European Fintech Surges; US Falls Behind

2026-03-25 - 06:20

While the US has long dominated the global fintech sector, recent trends show that Europe is rapidly closing the gap. According to growth investor Finch Capital, London is now the world’s top fintech hub, surpassing San Francisco and New York City (NYC) in funding volume. Meanwhile, European fintech hubs are attracting increasing capital while US volumes are declining, signaling a shift in investors’ focus. A comparative analysis of venture capital (VC) and growth funding reveals a stark contrast between the two regions over the last five years. Between the period of 2018-2021 and 2022-2025, funding in the European fintech industry increased by 37%. In contrast, fintech funding in the US declined by 13% during the same timeframe. This showcases a shrinking venture gap between the two regions, with investors increasingly favoring European fintech startups over US-based ones. London emerges as the world’s top fintech hub In Europe, London is solidifying its position as a premier fintech hub. Between 2022 and 2025, the city attracted more than EUR 30 billion in fintech funding, surpassing San Francisco, which secured just over EUR 20 billion during the same period, and NYC, with about EUR 16 billion. Top US and European fintech hubs, Source: 2026 State of European Fintech, Finch Capital Overall, the UK remains the undisputed fintech powerhouse in Europe, with a market size 1.7 times larger than the next seven biggest European fintech markets combined, namely France, Germany, the Nordics, the Netherlands, Spain, Ireland, and Poland. In 2025, the UK continued to attract more funding, with fintech investment increasing 38% year-over-year (YoY). Conversely, Germany and France both declined by 42% and 24%, respectively, further cementing the UK’s fintech dominance. Fintech deal value (EUR million), Source: 2026 State of European Fintech, Finch Capital Europe excels in regtech, CFO office Looking at the fintech ecosystem in Europe, the analysis reveals that the region’s strength lies primarily in verticals that are regulatory-intense and infrastructure-heavy verticals. European fintech companies in the CFO office vertical recorded a funding-to-exit value ratio of 2.54-fold during the 2021-2025 period, a figure that’s significantly higher than the 1.32-fold ratio observed for US counterparts in the same category. The funding-to-exit value ratio compares the total capital invested in a company to its valuation at exit, indicating the multiple of return investors achieved on their investment. Similarly, regulatory and compliance companies in Europe posted a ratio of 2.42-fold, compared to 2.24-fold for US companies. At the same time, artificial intelligence (AI) is disproportionately targeting these specific categories. 25% of AI-led fintech companies founded in Europe between 2020 and 2025 targeted regulatory and compliance. 19% focused on the CFO office vertical. These findings reflect how AI formation in Europe is skewed toward segments with historically high operational headcount and compliance intensity. This suggests a strong focus on cost reduction and risk mitigation, driven by operational necessary and regulatory pressures. US dominates in risk and infrastructure The US, on the other hand, leads in risk-driven and balance-sheet-intensive segments. US startups in the insurance category reported a funding-to-exit value ratio of 1.38-fold in the 2021-2025 period, against 0.45-fold for their European counterparts. Similarly, US companies in the lending and mortgage vertical posted a 0.61-fold ratio, against 0.28-fold for European ones. Funding/exit value ratio 2021-2025, Source: 2026 State of European Fintech, Finch Capital The analysis also reveals that while Europe dominates the fintech experience and distribution layer through industry leaders like Revolut, N26, and Klarna, the US leads over the enablement platforms, and infrastructural layers, represented by players such as card issuing platform Marqeta, data transfer network Plaid, and payment processing company Stripe. Consequently, a large share of the value created by European fintech customer-facing companies flies back to the US through infrastructural rails. For example, 63% of European cloud compute runs on AWS, Microsoft Azure, and Google Cloud, and over 90% of card purchases volume in Europe is held by Visa and Mastercard. Who owns Europe’s fintech stack? Source: 2026 State of European Fintech, Finch Capital Investor dependence Despite Europe’s success in generating value in the fintech sector, the region remains dependent on US capital for late-stage growth. The analysis shows that all European fintech funding exceeding EUR 1 billion were led by US investors. Overall, US investors led 39% of all funding value secured in Europe’s fintech industry between 2021 and 2025, against 28% led by European investors, underscoring the critical role of US investors in fueling and shaping the European fintech landscape. But this reliance also highlights a significant funding gap. Though Europe has the players to fill the estimated EUR 9 billion funding gap, very few local institutions are actually participating. Currently, pension funds in Europe allocate less than 0.02% of their assets to VC funding, compared to 1.9% for US pension funds. Closing this gap could result in a EUR 37.3 billion upside for the European startup ecosystem. European fintech VC and growth funding 2021-2025 (EUR million), Source: 2026 State of European Fintech, Finch Capital At the end of 2025, there were a little over 33,600 fintech companies worldwide, according to Statista. Of these, 10,000 were headquartered in Europe, making the continent the world’s second-largest fintech ecosystem, trailing only North America with over 12,500 fintech companies. The two regions also host some of the world’s largest and most successful fintech firms, including Stripe from San Francisco, which now stands among the top five global merchant acquirers by total payment volume at US$1.4 trillion, and Revolut from the UK, one of the world’s largest digital banks with 65 million customers. Featured image: Edited by Fintech News Switzerland, based on image by artisancollective via Freepik