2022 has been a tough year for fintechs. With looming recessions, rising interest rates, and a decrease in valuations, it has certainly changed the tech startups’ landscape. But there are still positive points and exciting developments. Let’s recap some of the recent must-know events of the fintech industry.
Fintech foundings, M&A activity slow
It’s been a tough time for fintech, especially after the industry’s boom over the past several years. According to Finch Capital’s “State of European Fintech,” the emergence of new fintechs fell by 80% between 2021 to 2022, with venture investors slashing their investments in the sector by 50%.
Public fintech exits have dropped by 74%, with M&A activity slowing, too. One of the few remaining bright spots for the sector seems to be in M&A on smaller deals, particularly those below €200 million.
Leading neobank N26 rolled out cryptocurrency trading for its customers through a partnership with Bitpanda, an Austrian trading platform. Initially, trading via the N26 app will only be available to Austrian customers, though the company plans to release the new feature to other European countries over the next six months.
The app currently supports trading for 100 different cryptocurrencies, and the company expects to support nearly 100 additional digital currencies. Customers of N26 will be able to fund, trade, and cash out of cryptocurrencies directly through their N26 accounts and the N26 app.
Though N26 has plenty of runway thanks to several successful funding rounds, the Berlin-based bank is still netting significant losses due to high operating costs.
After meeting with regulators earlier in the year, Coinbase appointed Daniel Seifert as its regional managing director of Europe. Seifert, the former COO of Solarisbank, is expected to head up Coinbase’s expansion into the European market.
Coinbase, like other exchanges and the entire cryptocurrency market, is eagerly seeking ways to boost revenue as many investors remain on the sidelines. After its IPO in April of 2021, Coinbase’s stock suffered catastrophic losses, shedding nearly 75% of its value this year.
Employees at fintechs of all sizes are at risk, with mounting layoffs continuing to sweep through the sector.
Klarna and Stripe, two of the largest European fintech firms, are taking an absolute beating this year, with valuations down 85% and 64%, respectively. For the second time in 2022, Klarna announced layoffs, despite raising 800 million dollars in July. Meanwhile, Stripe, the Irish-American payments company, is hinting at cutting its headcount through performance-based layoffs.
While the European market hasn’t been immune to layoffs and cost-cutting, employees of European fintechs are experiencing fewer layoffs than their American counterparts. US unicorns Brex and MX both pared down their workforces, citing external challenges as the impetus for their October layoffs.
Overall, fintech seems to be in the throes of cooling and consolidation across the board. Venture investors are playing it safe and scaling back their capital commitments, and only a brave few are founding new fintechs. Though the news today appears bleak, hope for a better tomorrow may rest in the combination of VCs’ accumulating more dry powder and a decreasing number of startups to invest in.