Fintech 2023/2024

Fintech 2023/2024

Abstract

The German fintech sector, a significant pillar within Europe’s financial services landscape, stands at a transformative juncture. This paper examines the sector’s evolution in 2023 and 2024, analyzing investment trends, strategic partnerships, regulatory influences, and market structure shifts. This paper aims to provide insights into current challenges and key opportunities in 2025.

Introduction

The German fintech sector has been a driving force of innovation in financial services across Europe, transforming business and customer interactions with financial products across payments, lending, insurance, and wealth management. In recent years, this sector has flourished, fueled by rising digital adoption, strong venture capital interest, and a robust demand for efficient financial solutions. However, recent economic headwinds have tempered its growth trajectory.

In 2023, rising inflation, increased interest rates, and a cautious investor focus on profitability over expansion led to an unprecedented decline in German fintech investments, which dropped to around USD 1 billion—a decade low.1 This strategic shift reflects a broader trend of risk aversion among investors facing global uncertainties, leading many fintechs to shift from growth-focused models to strategies that prioritize sustainable profitability.

Throughout 2024, investors maintained the same strategy and a preference to B2B over B2C business models, accounting for 41% of all funding over the year.2 By the end of last year, German fintech investments remained at the same level as in 2023, indicating a stable market for young companies with profitable and robust businesses.3 As new technologies continue to enter the market, 2024 has also been marked by regulations with the Market in Crypto-Assets (MiCA) and the EU AI Act, among others, entering into force. These two regulations focus on investor security by establishing requirements for companies to act in the European market and ensuring transparency and accountability.4 

This paper examines the German fintech sector’s evolving dynamics in 2023 and 2024, focusing on investment patterns, regulatory influences, and market structure. It provides a comprehensive analysis of trends within various fintech segments and highlights the strategic role of partnerships, offering insights into the sector’s future outlook in 2025.

The German Fintech Market Amidst The 2023 Venture Capital Downturn

The global fintech market has faced significant challenges as the venture capital (VC) landscape contracted. According to Dealroom.co, fintechs raised a mere USD 7.1 billion globally in Q3 2023, marking less than half of the funding seen in the same period a year prior.5,6 While a slight recovery was noted in early 2024, funding dropped again to USD 5.1 billion in Q3 2024, highlighting persistent investor caution.5,6

In Germany, the fintech investment climate mirrored global trends, with total funding dropping to USD 1.1 billion across 86 deals in 20231, the lowest level since 2021. This steep decline reflects broader macroeconomic challenges, including rising interest rates, high inflation, and recalibrated investor priorities. Once a dominant player, the German ecosystem has slipped in global rankings, largely due to a lack of competitive funding power compared to other European countries like the UK and France.

Historically, Germany was Europe's second largest fintech market, encouraged by innovation hubs and a strong entrepreneurial ecosystem. However, from 2022 to 2023, European fintech investments plummeted by approximately 64% YoY—from EUR 22.3 billion to EUR 9 billion7. While the UK retained its leadership position with EUR 5.1 billion in investments, France took the second position, securing EUR 1.2 billion in funding compared to Germany’s EUR 1.1 billion, marking its relegation to third place.1 Despite these setbacks, in the first half of 2024, German fintech investments grew by 19% compared to the second half of 2023. This growth starkly contrasts with declines in France (-50%) and the UK (-37%) over the same period8 , which led Germany to regain its position at the end of last year.

Globally, fintech funding saw a shift in priorities over the past years. B2B Software-as-a-Service (SaaS) fintechs emerged as the dominant focus, while B2C fintech investments fell from over 50% of total funding in 2016 to around 20% in 2023.6 In Germany, this trend has spurred partnerships between traditional financial institutions and fintech companies. Key areas of innovation include Embedded Finance, API Integration, Banking-as-a-Service (BaaS) and SaaS Models.9 These developments underscore the country’s strategic pivot towards a collaborative and scalable B2B fintech ecosystem.

Source: Innovatefinance Fintech Investment Landscape 2023

Source: Fintech Global 2024

Despite the challenging climate, standout German fintechs demonstrated resilience. Flagship companies like IntegrityNext (USD 109 million) and Scalable Capital (USD 65 million) secured substantial funding, reflecting their mature business models and investors' confidence in their long-term potential. Smaller players also managed to attract capital, particularly in insurtech and payments—sub-sectors that continue to capture investor interest despite ongoing consolidation. Interestingly, climate fintech is emerging as a new key destination for investment. Players like Integrity Next, focused on driving decarbonization through innovative financial solutions, have begun to dominate funding rounds. This sub-sector reflects a growing investor appetite for solutions that align with global sustainability goals.

While 2023 represented a low point in funding activity, 2024 offered signs of a recovery. Whether this momentum can be sustained will depend on Germany’s ability to attract and retain investor confidence amid intensifying competition from other markets.

M&A Activity, Market Consolidation and Partnership

With funding pressures intensifying, M&A has become a critical strategy for fintechs aiming to strengthen market positions. During the past years, key acquisitions reflected efforts to scale and capture market share, especially in payments. The preference for M&A over funding in general is driven by:

  • Market Volatility: Economic uncertainty and fluctuating valuations make IPOs less attractive, whereas private M&A deals offer stability.
  • Access to Capital: Tightened venture capital funding has prompted fintechs to seek acquisitions as a strategic path to secure capital.
  • Regulatory Pressures: Acquisitions help fintechs streamline compliance by merging with well-capitalized firms.
  • Consolidation Trends: M&A provides established firms with new technologies and broader market access, avoiding the costs and risks of going public.

These conditions make M&A a preferred path for fintech growth and exit strategies post-2022. German fintechs have capitalized on growing involvement from traditional financial institutions, which pursue acquisitions and partnerships to accelerate digital transformation, diversify services, and integrate advanced technologies.

In this challenging investment climate, M&A has been further driven by the consolidation trend that extends beyond Germany, as European fintechs look for economies of scale in order to achieve profitability.

Global Fintech M&A Volume in $bn



The Current German Fintech Landscape and Structure

The years of 2023 and 2024 registered the lowest level of investment in German fintechs in a decade. This difficult scenario resulted in a change of direction for both investors and founders, that now are more focused on building companies with sustainable profitability. For fintechs per se it meant, sometimes partnering up with traditional companies instead of positioning themselves as competitors and specializing in a niche instead of capturing an entire value chain. In addition, the German regulatory environment, characterized as complex and risk-averse, still poses unique hurdles for fintechs based in the country.

In spite of the difficult scenario, a couple sub-sectors stood against the tide and attracted investors’ attention because of itstheir capability of fulfilling new market and regulatory requirements. The traditionally predominant payments sector faces increasing competition from banks and new fintechs yet remains firmly established with a strong presence. Lending fintechs have made progress, launching digital solutions to improve the availability of loans for individuals and SMEs. Once less prominent, insurtechs are now seeing an increasing demand for customized, digitally oriented insurance products. In parallel, ESG fintech is gaining traction, combining financial growth with sustainability and ethical standards. These areas underpin Germany’s strong position as a European fintech hub.


Climate FinTech

Climate fintech is simply spoken the junction of climate, finance, and digital technology, three of the greatest current priorities for governments and companies. Based on that, the sub-sector attracted USD 2.3 billion10 in funding in 2023, which, compared to the rest of the market, held up well throughout the year. The digital innovations offered by those companies, that include energy management, carbon accounting, ESG reporting and supply chain analytics, among others, serve as crucial financial intermediaries between stakeholders pursuing decarbonization. It comes right on time with the new European regulations on carbon emissions and disclosures, such as the Corporate Sustainability Reporting Directive (CSRD), which obligates companies to comply with the new rules in the coming years.

The new regulations, at both European and German level, create a high demand for environmental services that can help companies from all industries adapt to their requirements, leading Climate fintechs to attract more funding in Germany in 2023 (USD 710 million), than the next nine European markets combined, including the UK. In numbers German climate fintechs, such as Integrity Next (100mEUR), managed to secure almost 3.4 times more funding than UK companies in this sub-sector (210mUSD).11 This underlines a potential new growth area among German fintechs, attracting (also international) investor groups.

Global funding volume by sub-sector in 2023 (in mUSD)

Source: Climate FinTech Report 2024, Commerz Ventures

Payments

Digital payments have been increasing year over year in Germany, opening doors for new fintechs wanting to expand the payment modalities offered to customers. In 2023, the sector received the largest share of all fintech investments in Germany, despite a significant decline compared to 2022.12

Recent regulations at European and German levels have created both challenges and opportunities for fintechs. Young companies are increasingly partnering with traditional banks to leverage their expertise and create products that comply with the stricter rules and meet the growing demand. This shift is fostering diverse digital payment solutions, such as factoring-based options and flexible installment loans. However, interest rate reversals favour banks over non-bank fintechs, as refinancing remains more challenging and costly for the latter.

A great example of the situation described above is the Buy Now, Pay Later (BNPL) modality. Leading the trend in Europe, the German BNPL market generated revenues of USD 417.4 million13, accounting for one-third of it globally. Adding to the great results from 2023, there is an expectation that this kind of payment will reach 900 million users globally by 202714. The new regulations, though, emphasize stricter credit ratings to prevent consumers from falling into debt, giving the traditional banks an opportunity to jump into the market with their strengths and experience in credit assessments. Based on this scenario, partnerships such as Deutsche Bank and Credi2 are becoming common within the payment fintech sector. The fintechs come with the technology, while the banks provide them with their customer base and credit rating process.

Market share of payment methodes in online shopping (Germany, 2016.2023)

Source(s): GlobalData; IMF; McKinsey & Company; World Bank; Worldpay

Alternative lending

The German fintech lending market is undergoing a significant shift, marked by increased focus on SMEs and evolving consumer and business lending trends. According to the KfW SME Panel 2024, investment loans to SMEs in Germany decreased to EUR 72 billion in 2023 (over EUR 76 billion in 2022), with short-term and microloans (below EUR 1.000) constituting 79% of these loans. This trend reflects SMEs' cautious stance towards large-scale investments, influenced by economic uncertainties and rising interest rates. Nevertheless, loan offer rejections among SMEs increased to 25%, indicating greater access to alternative funding and a diminished willingness to accept unfavorable terms.15

Traditional banks maintain a stronghold in SME lending, benefiting from established relationships. However, fintechs have carved a valuable niche by providing unsecured loans, short-term financing, and factoring solutions that offer faster access to credit. The intensifying competition in the business lending space underscores the need for fintechs to continuously innovate to retain and attract SME clients.

The consumer lending segment initially saw rapid growth within German fintech, largely propelled by peer-to-peer (P2P) and marketplace lending platforms. However, economic uncertainty, market saturation, and increased default rates have dampened investor enthusiasm in this sector. Hence, several consumer-focused fintechs are either shifting towards B2B services or pursuing mergers to consolidate resources and enhance profitability. Despite these shifts, consumer lending remains the largest segment by alternative lending transaction volume, with projections indicating modest growth from USD 751.9 million in 2023 to USD 814.5 million by 2028. Meanwhile, business lending through crowdlending is expected to see a slower rise, from USD 137.1 million in 2024, a downturn from 2023 (USD 139.3 million), to USD 142.7 million by 202816, reflecting a more tempered growth trajectory.

The upwind of BaaS and embedded finance represents transformative trends within the German fintech sector. BaaS enables non-financial companies to integrate banking functionalities directly into their offerings, creating a seamless user experience.17 Similarly, embedded finance allows companies to offer payment and lending services within their platforms, generating new revenue streams and enhancing customer convenience.18 The adoption of these solutions is driven by the rising demand for integrated, contextualized financial services.

Overall, the German alternative lending landscape is shifting from consumer to business lending, particularly for SMEs. This transition reflects the growing demand for digital, tailored short-term credit solutions, in which fintechs are positioning themselves as leaders, capitalizing on opportunities in SME lending and green financing.


Insurtech

The past year represents a turning point for the German insurtech sector. Since the complete domination of the market by Wefox (culminating in the largest Series C funding ever of USD 650 m), companies in the market have not been able to attract as much investment with their business models. Without Wefox, Germany's funding for insurtechs over the past four years would have been USD 1,153 m, representing only half of France's and 42% of the UK's.19

Among the main reasons for the downturn are the many regulatory difficulties businesses encounter already in their early days. In a way of trying to break through these barriers and avoid the competition of traditional insurers, many companies have switched from being a Full-stack business (like Wefox) to offering specific services within the value chain (e.g. claims management, and broker enablement). Innovations in application programming interfaces (APIs) and embedded insurance power up the overall improvement of the customer experience.20 They foster innovation and flexibility, allowing rapid implementation of new services and the creation of complementary service ecosystems.

This shift of strategy ended up turning insurtech into a challenger to the downward trend in the overall fintech market in 2023, being one of the three sub-sectors (together with PropTech and Climate FinTech) that presented a global increase in funding volumes between 2022 and 2023 (from USD 5.9 billion to USD 8.1 billion).21 The first three quarters of 2024 recorded a 7% fall in funding, reaching USD 3.2 billion. Despite this, the trend positively indicated a rebound in the last quarter, led by late-stage’s exits.22

Split of start-ups alongside the value chain (% of total number of InsurTechs)

Source: 10 Years of InsurTech in Germany, InsurLab Germany

Blockchain fintechs

In 2023, the German blockchain fintech sector went in the opposite direction of the global market and experienced notable growth, with total funding reaching USD 355 million across 34 deals. This represents a 3% year-over-year increase in funding, highlighting the sector's resilience despite broader market challenges. Germany achieved a record-high share of global blockchain funding, attracting 2.4% of global blockchain investments and 2.5% of global deals. Within Europe, German blockchain fintechs secured 9.4% of European funding and 10.3% of all deals, underscoring its leadership in the European ecosystem.23 

A significant portion of this investment was directed towards early-stage and seed rounds, accounting for 72% of the total blockchain investment in Germany. Among the notable deals, Matter Labs, the creators of zkSync, secured an impressive USD 200 million in funding. Additionally, the joint venture Tools for Humanity (TfH) gained global attention through its major project 'World'. Founded in 2019 by Alex Blania, Sam Altman (CEO of OpenAI), and Max Novendstern, TfH has raised around EUR 250 million in funding over recent years, implying a valuation of approximately EUR 3 billion.

Tools for Humanity was created with the ambitious goal of building a global financial infrastructure. World’s mission is to provide every person with access to a global cryptocurrency (World Coin) linked with a unique identification system, the 'World ID', which uses biometric data to enable unique online identification. While critics warn of the privacy risks such technology may pose, proponents argue that a technology like World ID and World Coin could enhance internet security and offer a unified global currency, ensuring financial inclusion.

Although Germany frequently finds itself torn between the adaptability and risk-taking spirit, provided by blockchain technology, and its strong focus on regulations, the overall sector's performance in past years reflects its growing importance and leadership within the global and European blockchain landscapes.

How fintechs are adapting to crypto and the effects of MiCA

Fintechs are leveraging crypto-assets in various innovative ways to improve their business models and offer new services. Among the products offered are solutions for businesses and governments to accept cryptocurrencies as a payment method, enabling faster and cheaper transactions. Digital wallets are also being developed to store, send and receive not only cryptocurrencies but also assets in general. Another business opportunity created by cryptocurrencies is the partnership of traditional and neobanks with companies such as Bitpanda and Upvest, which offer their end customers a trading platform for digital assets, including cryptocurrencies and NFTs.

As this asset class began to attract the attention of investors, European authorities have endeavored to develop a comprehensive framework to regulate the EU market in a unified manner and ensure its integrity. The final implementation phase of the Markets in Crypto-Assets (MiCA) regulation was completed on December 30, marking a significant milestone for the global market. Key elements of the framework include the consistent supervision of crypto service providers by the national authorities, the obligation for companies to obtain a special license to operate crypto-assets in the EU, as well as preventive measures against money laundering and terrorism financing.24

On the one hand, specialists say that the framework will foster innovation and give Europe an advantage over other regions because of the security it generates for investors.25 On the other hand, founders and fintechs with less financial backing are facing some challenges in adapting to the new rules.26 Not only can MiCA generate high compliance costs, it also requires stablecoin issuers to hold reserves in euros that cover the full value of the tokens issued. In addition, it imposes a threshold limit of either 1 million transactions, or EUR 200 million a day. A normal business day typically sees up to EUR 50 billion in transactions.

2025 will be an adaptation period for these companies, and it is still difficult to predict with certainty what will happen to the European crypto industry. However, the inauguration of President Trump and the immediate signing of an “executive order aimed at advancing crypto innovation has already shown that it could have a significant impact, also on the European market. While MiCA aims to provide a harmonized regulatory framework and enhance investor protection, the U.S.'s proactive stance might attract talent and capital away from Europe, challenging the region to balance regulation with innovation.

The rigorous regulatory environment imposed by Germany brought its own challenges

Germany’s regulatory landscape presents significant obstacles for fintechs, particularly compared to other European hubs. The regulatory focus in Germany is often on risk avoidance rather than fostering innovation, which creates a competitive disadvantage for German fintechs. Complex licensing requirements, long approval timelines, and a lack of regulatory alignment with neighboring countries makes many companies feel hindered by complex and time-consuming regulations.

A survey conducted by the Bitkom e.V.’s revealed that only 11% of all founders feel that fintechs are adequately considered during the legislative process. Besides, many fintechs also feel at a competitive disadvantage within Europe, with 53% claiming that Germany's regulatory requirements are more burdensome compared to other European fintech hubs. In response, a clear, harmonized licensing system across the EU is highly desired by 72% of fintech founders, that support such reforms to reduce barriers to growth. Furthermore, fintechs express frustration with the lengthy and complex application processes for banking and financial services, which 75% find time-consuming (around 2 years to have the license) and difficult to plan.27

Partnering with Financial Institutions

As the German fintech market tries to react to the new normal of investments, partnerships between fintechs and traditional financial institutions, and with other fintechs, have become cornerstones of strategies to scale, diversify services, and meet regulatory requirements. Alliances allow fintechs to leverage the strengths of their counterparts, whether through access to a broader customer base, improved technology infrastructure or compliance expertise. For financial institutions, these collaborations offer a cost-effective route to digital innovation, enabling them to expand their product portfolio and enhance the customer experience without the costs associated with in-house development.

The multiplicity and strategic focus of these partnerships is illustrated by several noteworthy partnerships in Germany. A selection of prominent examples underscoring the trend towards collaboration is outlined below:

Commerzbank partnered with Grover, a fintech specializing in the rental of tech products like smartphones and laptops. Through this collaboration, Grover’s rental service was integrated into Commerzbank’s digital marketplace, offering customers the option to rent rather than purchase tech devices. This partnership reflects Commerzbank’s strategy to diversify beyond traditional banking services and incorporate lifestyle-related financial services to increase customer engagement. For Grover, the partnership enables access to a broader audience through an established banking platform.

Banxware, a fintech focused on providing embedded lending solutions, partnered with several digital marketplace platforms, including Lieferando. This collaboration enables Banxware to offer real-time financing options directly within the platforms that SMEs and independent businesses frequently use. For example, restaurants on Lieferando can access short-term financing to cover operational costs without leaving the platform. This embedded lending solution allows Banxware to reach SMEs in need of liquidity while adding a financial services layer to Lieferando’s ecosystem, creating value for both parties.

Bitpanda, a multi-asset investment platform, expanded its partnership with Deutsche Bank to integrate real-time payments and local IBANs for German users. By leveraging Deutsche Bank’s API-based infrastructure, Bitpanda can offer more seamless, localized financial services to its users, enhancing payment speed and functionality on its platform. For Deutsche Bank, this partnership with Bitpanda aligns with its strategy to collaborate with fintechs that can attract younger, digital-native customers, strengthening its position in the digital financial services market.

N26 partnered with Wise, a global provider of cross-border payments. This partnership enables N26 customers to send international money transfers through the Wise platform, with lower fees and faster processing times than traditional banking options. The integration of Wise’s payment services allows N26 to expand its service offerings for users who need international transfer capabilities, while Wise gains access to N26’s extensive customer base in Germany and Europe.

Solaris partnered with American Express to enable the latter's entry into the German lending market. This collaboration leverages Solaris’s advanced digital banking infrastructure, allowing American Express to introduce customized financial products with reduced development time. Through this partnership, American Express can offer seamless lending solutions in Germany, while Solaris strengthens its position as a leading BaaS provider. This alliance not only boosts Solaris's credibility but also expands its network of high-profile clients, reinforcing its stature in the fintech space.

A year of recovery in 2024 – and what’s next in 2025

2024 continued to present a challenging macroeconomic and geopolitical scenario for venture capitalists, even more so, following fall of the German coalition government in November. Nevertheless, the volume of funding in the first half of 2024 reached EUR 482 million, an increase compared to the second half of 202328, and of USD 1 billion at year end2, demonstrating the resilience of investors. In addition, the German government plans to support future growth by injecting almost EUR 2 billion into the venture capital ecosystem via the so-called the Future Fund.29

The past year has also served as a proof of concept for the thesis that the future of fintech lies in partnerships, both with traditional financial institutions and with other fintechs. Upvest, a provider of Investment as a Service (IaaS) to other fintechs such as N26, Revolut and Bunq, is the beneficiary of the largest funding of year 2024, totaling EUR 100 million. Investors have noted the sustainable profitability of the business, which currently processes 1 million trades per week, and are confident that the business model will work in the UK market, Upvest's next target. The news comes as a relief to the market, which has been worried about an 'as a service' crisis in recent months since Berlin-based Solarisbank announced its hugely negative financials for 2023.30 It is important to notice though, that the bank was caught in a very unfortunate combination of high interest rates, aggravated by legacy problems with the BaFin, and the migration of business focus from BaaS to credit card provider, marked by the large-scale credit card issuance contract with ADAC.

Following the trend of the previous year, the sub-sectors with the most invested capital in 2024 are payments, banking, insurtech and lending. An even greater focus on payments and banking is expected in 2025, as the EU AI law comes into force and investors seem to feel more comfortable and excited about investing in this technology, changing the scenario of last year's market appetite.

The next few years may not see the high levels of fundraising and growth seen in boom-year 2022. And we may expect an even more dynamic adaptation to new regulations. However, we think that the German fintech market preserved its capacity for innovation and will hold steady through macroeconomic challenges ahead. In short: We have some new (consolidated and more regulated) structures, but still transformative technology, which offers future opportunities for both, new fintech players and investors alike.

Sources:
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  2. Q1_2025_PitchBook_Analyst_Note_Fintech_State_of_the_Industry_2025.pdf
  3. FinTech Investment Landscape 2024 - Innovate Finance – The Voice of Global FinTech
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  5. Global Tech and VC - Q3 2023 | Dealroom.co
  6. Fintech | Dealroom.co
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  10. https://commerzventures.com/climatefintech
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  14. Warum Banken jetzt den "Buy now, pay later"-Trend befeuern 
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  16. Crowdlending (Business) - Germany | Market Forecast
  17. Expert Talks: Open Banking und Banking as a Service machen es möglich: Jedes Unternehmen kann zur Bank werden.
  18. Embedded Finance: Wie Banken ihre Rolle durch disruptive Veränderungen verlieren könnten
  19. Studie 10 Years of InsurTech Germany.pdf
  20. Deutsche Insurtechs: Anbieter-Kooperation statt Konkurrenz | DAS INVESTMENT
  21. Global investment in fintech by segment 2023 | Statista
  22. Global insurtech funding stabilizes and is expected to reach $4.2 billion by the end of 2024 | MAPFRE
  23. Germany Emerges as A Blockchain Hero Amid Global Funding Decline
  24. Investment services and regulated markets - European Commission
  25. Coinbase_Institutional_Crypto-Market-Outlook_2025_v1.pdf
  26. https://www.ft.com/content/46bd8a05-78d5-43b6-a87b-e92b47d2eb26
  27. Nur jeder fünfte Fintech-Gründer würde wieder in Deutschland gründen | Presseinformation | Bitkom e. V.
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  29. EUR 1.75 billion for the VC ecosystem | KfW Capital
  30. Upvest sammelt 100 Mio. Euro ein – und stemmt sich gegen die "As a Service"-Krise