via a card issued by Swile.
A new dawn for the Fintech consumer public?
In the coming years, or even before, we plan that many of the first successes in terms of the consumer Fintech are planning to disappear as the first generation of Fintech Startups consumer public approaches the end of its life cycle. Klarna recently announced her stock market deposit; While rumors according to which other unicorns Fintech consumer public, notably Revolut, Monzo, Starling Bank and Zilch, are considering an IPO soon. Despite the global macroeconomic pressures, starting investments in financial technologies have been relatively robust. In 2024, Fintech agreements at an early stage Dominated worldwide, the start and serials ATS representing 81 % of all transactions. This testifies to the continuous interest of investors for the potential of fintech, giving birth to the new generation of fintech startups.
We certainly do not expect to see a lot of innovation continue with the Challenger banking services, so do not expect more neobanques to appear. But we see other areas where there are opportunities and an appetite for new fintech offers.
What is looming on the horizon for the Fintech for the general public?
Despite the challenges linked to the current economic climate, there is still an opportunity to seize for the new Fintech Startups for the general public. The next generation of consumer startups creates products for specific niches. Including consumers access to financial products in neglected circumstances. For example, Gaia offers funding and insurance to lighten the financial burden of families passing through IVF. Startups focusing on specific demographic segments, in particular Over there Target young professionals living in cosmopolitan urban areas such as London with a lifestyle credit card offering reward points that can be exchanged for experiences with lifestyle companies in the hotel industry, D2C brands (direct-to-consumer) and travel.
The consumer startups are also successful by focusing on the conquest of the Genz, which is a segment with distinct values and preferences and which resonates with a relevant and fun cultural brand image. Fintech startups that have managed to target the Genz include those based in London, CleoA financial assistant fed by AI. Cleo’s brand image is daring and irreverent. If you visit their website, you will meet bright and energetic colors, a Pizza-Emoji mouse cursor and many memes and culturally relevant references. This tone of voice and this brand image also appears in their product which offers features such as a “roast mode” that grills users and provides information on their most frivolous expenses, and a “hype” mode offering The type of opposite recognition where they congratulate users for their more judicious expenses. Based in Tallinn, Cinois another fintech focused on the genz; Help consumers automatically distribute payments with a virtual card issued for trained groups.
In response to the growing cost of acquisition of users, these startups succeed thanks to more profitable acquisition strategies, rather than relying on traditional paid advertisements. Many companies now focus on creating content and aim to become viral on social networks. Cino claims that one of the key factors in its growth is its multi -like growth approach, which depends strongly on social media. They hired an internal social media expert to create content to share their history and story with a minimum budget. Cino discovered that his audience Genz was in resonance with the concept that money was a taboo subject.