This year, the European fintech industry is showing resilience, capturing a growing share of venture capital (VC) funding and recording year-on-year (YoY) increases.

In H1 2025, the sector secured a total of EUR 3.6 billion, marking 23% YoY increase from EUR 2.9 billion in H1 2024, according to a new mid-year report by Finch Capital, a UK-based growth investor. Several trends are reshaping the sector, including artificial intelligence (AI) and stablecoins, the report says.

Fintech shows resilience

In H1 2025, fintech accounted for 23% of all VC and growth funding in Europe, marking a 5-point increase from 18% in H1 2024. This increase confirms the resilience of fintech, the industry’s position as the leading asset class for tech investors, and its role as the backbone of Europe’s tech ecosystem.

After a trough in 2024, US investor activity in European fintech is rebounding this year, accounting for 28% of all transactions in H1 2025. Sequoia, a leading VC firm from the US that has backed iconic businesses like Apple, Google, and Airbnb, was the most active VC firm in the sector, with fintech representing 35% of its deal volume, neck-and-neck with UK-based Balderton. They were followed by Atomico, from the UK, and Speedinvest, from Austria, with fintech making up about 26-28% of their investments.

This year, Europe has yet to see a recovery in deals above EUR 500 million. However, mid-market M&A remains active and presents the biggest potential for fintech startups and scale-ups.

This dynamic has created a significant initial public offering (IPO) backlog. Currently, 22 European fintech companies are valued above US$2 billion, including Revolut, Checkout.com, Klarna, Rapyd, and Trade Republic. Together, they hold a combined valuation of US$150 billion. Fintech companies make up about half of Europe’s IPO backlog, compared to US$170 billion for 42 non-fintech firms.

AI in financial services

Another key trend outlined by Finch Capital is soaring adoption of AI in financial services, particularly in credit scoring, underwriting, and wealth management.

According to the report, about 55% of lenders are piloting or scaling AI this year, with adoption projected to rise to nearly 70% by 2026. These players are turning to AI to improve the loan underwriting cycle. Currently, manual loan reviews take an average of 12 days. AI-assisted processes cut that cycle to 6 days, while full AI automation reduces this to just 2.5 days.

Wealth managers, meanwhile, are embracing generative AI (genAI) to enhance customer experience and improve operational efficiencies. According to the 2025 EY-Parthenon Wealth and Asset Managers Generative AI Survey, 95% of the 100 wealth and asset managers surveyed are deploying at least three genAI use cases, while 77% of firms have either mandated existing teams to focus on genAI initiatives or have mobilized a team to solely focus on these initiatives. Respondents identified marketing, compliance and risk, and client onboarding as the top areas for genAI deployment.

Despite the momentum, AI fintech remains a nascent sector. Though these companies accounted for 21% of fintech deal volume in H1 2025, they represented just 7% of deal value in H1 2025, reflecting early-stage dynamics.

Payments at a crossroads

Another key trend highlighted by Finch Capital is the profound changes taking place in the payment landscape, driven by the rise of stablecoins, and agentic AI.

Favorable regulations such as the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act), combined with institutional backing from banks and payment firms, are fueling adoption of stablecoins. Stablecoins reached a total supply of US$250 billion in H1 2025, representing 10% of US currency in circulation.

Adoption of stablecoins is particularly high in high-inflation economies such as Argentina and Venezuela, where inflation reached 117.8% and 48% in 2024, respectively. In these markets, US-backed stablecoins are being used to preserve savings, facilitate cross-border payments, and avoid government restrictions on buying US dollars.

Agentic AI is also reshaping payments, with firms like Visa, Mastercard, and PayPal racing to build the agentic payment stack. Within the payment landscape, AI-driven agents are expected to take on tasks such as budgeting, bill payments, and dispute resolution.

According to a 2025 BCG consumer survey, 81% of consumers are set to shop using agentic AI. In the coming years, more than US$1 trillion in spending, representing about 50% of total e-commerce expenditure today, could be agent assisted, with early adoption focused on routine purchases such as groceries, restaurant orders, and personal care products.

UK maintains leadership

This year, the UK continues to dominant the European fintech landscape, netting 56% of total fintech funding in H1 2025 or just about EUR 2 billion. London alone accounted for 79% of this activity.

Payments and wealth management were the leading verticals, with major rounds including Rapyd’s EUR 474 million raise, Dojo’s EUR 168 million growth round, and FNZ’s EUR 460 million round.

Rapyd and Dojo are payment service providers, while FNZ is an end-to-end wealth management platform for financial institutions and wealth management firms.

Germany followed, posting strong performance and attracting increasing foreign investment. The country secured about EUR 500 million in fintech funding, with deals mostly concentrated in wealth management, banking, and digital currency.

Notable transactions included Scalable Capital’s EUR 155 million raise, Solaris’ EUR 140 million venture round, and Nelly’s EUR 50 million Series B.

Scalable Capital is a digital investment platform, Solaris is an embedded finance specialist, and Nelly is a finance platform for the healthcare sector.

Featured image: Edited by Fintech News Switzerland, based on image by smmedia.io via Freepik