As Europe’s fintech sector strikes past the growth-at-all-costs period, a brand new part is rising – one constructed on worth, regulation and infrastructure, writes Julie Sutton, head of progress Europe at Paymentology.
European fintech is getting into a brand new part which is much less about quantity, extra about worth. Whereas funding has been quieter over the previous few years, funding in Europe is anticipated to develop by 19 per cent in 2025, with buyers prioritising bigger, later-stage offers. That’s encouraging momentum after the sharp droop in funding and deal movement, each in recent times and once more in Q1 2025.
The UK stays Europe’s fintech capital, accounting for almost half of all EMEA funding, regardless of hitting a four-year low in 2024, down 27 per cent to $9.9billion. Profitability is beginning to floor, however solely simply, in some circumstances. Of Europe’s 66 fintech unicorns, solely 13 are worthwhile, a reminder of the strain between fast scale and sustainable returns.
However the tide is popping. Revolut posted a pre-tax revenue of £1.1billion, in keeping with monetary outcomes from 2024. Bitpanda and SumUp have additionally reached profitability, signalling a shift in focus from top-line progress to long-term viability.
Shopper and SME adoption of fintech companies is rising quick, notably in areas like open banking and embedded funds. Within the UK, open banking funds hit 31 million in March alone, up 40 per cent year-on-year. For the primary time, shopper utilization has caught up with small enterprise adoption.
Collectively, these level to a extra mature chapter. That is fintech’s post-hype period, the place buyers not reward unchecked progress, regulators are stepping in with tighter frameworks, and the long run is being rebuilt atop belief, infrastructure, and self-discipline.
So, what does this subsequent wave of fintech seem like?
The defining themes of 2025 supply a transparent path. Embedded finance is turning into the default throughout industries, turning non-financial platforms into monetary suppliers. Stablecoins and tokenised deposits are getting into the regulated core of the banking system. Purchase-now-pay-later is being redefined by compliance. And Open Banking, as soon as a rallying cry, is lastly transferring in direction of its Open Finance future.
Embedded finance Is now the norm
The fastest-growing monetary manufacturers in 2025 usually aren’t banks. They’re marketplaces, ride-hailing platforms, or software program companies embedding funds and lending into their ecosystems.
Throughout the area, organisations have gotten monetary suppliers in their very own proper. Throughout the board, it’s beginning to beg the query: why isn’t your model a funds firm but?
Earlier this 12 months, Xero introduced it’s buying Melio, embedding invoice funds straight into SME accounting flows. It’s now ubiquitous for retailers to supply BNPL at checkout throughout a number of European markets. And in mobility, platforms like Bolt are enabling real-time earnings disbursement by way of in-app wallets throughout Europe.
It’s a structural shift. By 2030, the embedded finance market might surpass €100billion and account for 10 to fifteen per cent of banking income swimming pools.
Stablecoins go quietly mainstream
Lengthy thought-about a crypto aspect story, stablecoins are quick turning into a foundational a part of the funds ecosystem. The entire worth of issued stablecoins has doubled to $250billion as we speak from $120billion 18 months in the past, and it’s forecast to succeed in greater than $400billion by year-end and $2trillion by 2028.
In June, Fiserv launched a stablecoin aimed at institutional purchasers. A number of European banks are actively piloting tokenised deposits to scale back settlement instances and prices. The dialog is shifting from crypto volatility to regulated utility.
Crucially, the regulatory scaffolding is falling into place. Below the EU’s MiCA framework, fiat-backed stablecoins should be absolutely reserved, licensed, and controlled as e-money tokens. Within the UK, the Monetary Providers and Markets Act 2023 gives the authorized basis for regulating sure fiat-backed stablecoins as a way of fee, with full implementation anticipated to observe detailed secondary laws now in draft.
For card issuers and networks, the implications are important. Stablecoins have the potential to bypass conventional interchange fashions, providing sooner, lower-cost settlement, particularly in cross-border use circumstances. The subsequent wave of card innovation isn’t essentially about plastic or digital format, however concerning the underlying forex and the way it strikes.
Tokenisation strikes from backend to entrance web page
Earlier this 12 months, Mastercard introduced its plan to part out handbook card entry in e-commerce by 2030, changing it with a mix of tokenisation, Click on to Pay, and biometric passkeys. Already, greater than 25 per cent of Mastercard’s international e-commerce transactions are processed utilizing tokens, a determine that’s anticipated to speed up as retailers, banks, and wallets embed token-first options.
In accordance with Mastercard, tokenised transactions cut back fraud by as much as 80 per cent and decrease false declines by as a lot as 9 per cent.
In Europe, tokenisation can also be gaining traction on the issuer degree. Banks and processors are investing in infrastructure to provision and handle tokens throughout channels, from playing cards to digital wallets to wearable units. The implications are far-reaching: a token-first mannequin might allow much more granular management over funds, cut back the worth of stolen card information, and finally pave the best way for safer types of embedded finance.
BNPL continues to develop up
Purchase now, pay later adoption stays excessive throughout Europe, with nations like Germany, Sweden, and the UK main the cost, pushed by heavyweight gamers similar to Klarna and PayPal. As of Might 2025, Klarna counts 11 million lively clients within the area and has doubled its service provider base to 60,000 in only one 12 months, launching with main manufacturers like Argos, eBay, Eurostar and John Lewis.
However the regulatory image is tightening. The UK is finalising guidelines set to take impact in 2026 that may carry BNPL below Monetary Conduct Authority supervision, introducing necessary credit score checks, clearer disclosures, and stronger shopper protections. France and Germany are transferring in an identical path, with laws below manner to make sure accountable lending practices.
The European BNPL market is projected to develop by 12.4 per cent yearly, reaching $191.3billion in transaction quantity by the tip of 2025. However whereas the market remains to be increasing, the tempo is slowing, and maturing, below extra rigorous oversight.
Issuers are more and more providing instalment options straight on debit and bank cards. At Cash 20/20 Europe this 12 months, Klarna and Visa launched a pilot of a brand new debit card with elevated flexibility – permitting shoppers to pay instantly or pay later when wanted – on-line or in-store.
As regulation reshapes the enjoying subject, consolidation is anticipated. Bigger, well-capitalised gamers are adapting rapidly; smaller suppliers could have to pivot, associate, or exit altogether.
Open banking hasn’t peaked, however open finance is rising
Adoption is rising steadily. As of early 2025, one in 5 UK shoppers and small companies use open banking companies. However throughout the EU, uptake stays patchy. The subsequent wave of regulation is aiming to alter that. The EU’s PSD3 and Monetary Information Entry Regulation (FIDA), together with the UK’s upcoming Good Information regime, are laying the groundwork for open finance, increasing entry past present accounts to incorporate credit score, pensions, financial savings, and insurance coverage.
The shift is evident. Success will hinge not simply on sharing information, however on delivering seamless, safe, and consent-driven consumer experiences.
What to be careful for
With fundamentals now firmly in focus, the second half of the 12 months shall be outlined by strategic execution, regulatory readability, and smarter progress. Key developments to look at embody:
- Financial institution-led stablecoin pilots: Count on extra conventional banks to roll out inside pilots because the EU and UK finalise regulatory frameworks.
- Consolidation throughout BNPL and BaaS: Smaller gamers could exit or merge, whereas incumbents eye acquisition to strengthen embedded finance capabilities.
- Surge in tokenisation infrastructure: Token-first ecosystems are accelerating. Mastercard’s plan to part out handbook card entry by 2030 has set the tone, issuers at the moment are racing to tokenise playing cards throughout cell wallets, wearables, and browser checkouts to spice up safety and minimize fraud.
- Good Information Progress: The UK’s transfer from open banking to open finance will choose up tempo, with authorities coverage and personal innovation converging.
Fintech in Europe is not about who can transfer the quickest. It’s about who can construct the deepest.
The sector is recalibrating round sustainable progress, smarter regulation, and infrastructure that may scale. The winners on this new period received’t be these shouting the loudest, however these fixing the toughest issues: safety, belief, entry, and integration.