Fintech demonstrates robustness, standing out as the leading tech sector in Europe, according to Finch Capital's report.
In a recently published report, Finch Capital has provided a comprehensive overview of the European fintech landscape in the first half of 2025. The report highlights key trends, funding flows, and deal activity across various European markets.
The UK, particularly London, continues to dominate the fintech sector, accounting for 79% of the country's total funding and netting 56% of the region's total. Homegrown fintech stars like Monzo and Revolut have contributed significantly to London's success. Despite a decline in total fintech funding compared to other regions, the UK's drop is the least severe.
The UK maintains greater scale and diversity than its European counterparts, with the top two deals constituting less than 50% of total funding. The Netherlands held 4% of the European fintech funding value in H1 2025, making it a significant player in the region.
France, however, emerges as Europe's strongest challenger market to London, attracting only half the investment of Germany. Germany saw major fintech deals in the first half of 2025, with Scalable Capital raising 155 million euros and being valued at 1.5 billion euros, focusing on banking and credit services. Competitors like Trade Republic expanded bank licenses and payment solutions, while logistics tech startups such as MUVN received significant investments.
Artificial Intelligence (AI) is a prominent feature in the European fintech landscape, particularly in software focused on modification and cost-saving, especially in Wealth Management and Underwriting. Forty-eight percent of wealth managers are already investing in AI, with client experience and enhancements, task automation, and cost reduction being the top three incentives.
The report predicts that the number of lenders piloting or scaling AI for loans will almost double in the space of two years from 2024 to 2026. AI-based start-ups and scale-ups account for 21% of deal volume in European fintech, but only 7% of deal value in H1 2025. Underwriting is where the greatest revenue gains and cost reductions across functions are to be had for insurance firms embracing AI, increasing the value in underwriting to 36%.
The use of AI could replace manual loan underwriting completely for those that use it, shortening the average cycle from 12 days in 2024 to 2.5 days by 2026. The report offers a detailed snapshot of funding flows, deal activity, and emerging trends in the first half of 2025.
However, question marks remain over the US, with a sustained, buoyant fintech ecosystem, but an IPO backlog of 47%. Despite US investment in European fintech now accounting for 28% of all transactions, which is above the median figure for US investment since 2018, the report suggests that the US market may be facing challenges.
The European exit market for fintech is robust, with a pipeline almost half full of fintech deals. The decline in the growth of engineer teams in R&D at top fintech firms, falling from a 20% increase in net new hires in 2022 to an expected 2% by the end of 2025, is a notable trend highlighted in the report.
In conclusion, the Finch Capital State of European Fintech Report provides valuable insights into the current state and future trends of the European fintech sector. The report underscores London's leading position, the growing influence of AI, and the robust European exit market for fintech.
