In 2022, the Portuguese fintech ecosystem entered a new stage of development, marked by greater maturity of the sector, continued innovation through partnerships and a dynamic venture capital (VC) market, a new report by industry trade group Portugal Fintech, in collaboration with KPMG, Visa and law firm Morais Leitao, claims.

The Portugal Fintech Report 2022, released in October, shows a resilient fintech industry that has continued to grow, innovate and attract investors’ interest in 2022, despite falling tech stocks and concerns about an economic downturn.

This year, total funding to Portuguese fintech companies to date surpassed the EUR 1 billion mark, with blockchain and cryptocurrency, lending and credit, and regtech and cybersecurity attracting the most funding. These segments secured 76%, 12% and 6% of all capital raised by Portuguese fintech companies so far, respectively, according to the study.

Significant deals from fintech companies based in Portugal or with Portuguese founders were recorded in 2022. These include Uphold’s EUR 30.6 million round, Elucidate’s EUR 6.2 million seed funding and Habit’s EUR 5.2 million fundraising, the report notes. Uphold is a digital trading platform; Elucidate is a financial crime risk management platform; and Habit is an end-to-end insurance solution provider.

Industry partnerships are also increasing in number, the report says, with banks and insurance players moving beyond pitching competitions to now truly collaborating and testing new capabilities with fintech companies.

The report cites names like LOQR, hAPI, Visor.ai and Think Future as being among the fintech companies and tech providers that have recently inked collaborations with banks and incumbents.

LOQR is a digital onboarding platform for financial institutions that is partnered with Credibom and Banco Portugues de Gestao; hAPI is a provider of APIs that automatically collect data for onboarding use cases that works with the likes Banco Primus and Credom; Visor.ai is a conversational artificial intelligence (AI) platform that’s partnered with insurance firm Fidelidate; and Think Future is an insurtech company that counts among its partners MDS Group, a multinational insurance and reinsurance brokerage, risk consulting and benefits management company.

Fintech trends in 2022 and 2023

With the Portuguese fintech sector continuing to grow and evolve, industry participants and stakeholders were interviewed as part of the report to share the emerging trends they’ve observed in 2022 and those to look out for next year.

Eva Ruiz, head of fintech at Visa in Southern Europe, highlighted the rise of open finance, noting that the movement “will unleash the development of numerous new businesses and services” and bring about a plethora of innovative products and services that are more in-tune with customers’ preferences and needs.

She warned, however, that open finance will increase the complexity of the current open banking ecosystem, making it increasingly necessary to address the challenges to ensure data security and data privacy.

Joaquim Marques, commercial director at Weavr, stressed customers’ growing appetite for integrated experiences, noting that this has led to the rise of embedded finance. Moving into 2023, Marques expects embedded finance products to become ever more simple and intuitive, pushing with it greater adoption of such products. The range of products and services provided through embedded finance will also expand and extend to all financial services.

Dyma Budorin, co-founder and CEO of Hacken, and Andrii Matiukhin, CTO of Hacken, said that increased retail and institutional participation in the digital assets sector has turned the space into a lucrative target for hackers and criminals. At the same time, a lot of innovation is happening in decentralized finance (DeFi) and Web 3.0, two segments that are believed to hold huge potential to increase financial inclusiveness and offer superior customer experiences.

Against this backdrop, securing blockchain protocols will be critical for blockchain startups and projects and will define the winners and the losers, they said.

Carlos Eduardo Martins, a sustainable finance expert, said that environmental, social and governance (ESG) considerations and integration into business models and decisions have increased significantly over the past three years.

Moving forward, the release of the European Union taxonomy regulation will dramatically change the approach to sustainability by most organizations, he warned. The regulation is set to have a significant impact on businesses, change the investment landscape as we know it, and will likely give rise to a burgeoning green fintech ecosystem, he said.

Portuguese fintech industry

A look at the Portuguese fintech ecosystem shows that lending and credit is currently the largest fintech segment in the Portuguese fintech industry, counting 14 companies. Lending is followed by payments/money transfers with 11 companies, insurtech and blockchain/cryptocurrency, both with 10 companies each, and regtech and cybersecurity with eight companies.

Wealth management and environmental, social and governance (ESG), as well as real estate stand at the bottom of the list, counting seven and three companies, respectively.

In total, 69 fintech companies were recorded in the Portugal.