Fintech – On the brink of further disruption

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Fintech – On the brink of further disruption

Trends, opportunities and future outlook

Despite the COVID-19 pandemic, we appear to have entered a new phase in the evolution of the financial technology sector. What changes and opportunities have Fintechs brought to the financial services industry? What global investment activity can we identify? What does the European Fintech ecosystem look like, and what are M&A and valuation related challenges?

A new phase in the Fintech evolution

Since the last global financial crisis, investments in Fintech have been growing. Currently, the COVID-19 pandemic has initiated another recession. Despite the COVID-19 pandemic, we appear to have entered a new phase in the evolution of the financial technology sector. Although COVID-19 causes uncertainty in the Fintech market, it creates opportunities as well. The adaptability and innovation of Fintechs will help the businesses to realize their growth path.

Fintech – On the brink of further disruption

Fintech disruption

Fintechs have changed how financial services are structured, delivered and consumed. They have been very successful in defining the direction, shape and path of innovation across almost every subsector of financial services, both as stand-alone businesses and as crucial parts of financial value chains. Also, they have reshaped customer expectations and have raised the bar for user experience. However, they did not meet all expectations. Customer willingness to switch away from incumbents has been overestimated. Also, Fintechs have struggled to create new infrastructure and establish new financial services ecosystems, such as alternative capital markets. Still, they have laid the foundation for further future disruption. Deloitte has identified five opportunities for Fintechs, from continued acceleration of partnerships to harnessing the Internet of Things (IoT). These are discussed in our latest report.

Investment activity

Investments increased in 2018 and 2019, fueled by market confidence in Fintechs. However, in 2020 the market anticipates the impact of COVID-19, which might have triggered a (temporary) decrease in deal numbers, especially in the EMEA region.

European ecosystem

To have a better understanding of the current state of the European Fintech market, we have visualized the Fintech ecosystem with the help of Deepview. The results of this visualization are included in our publication. The deepdive allows us to trace investment activity and the most important clusters. The largest European Fintech deals are generally in markets related to payments technology and banking platforms. The deal activity of incumbents is also included. We conclude with an overview of specific M&A and valuation related challenges in executing Fintech deals.

Have a read on our Fintech report and reach out to any of our professionals in case of questions.

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