Crisis, what crisis? Fintech saw another record year in 2021, fuelled by the COVID-19 accelerator.
And with a record €26 billion of Fintech investments in Europe overall, Germany maintained its strong position as one of the prime locations for Fintech investments in Europe. With six months into 2022, Fintech money flows into Germany are continuing at an exceptional level, despite the current “hiccups” around crypto and trading.
Clearly, COVID-19 was a major catalyst, which led to a breakthrough in the digitalisation of peoples’ lives. Private life, work-life and – quite naturally – peoples’ financial lives. This effect was compounded by the integration of “Embedded Finance”, blurring the line between life and finance.
Contactless payments rose from 30% to 49% between 2019 and 2021 in Germany.
This is especially notable as German retail customers have traditionally held a very high preference towards cash as a payment method. As such, German consumers, traditionally hesitant in adopting non-cash payments as well as stock ownership, have taken their largest step to date by choosing to adopt both concepts at the behest of German Fintechs, whose growth subsequently flourished during COVID-19.
So most importantly, this development constitutes a profound behavioural shift, which is here to stay – permanently, sustainably. Given that, we don’t see the “Fintech bubble” bursting anytime soon. What we will see instead, is more PE buyers and some consolidation. This - in essence - is a good sign for a more grown-up market in German Fintech, with true relevance and impact.
With this paper we aim to show the underlying drivers of recent Fintech market dynamics in Germany as well as to derive an outlook for future investment and M&A activity for the second half of 2022 as well as in 2023.
We place special emphasis on the regulatory framework –along with BaFin’s concrete regulatory oversight practice –and show the resulting effects on specific business models and market segments, as well as on the overall competitive environment of the German Fintech industry