What is the Fintech Landscape like in Europe, the USA and Asia?
Fintech is similar and yet so different across various continents.
You can chat about the intricacies of Open Banking, push payments and the API economy for hours with fintechs from all around the world, and yet we will each have our own unique rules and regulations from each respective country.
Most fintechs are about democratisation and financial inclusion, yet in each continent the focus will vary: Asia may focus on reducing the number of unbanked, while the US may focus more on getting people out of debt and Europe on making cross-border payments affordable.
It’s one of the reasons we love working in the fintech sector: it’s incredibly niche, and yet we can work with people from the US, Singapore, the UK and Spain and we all feel part of the same community. There aren’t many industries where that happens.
In what ways are the US, Asian and European landscape similar and different when it comes to fintech? We thought we would try and compare the three based on our own personal experiences, a bit of research, the events we’ve attended (and hosted) and the hundreds of articles we’ve written on the topic. Let’s get started!
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Fintech in Europe
Fintech landscape: the largest investment category in Europe
The financial services scene in Europe is interesting because every country has different regulations, different languages and different financial laws. The mix of talent means that we’ve got several fintech hubs in Europe with very different cultures: London, Berlin, Paris and Barcelona.
Europe currently has five fintech unicorns: N26, Klarna, Revolut, Transferwise and Monzo. In 2018, fintech investment in Europe reached $34.2 billion, and according to a Finch Capital report, fintech is Europe’s largest investment category (20% total).
A larger proportion of overall investments are allocated to fintech – which means fintech is more active in Europe than both Asia and the US. Most fintechs in Europe are centred around digital global payments and mobile banking.
Europe is the continent with the most stringent consumer protection laws and data privacy regulations. European fintechs usually fall under criticism that their business model is not so sustainable, which may not be so much the case on the other two continents. But let’s dive into this a little more.
Regulation: the strictest
The regulations in Europe are mostly stable and strict. In countries like Germany and Switzerland, data privacy is a huge priority, sometimes even stifling innovation. In countries like the UK and Estonia, regulatory bodies are strict but cooperate with fintechs and financial institutions and launch sandboxes to encourage competition and innovation.
Most of the fintech industry in Europe needs to deal with two regulators: the local ones and the European ones. Having said that, Europeans are considered the pioneers of “innovation designed as compliance” thanks to the new Open Banking and PSD2 laws.
Customers: slow to adapt
When compared to Asia, consumers in Europe are not so digital savvy. Many customers are not ready to take the leap to digital and adopt a completely new way of banking. In fact, many say that most fintechs in Europe are about building “faster horses” than “cars”; meaning fintechs are simply building better traditional banks, rather than completely reinventing the way retail banking is done. We are still using debit and credit cards, and QR codes are still the exception rather than the norm.
Although we all speak different languages and are from different cultures, consumers in Europe have similar pain points when it comes to the financial industry: big banks that overcharge, underserve and are not at all customer-centric.
In Spain, La Caixa charges you 2€ to take money out of an ATM. In the UK, RBS charges you £10 to send an international transfer. We’re all speaking different languages, but we’ve complained about the lack of financial inclusion in Spain, the Netherlands, France and the UK. We all want better banks.
European consumers are not as reliant on credit as the Americans, and many favour socially-conscious policies to serve as a “financial cushion” and help those in need.
Capital: fintech gets the most investment
Here’s a graph that compares fintech to other industries in Europe:
Source: State of European Fintech
Although European VCs don’t splash around as much money as those in the US or Asia, the proportion of money going to fintech is still pretty astounding. With friendly regulators, a diverse talent pool and a considerable amount of venture capital funding, Europe is a truly eclectic place when it comes to fintech.
Fintech in the US
Fintech landscape: where a lot of innovation happens
The US is the pioneer of innovation, which is why it comes to no one’s surprise that Silicon Valley is the largest fintech hub in the world. The very first fintech (Paypal) was founded here, and new and innovative financial products are launched almost every week by entrepreneurs.
The US is the country with the largest number of unicorns, including 38 fintech unicorns. We won’t list them all here, but some of the more notable fintechs include:
Stripe
Circle
Coinbase
Robinhood
Affirm
Credit Karma
The US has twice the amount of fintech companies than the APAC region, and fintech investment reached $59.8 billion in 2019. Recently, there’s been a growing trend of B2B fintechs, financial services providers as well as several notable M&As.
Regulation: more market-driven, but still very complex
The fintech model in the US seems to be a little more sustainable: regulations such as the Durbin amendment means small US banks with less than $10 billion in assets can charge higher interchange fees, and therefore realistically make a revenue from consumer transactions. This also makes small banks and fintechs attractive partners for US brands, who can then partner up with a fintech company and offer more holistic services to consumers.
Regulation in the US is, in some ways, even more complex than regulation in Europe. Every state has their own laws and requirements, making it more difficult for fintechs to offer country-wide services. Bureaucracy is also the law of the land, although consumer data protection is not prioritised like it is in Europe.
Customers: a lot of variation
Customers from different parts of the US are in different stages. On one end of the country, many customers are still using cheques, chip & pin debit cards and cash. On the other end, people are paying with their heartbeats, going to work on hoverboards and ordering food with artificial intelligence.
US consumers are used to the likes of Amazon, Google and Uber, but many can’t open a bank account without heading to a branch. This is partly due to inequality, partly because the US consumer base is simply enormous – you are more likely to get a bit of everything when there are a lot more people.
Like Europeans, most US consumers lack financial education and incumbent banks have been overcharging customers for decades. American consumers are also more reliant on credit, credit scores and loans than consumers in other countries.
There is also an interesting distinction between the regional credit union banks and the “big four” incumbents. Most consumers despise the large incumbents, but absolutely love their credit union bank.
Capital: where the money is
VCs and investors in the US have a lot more money than in Europe. After all, the US is the home of Big Tech companies such as Amazon and Google, and where the biggest deals really happen.
Just look at the tremendous purchase amounts in the most recent acquisitions: FIS buying Wordpay for $35 billion, Visa purchasing Plaid for $5.3 billion (which didn’t end up happening) and Intuit buying Credit Karma for $7.1 billion. 2019 was a record year for fintech deals, which has now slowed down in 2022 and 2023.
Source: Top 10 Largest, Most Recent Fintech Acquisitions and M&As
Fintech in Asia
Fintech landscape: a lot of variety between countries
Some say that Asia is home to the largest financial technology company in the world: Ant Financial. Although some would categorise them as a Big Tech like Amazon and Google, the main difference is that Ant Financial also offers loans, credit scores and P2P payments. They do a bit of everything.
In Asia as a whole, there are various fintech hubs including Singapore, Hong Kong, several cities in China and India. Although the US has many more fintechs than the Asian Pacific (APAC) region as a whole, the Asian fintechs are valued 2.5 times more than fintechs in the rest of the world. Ant Financial has a valuation of $150 billion, which makes it more valuable than both Goldman Sachs and Morgan Stanley combined.
Countries in Asia all vary dramatically in terms of digital adoption, literacy and education. This means that fintech startups in Asian countries are all very different, fixing unique local problems and customer demands.
This is unlike Europe, where we could agree that most countries are on similar levels in terms of GDP, literacy rates and level of education. Although each Asian country is a completely new ecosystem, they do significantly influence each other – with China being the most obvious one.
In Asia, fintechs are more about partnering and converting existing customers, rather than building a new bank from the ground up (which is more what Europeans do). This means their business model is a bit more sustainable: instead of spending thousands of dollars on acquiring organic customers, they focus more on partnering up with large companies and converting customers.
Think of marketplaces such as WeChat and Grab – everything happens in one place. This means that fintechs in Asia aren’t wasting so much money on customer acquisition, and can actually focus on being profitable.
After China, Singapore is home to most of the fintechs, taking in 39% of the ASEAN region. According to a UOB report, Singapore fintech investments recently reached over one billion dollars.
Regulation: data sharing is more common practice
Once again, every country in APAC has their own regulations, laws and practices. In China, large fintechs are working together with the government.
In countries like Malaysia and Singapore, the regulators are creating sandboxes and organising conferences. In countries where there is a large unbanked sector, such as Vietnam and the Philippines, fintechs are focusing more on digital adoption and serving the underbanked.
Regulation in Asia is definitely not as consumer conscious as in Europe. Sharing data is much more socially acceptable and everything can be integrated with everything (remember WeChat and Grab). This is especially true in China, where consumer privacy is irrelevant and all your details are shared with the government. More on this below.
Customers: very digital savvy
In Asia, consumers spend a lot more time on their phones than consumers in other geos. They love playing the latest games, keeping up with new technologies and chatting online. They are incredibly digital savvy and very open to trying new apps, new tech and new customer experiences. They love ecommerce and anything to do with the internet.
However, many countries in Asia have a large unbanked population that are on another level of underserved than in the US or Europe. Half of the ASEAN population is under 30 years old and over half of the population is unbanked, with 74% of the population in rural areas without access to a bank account.
These people are harder to reach – if they don’t even have personal documents or a bank account, it can be complicated for fintechs to offer them relevant services (although fintechs in Africa are solving this problem in ingenious ways).
Since Asian customers are early adopters and tech savvy, there is a lot of opportunity for financial services companies to test products, acquire customers quickly and receive feedback. It’s a fascinating place for more innovative financial technology, like cryptocurrencies and distributed ledger technology.
Capital: a lot of money, but carefully invested
Although Asia has fewer fintechs than the US, the fintechs that are there have higher valuations and their business model is more sustainable. This is because the cost of setting up a fintech company is higher in some Asian countries, and also because startups and innovation isn’t as big as it is in the US and Europe.
According to PwC, China and India have the largest fintech ecosystems, with Singapore leading in the Southeast Asia region. In the year 2019, $12.9 billion was invested in APAC.
In Q3, the Chinese government put together a 3-year plan for fintech, and many other countries are kickstarting sandboxes, issuing digital banking licences and building partnerships. It’s an incredibly fast-moving region which is likely to see the largest amount of growth in the coming decades.
The fintech landscape: hugely varying across geographies, but still very connected
In this article we only compare three regions: Europe, the US and Asia. But we are fully aware that there are prominent regions that we have skipped: Australia, Africa and South America.
Australia’s incumbents are a little more advanced, Africa has some fascinating ways to serve the unbanked and South America is home to the largest neobank in the world, NuBank. This is just further proof that fintech truly is global, and you really can’t get bored in this industry.