While overall funding in the European fintech sector declined by 25% year-on-year, UK companies dominate the scene, accounting for 65% of all deals in the region.

The annual State of European Fintech report by Finch Capital revealed that 65% of the European fintech funding registered in the first half of 2024 landed in the UK.

The sector is facing a few ongoing challenges, including higher interest rates, a focus on cost efficiency and increased scrutiny of business model sustainability. These factors, among others, have led to a 25% year-on-year decline in fintech funding in Europe. Overall, the region’s fintech sector raised €2.9Bn across 443 fundraising deals in H1.

Meanwhile, UK fintech funding increased 3% YoY, from ￡1.9 billion in H1 2023 to ￡2.2 billion this year. The largest deal registered in Europe in H1 also occurred in the UK. It was Monzo neobank which raised about ￡500 million in equity to accelerate its international expansion plans. The total $610 million round marks the single-biggest funding round for a European fintech within a year. Monzo raised $430 million in March and another $190 million in May 2024.

One of the prerequisites for large funding rounds like Monzo had this year is higher interest rates that brought record profits for challenger banks, states the report. Hence, banking occurred as the most mature sub-sector with the largest deal values.

At the same time, crypto companies saw the highest number of deals in the first half of the year. This sub-sector is attracting a lot of attention and offering a variety of investment opportunities at the early stage. It ranks second in terms of the deal value.

The report also showed that funding rounds for FinTech unicorns have slowed. Instead, there’s an increasing activity in the mid-market M&A space across Europe.

The fintech sectors of the Netherlands and Nordics showed resilience, with investment volumes remaining at a steady level. At the same time, Ireland, Germany, and France all saw major government-backed initiatives aimed at fostering fintech growth through 2025, so their funding levels are also showing sustained stability which is poised to strengthen further as the government-backed ecosystem matures.