Fintech IPOs in Europe and What it Means for Banks

One of the most stunning financial revolutions across Europe is the way fintech companies are gaining ground. Considered conservative as compared to the United States, Europe has not only caught up but is experiencing some big bang IPOs in the fintech industry. This not only brings the fintech ecosystem into the mainstream but empowers them to expand across Europe.

Peaking into the past & looking at the current scenario:

The Fintech sector is attracting large amounts of investments since the year 2014. Europe’s Fintech firms have raised $3.13 Billion in the first five months of 2018.

Source: Medici

Brexit is also leading to an evolution and growth of the Fintech space in Europe. More companies are being launched in continental Europe as compared to the original fintech hub – London. Investors have also caught onto the trend and are voting with their wallets. This also has had an impact on the valuations of the startups in the space. A major tailwind is that investors in the Fintech space are not really considering the current results but are analyzing the growth of the market in the long term. Even if we leave aside investments, half of the top 100 global banks formed over 130 partnerships with FinTech companies, and 37% were actively involved in the 60 acquisitions.

Major IPOs

Adyen’s mega IPO is obviously in the news for all the right reasons. It raised almost $1 billion in IPO for a valuation of an estimated $8 billion. But the icing on the cake was the remarkable 70% surge in the opening days and is now almost as valuable as Deutsche Bank, the venerable German Bank. Other players like iZettle, the Swedish fintech startup, were also on the line to raise money at a Billion dollar valuation but got snapped by Paypal before the IPO at a staggering $2.2 billion valuation. The most anticipated IPO is bound to be of Funding Circle, the UK marketplace lending giant.  The company has picked Goldman Sachs and Morgan Stanley as advisors and is looking at an over 2 billion pound valuation. There was also TruFin which raised 70 million pounds in February.

Banks and Fintech – the integration

The growth in the Fintech space is quite evident by now. Banks can use this opportunity to leverage the growing industry to their advantage. An analysis by the European Business Review reveals that banks can gain a potential 3 to 5 percent in their revenue by collaborating with Fintechs. Another area that banks shall be benefitted in is the area of credit scoring. Fintechs have come up with AI powered algorithms to design a more comprehensive credit scoring model. Banks and their integration with Fintechs will therefore serve to be of mutual benefit for both.

The future

The Fintech space definitely seems to be a very successful and promising area for the future. The Adyen IPO suggests that the fintech industry has matured in Europe and institutional investors are getting on board with the growth plans of the companies. It will be exciting to see how they reshape the centuries old European financial services industry.