UK Centre Stage of European Fintech Comeback as AI Ushers in New Era

Today, Finch Capital released the tenth edition of its State of European Fintech Report. Please find key findings and analysis from the Finch team below, and the full report at the link here. 

UK market matures, and dominates venture funding

Greater concentration of funding is prevalent across European regions amid an overall drop in total funding. This lack of diversification, however, highlights the UK’s dominance, netting 56% of total funding, 79% of which is concentrated in London.

Moreover, at a national level, the UK maintains greater scale and diversity than its European counterparts, being the only region whose top two deals constitute less than 50% (45% compared to 56% and 84%) of total funding. This is despite its top two deals as a percentage of total funding having increased the most (2.8x compared to the second most, 1.4x). The UK’s drop in total fintech funding is also the least in the region (47% compared to the second least, 64%).

London’s standout success can be attributed to homegrown fintech stars such as Monzo and Revolut, and its rich payments ecosystem.

Germany, France and other markets are driven largely by one or two significantly sized deals in AI-driven compliance, wealthtech, and capital markets data analytics. While Germany’s median deal value is up 189% YOY, its volume count is 27, lagging behind France’s 38. 

This makes France Europe’s strongest challenger market to London, says  the report, hallmarking its dynamism, depth and YOY growth in funding, albeit attracting only half the investment of Germany. And bigger deals loom on the horizon during the remainder of H2 2025. 

In the Netherlands, the top two 2025 deals to date represented 90% of its overall funding, with FINOM Payments SME services attracting €115m. A groundswell of opportunity, however, lies in Crypto and Stablecoin infrastructure, and regtech for digital assets, if regulatory clarity improves.

NL held 4% of the European fintech funding value in H1 2025, just pipping Ireland and Poland (both 3%) to fourth place.

The intensification of funding concentration can be seen as the mark of a maturing market. The top 20 deals as percentage of total funding value jumped significantly from 37% in H2 2023 to 73% in H1 2025, alongside an increase in funding value of 23% in H1 2025 and a drop in deal volume of 32% in the same timeframe. 

These figures speak to considered and confident investment decisions, funnelling capital into established entities, courting longevity and staking a hefty claim on the continued momentum of the market.

Aman Ghei, Partner, Finch Capital, says, “The fintech vertical is the most important sector in Europe. Having undergone its own transformation 2-3 years ago, the quality of companies and entrepreneurs that are burgeoning from the ecosystem sets itself apart from other verticals. They are the first to implement new technologies, enable AI infrastructure in their products and build profitable businesses at scale.” 

Volume Trumps Value as European fintech gives US run for its money and greater bang for its buck

European fintech companies constituted a quarter (25% median) of all VC/Growth deals done by the top global technology investors in Europe in the six months to H1 2025, and looks to be re-setting its status as prime asset class for the longer term, given the steady rise from 18% of total deal value in 2024 to 23% in H1 2025.

This indicates that, after a few challenging years amid macroeconomic turbulence and political upheaval, the European fintech market has made a stealthy recovery in a subtle display of resilience and fortitude.

While the overall number of deals is down 32% YOY from H1 2024, overall capital invested in fintech is up 23% to €3.6bn within the same period. 

Within this, the hotbed of activity lies in the €100-500m M&A transaction range. The total volume of these is 5.3x that of the €500+ range and constitutes the greatest differential to date, indicating great investor appeal and significant potential for fintech founders.

Amplifying this, US investment in European fintech now accounts for 28% of all transactions involving at least one US investor, the consistency and stability in European trading being a key draw after the volatility brought about by President Trump’s election and subsequent decisions. This figure runs above the median figure for US investment since 2018.

Furthermore, Europe’s exit market is quietly robust with a pipeline almost half full of fintech. Question marks remain over the US still attracting major future listings but an IPO backlog of 47% is a clear reflection of a sustained, buoyant fintech ecosystem.

Engineering teams shrink

The volume over value trend plays out in AI-specific investment as well. AI-based start-ups and scale-ups account for 21% of deal volume in European fintech (up from 16% in 2024) but only 7% of deal value in H1 2025. 

However, a closer look at R&D teams in the report reveals a stark stemming of growth in engineer teams since 2022 when there was a 20% increase in net new hires in R&D at top fintech firms. This fell to 14% in 2023, 9% in 2024 and it is expected to be a mere 2% by the end of 2025.

Firms are optimising activities, focusing on computer engineering- fine-tuning existing models, maintaining and integrating, rather than building.

Aman Ghei, Partner, Finch Capital, says, “Firms don’t have resources to develop their own models, per se, hence they need to use what’s out there, putting their own wrapper on it. That is what’s happening in the market today and what probably will happen for the next year or two.

“Replacing front-end engineers, the biggest job posting out there is prompt engineer– someone who interacts with language models get the best output possible from an engineering perspective. Now, you don’t have to worry about needing as many engineers to grow your business.”

AI: Fintech’s fortified new brain

The ‘slow burn’ theme of maturity and building is echoed further in what the report reveals about the application of AI in fintech, which is strongly centred around modification and cost-saving, as seen in Wealth Management and Underwriting. 

For example, genAI in wealth management is improving margins rather than generating return. At this stage. Forty-eight per cent of wealth managers are already investing in AI, with client experience and enhancements (69%), task automation (62%) and cost reduction (56%) the top three incentives.

Underwriting is where the greatest revenue gains and cost reductions across functions are to be had for insurance firms embracing AI. Using AI increases the value in underwriting to 36%, from a mere 10%. Interesting to note, at this time, there is zero value (0%) to be gained from AI implementation in insurance Procurement, Legal or product management.

Adding significance to the value of AI in underwriting, the report projects that in the space of two years from 2024 to 2026, the number of lenders piloting or scaling AI for loans will have almost doubled, from just over 35% to just under 70%. 

Even more stark, in the same timeframe, the report predicts the use of AI could replace manual loan underwriting completely for those that use it, shortening the average cycle from 12 days in 2024 (entirely manual) to 2.5 days (entirely AI).