European fintech faces an 'existential crisis' as funding has dropped 'from surplus to scarcity,' McKinsey report says
Economies in Europe are expected to contract by 11% in 2020, before returning to pre-virus levels only in 2023. This reality brings forth a larger focus on business-model vulnerabilities and a shift in dynamics, thereby negatively influencing fintech funding, McKinsey said.
The scale of funding has dropped substantially during the COVID-19 crisis after the sector grew by over 25% every year since 2014. In the first half of 2020, investment into the sector fell by 11% globally, and by 30% in Europe compared to a year-ago, McKinsey found. The glaring drop poses a serious challenge for fintechs that are not yet profitable, and have consistent capital needs as they continue to work on the ideation cycle of product discovery.
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