WealthTech is really heating up in Europe
The WealthTech market continues to grow at a rapid rate. The wealth management platform market is expected to grow at a 13.8% CAGR to reach $9.18bn by 2028, according to research from Insight Partners. The value of the market in 2021 was $3.71bn.
WealthTech fever is happening around the world. For example, Brazil-based renewable energy investment platform Solfácil closed the biggest FinTech funding round in Latin America in April 2022, pulling in $100m. The second biggest deal in the region was also closed by a WealthTech, with small business bank account provider Stark Bank pulling in $45m. Staying in Latin America, WealthTech apps dominated app stores in Argentina and in Mexico in 2021, according to FinTech Global’s research.
Moving over to Europe, WealthTech companies took the lions share of FinTech investment deals in Q1 of 2022. There were 49 deals over the course of the three months, representing 18% of all deal activity. The second biggest segment was blockchain and cryptocurrency, with 16% of deal activity.
Speaking on the rising interest of the sector, Currencycloud commercial director, France Mohan Madouri said, “If globally the FinTech ecosystem is following a consistent growth trend, the WealthTech segment is literally booming. Since PSD2, financial products have become more consumer-friendly, with the “Wealth” environment accessible to everyone.”
While interest is growing around the world, there are some countries where interest is rising rapidly. Notably, Madouri pointed to the UK, Germany and France. While the UK often gets a lot of attention in WealthTech, the sector is also exploding in Germany and France.
Madouri offered the example of Trade Republic in Germany. The neobroker closed a €250m Series C extension round in June 2022, which valued the company at an impressive €5bn. The funding round followed the initial Series C close of $900m in 2021.
As for France, Shares is a social investing app that lets people share their views on investments and interact with friends regarding their portfolio. The startup closed a .
Madouri added, “If we can measure a trend through funding and investment both of these countries highlight an increased interest, and confidence in, WealthTech.”
Similarly, Kidbrooke co-founder Fredrik Davéus also sees the WealthTech sector taking off in Europe. He said, “Northern Europe is really waking up to the need of better decision support across channels as the way to build an efficient sales machine.”
The main reason for this is due to a need to sort out pensions, which Davéus described as “broadly lacking in the region, especially for expats who do not accrue home country state pension credits.”
Why the jump in WealthTech?
The Covid-19 pandemic has been a major force of change around the world. Most sectors have felt its effects and adapted as a result. WealthTech is no different. Whether it is people having more engagement with their finances through personal finance apps, or a desire to invest for greater financial stability during the uncertainty of the pandemic. According to a survey from the FINRA Investor Education Foundation and NORC at the University of Chicago found that 38% of new investors to open one or more non-retirement investment accounts during 2020 had never previously had one.
As mentioned, Germany’s WealthTech sector is booming, and this is partly down to the pandemic. Madouri said, “With the pandemic reshaping consumer behaviour, robo-advisors like Germany’s Scalable Capital and France’s Yomoni are now normal – allowing people to easily invest through a customised app from wherever they are.” Popularity has also been caused by the rising acceptance of digital business models by consumers, as well as major developments in technologies, such as big data, machine learning and AI, that have improved the quality of wealth management advice.
What is next?
WealthTech is only going to become a bigger and bigger sector. Madouri said it is “part of the new way of accessing finance.” It is making a much more consumer friendly market.
As the sector matures, Madouri sees buy now, pay later, cryptocurrency, blockchain and non-fungible tokens as becoming a big part of that future of investing. WealthTech companies also need to embrace new technology developments, such as no-code and AI, as well as regulations such as PSD2 and the looming PSD3, he said.
Another area to watch is social impact. ESG has become a hot topic these past couple of years and it will only grow more important. Consumers want to know where their money is going and that it only supports companies that align with issues they care about. Companies need to cater to this need.
Madouri concluded, “Looking forward, the crypto and digital asset space will be one area to watch in Germany — not only in terms of trading platforms but also solutions focused on other areas of the value chain. Increasingly, investment and property management companies worldwide are extensively researching the viability of blockchain technologies.”
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