Fintech: money, money, money

Published in
16 min readApr 6, 2022


By Armelle de Tinguy, Amélie Juge with the help of Saish Rane, Marc Rougier, & Xavier Lazarus

What are the next hot topics as an investor? This multi-billion dollar question is on everybody’s lips. Our crystal ball at Elaia is no more accurate than others. But our analysis has highlighted 5 sectors which we believe will keep growing — even thrive, during and after the pandemic. Cloud Infrastructure, Digital Transformation, Retailtech, Fintech and Digital Life Science are compelling investment opportunities due to their transformative potential for businesses and consumers.

We’ll regularly share with you our learnings and insights on each of these game-changing sectors, so stay tuned to Elaia’s Medium account and subscribe to our newsletter!

After having focused on Cloud Infrastructure, Digital Transformation, RetailTech, and Digital Life Sciences, let’s now tackle why we invest in Fintech.

In a European ecosystem gone mad with startup funding, Fintech startups, in which we include Insurtech, stand out as one of the hottest beauties. This sector has long been the top-funded in the European landscape and reached new heights in 2021: $15bn in 2021, +160% as compared to 2020 ($9.4bn). One in five unicorns in Europe is now a Fintech or an Insurtech, with Klarna leading the way at a $45.6bn valuation. And with Fintech startups that continue landing 9-figure rounds at a steady cadence, the sector will blow past all records in 2022.

Despite all this past progress, Fintech and Insurtech future opportunities remain vast. These startups have the potential to solve complex problems and to create the foundation to unleash innovative services in other sectors. It is the lynchpin for a market opportunity that is almost boundless.

To understand why, let’s probe a bit deeper and explore the reasons Fintech and Insurtech are surging, what we believe will be the defining trends to watch in the coming years, and a few challenges everyone should keep in mind.

Part I — Why are Fintech and Insurtech bringing the thunder?

Let’s break down some of the factors that have made these two sectors so dynamic:

  • Market opportunities are juicy: Investors like business models that attack large-scale markets. Fintech and Insurtech have this in spades. Our view is simple: alongside energy and talents, money is one of the basic fuel of our economies. As it relates to every possible financial services and products provided to both B2C consumers and B2C customers, small and large alike, in vast areas such as banking, insurance, investing — so basically anything that relates to money and finance — Fintech is by essence one of the largest and most critical markets worldwide. And thanks to the digital foundation that the traditional financial sector has been building since the 1980s, they are natively global markets, and have been for decades before we were talking about digital disruption. So the models that the best entrepreneurs are developing are based on potentially huge volumes of transactions, and the opportunities for the right startups are ripe for the picking. For a startup that finds the right product-market fit, the addressable market size is huge. And that, in turn, makes the possible returns for investors particularly juicy.
  • Fintech and Insurtech are engines: While Fintech and Insurtech can disrupt traditional services, they are also fueling whole new sectors, bringing new use cases and business opportunities. For instance, Fintech is capitalizing on the rise of online spending as growth in new payment services is being fuelled by the adoption of eCommerce and Marketplaces. These new platforms are also creating the need for Fintech services that provide additional value like BNPL (buy now, pay later) or escrow. The result is a multiplying effect in terms of impact and potential returns. Fintech transcends finance and impacts just about every digital experience consumers and businesses have. That makes the potential market size almost boundless.
  • Traditional players struggle: Banks, large insurers, and other financial institutions have dominated financial and insurance services for decades, enjoying near-monopolistic control, a status supported by regulations. This has left them particularly ill-suited for a fast-moving sector that is suddenly being reinvented by swifter, nimbler upstarts who don’t carry the burden of legacy services and infrastructure. In the Fintech space, these challenges are also getting a boost from new regulations that are encouraging disruptive ideas. For example, Open Banking allows access to financial data of banks’ customers to third parties through APIs which enables new products and services. This dynamic has ended banks’ monopolies over customers, opening the way to new or renewed products and services such as easier opening of new accounts, account aggregation, instant credit, and so on. The example of B2C neobanks, one of the most interesting fintech revolutions of the past decade, is appealing: by simply proposing renewed experience and simplified banking usage, neobanks created a first big bang in the banking industry. And paved the way to new waves of innovation, now targeting more complex financial products and services. In a nutshell, leaving the terrain wide open for savvy Fintech founders.
  • Exit-palooza: Last, but far from least, we note with some measure of glee that Fintech has become one of the most acquisitive sectors in tech. Visa acquired Swedish open banking provider Tink for €1.8 billion and U.K.-based CurrencyCloud for $952m, just two of many examples of big exits. That’s not to say that all risk has been eliminated. But the pace and size of exits give us great confidence that the returns are there for investors who have the right connections to recognize startups with big ideas.

“Large market opportunities and exit potential are strong incentives for venture capitalists to pour so much money into Fintech,” said Elaia’s investment director Armelle de Tinguy. “The risk-reward equation is very favorable. And the more exits we have, the more that attracts investors that make the whole cycle go faster and faster.”

Part II — Europe wants its share of it

While these factors are global, European entrepreneurs have been particularly aggressive about leveraging them. Europe has been at the forefront globally in terms of Fintech and Insurtech innovations. Why? The region has a progressive regulatory landscape, a strong pool of technical and product talent, and available investment capital to support these sectors. That’s why some key Fintech trends like neo-banking (Revolut, N26, Lydia) were born in Europe. All of the ingredients are there to build the next generation of global Fintech and Insurtech leaders.

For a long time, when we’d say Europe, what we really meant was the U.K. which was the Fintech and Insurtech epicenter. Given London’s status as the center of global finance, it seemed perfectly natural that it became the beating heart of the tech-driven financial and insurance world. But that center of gravity is shifting.

Outside of the U.K., other European countries have produced world-class champions : Klarna, Tink in Sweden; Wefox, N26 in Germany; Adyen, Mollie in the Netherlands; Qonto in France. These other European ecosystems have been maturing rapidly in the past few years, challenging the U.K.’s Fintech and Insurtech leadership in Europe. In that sense, Brexit is just another handicap for the U.K., one that is weakening its perception as a bridge to Europe by creating new regulatory challenges for expanding to the E.U. That has allowed the wealth of Fintech riches to spread across Europe.

As the balance of Fintech and Insurtech power in Europe tips away from the U.K., France has taken its place in the top three European fundraising countries: €2.3bn funding in 2021 in 93 deals, displaying a huge increase since 2020 (+174% YoY). But more interestingly, it now includes more and more 9-figures mega deals reaching €100M, €150M, €300M. France has emerged as a powerhouse where (so far) 10 Fintech or Insurtech unicorns have emerged, including 6 in 2021: Alan, Shift Technology, Ledger, Lydia, Sorare, and Swile. And the trend is accelerating with 3 new mega rounds announced in January 2022 alone: Welcome Qonto, PayFit, and Spendesk! But if that seems dizzying, then your vertigo will probably get worse: No doubt there are many ‘soonicorns’ growing their horns as we speak.

The burst of the Fintech and Insurtech scene across Europe is already giving substance to the revolution. No surprise, then, that International investors are now clamoring for seats at the European deal table. They are coming in at earlier stages, and flooding the later stages with huge checks. Fintech and Insurtech are generating mega deals every week. That means more gunpowder and legitimacy to compete in worldwide markets. Europe is now becoming the next hotspot for growing Fintech and Insurtech unicorns.

Part III: What’s next in Fintech-Insurtech?

For anyone investing in Europe, Fintech and Insurtech are simply too big to ignore. However, as the opportunities multiply, so does the complexity. These are hard sectors to grow and a dense industry where innovative waves keep coming at an accelerating pace.

Fintech has long been a centerpiece of our portfolio. And while there are no certainties in our topsy-turvy world, there are 5 trends we are following closely:

1) Embedded finance and insurance are everywhere:

This is the next big thing. It expands significantly the boundaries of Fintech and Insurtech innovation as it enables non-banks — brands and companies — to offer financial and insurance products and services that enhance and extend their core business. They are delivered either through APIs easily inserted into platforms or through next-generation banking infrastructure now available off-the-shelves. Without much hassle, a non-financial company can quickly turn on banking products such as cards, accounts, IBANs, and propose extended services to its customers: insurance, forex, credit, installment payments, just to name a few.

As we hinted above, marketplaces represent a particularly appetizing opportunity for these embedded products. Online spending on marketplaces is soaring as they allow brands to expand their e-commerce footprint. These embedded products are an essential component of marketplace dynamics that create tremendous value for customers, both B2B and B2C, and for platforms which leads to new monetization streams while also improving user experience and boosting customer retention. This also results in big volumes of transactions that produce sizable revenues when those embedded products take their slice. It’s a true win-win-win situation; And the perfect example of how pervasive Fintech has become and how it is having an impact beyond just classic financial sectors. If we were going to pick just one trend to keep your eye on, it would be this one.

2) The Permanent Payment Revolution:

With all the hype that payments have received, it’s tempting to believe all the problems have been solved and that you likely missed the investment boat. But that’s not true, not even close. This sector is in a constant state of upheaval and disruption. From online payment processing and checkout to frictionless B2B payments, there continue to emerge additional layers for managing this space, and more recent developments such as BNPL.

On the front-end side, deferred payment solutions will be all over the retail sector in 2022. We also foresee a 3rd wave of BNPL services in B2B, as well as in direct to consumer offerings such as escrows. And anything that removes payment friction will be in high demand. Overall we believe there will be a new wave of B2B payment innovation that follows in the tracks of the B2B commerce explosion. Virtual cards, virtual accounts, and open banking account-to-account rails will streamline and simplify B2B payment processes — with more than 80% of payments processed digitally by the end of the year, according to Forrester.

But we’re also watching closely what is happening deeper in the stack as underlying infrastructures keep moving as well. One good example is payment orchestration. Payment possibilities being increasingly complex, eMerchants and marketplaces are now in need of additional abstraction layers of payment orchestration in order to manage and integrate multiple providers (PSPs, payments options), and improve payment routing for better transaction success and sales conversion.

Don’t take your eyes off the payment space because the opportunities remain tremendous.

3) Spotlight on InsurTech:

Insurance is a $6 trillion global market, so it’s no surprise that startups are drooling over it. Underlying this market is a value chain long dominated by traditional insurers who control insurance capabilities and therefore hold almost absolute power over this industry.

The Insurtech revolution started with two types of insurgents mounting assaults that seemed to pose little threat. First, there were those tackling the value chain at its customer-facing end: neo-brokers digitizing distribution. They were hardly a menace to insurers which still carry insurance capabilities and already delegated part of their acquisition effort to brokers. Second, there were those who focused on enablement technology. This camp digitized and automated traditional insurers by providing them with tools for better operational efficiency using AI or RPA.

Now startups are aggressively nibbling their way more deeply into the insurance value chain. And in doing so, they are definitely taking the lead on the next generation of insurance products. The use of technology and data enables new players to create next-generation insurance usages and models such as data-driven or usage-based insurance. It also enables them to address new markets and seize market opportunities in a way legacy players cannot, as technology and use of data are providing unbeatable competitive advantages. It requires agile and new-gen infra that traditional players are not able to provide.

One good example is Indeez which addresses the protection needs of independent workers of the Gig Economy. As most workers operate through platforms, their insurance products are directly embedded into these platforms, enabling both a smooth experience for end users and a layer of product that is key for platforms to deploy and manage those insurance products. Product and technology is key to deliver insurance to this growing and already massive market opportunity. Learn more here.

The next frontier of Insurtech is startups acquiring the capability to act as full-stake insurance providers. This strikes directly at the heart of incumbent insurers’ most vital functions. The logic here is simple: Whoever holds insurance capability wields power over the whole value chain. The goal is to remove the traditional insurance carriers from the equation and seize control over their model from cover to cover.

In that respect, two emerging models seem particularly interesting to us for the coming years:

  1. Full-stack verticalized players: Startups that began as distribution-focused on a specific insurance market (health, or property insurance) but are now going down in the tech stack and getting licensed. We can expect more and more startups to take this path, and all have the similar objective: Being the best specialized insurer in their vertical, gaining unbeatable expertise thanks to data, and going big.
  2. Full-stack infrastructure players: Startups focused on providing insurance capabilities to brokers and distributors, either Insurtechs or traditional brokers, through a platform supported by new-gen infrastructure. Those infrastructure players are obviously preferred partners to Insurtech who see an opportunity to remove themselves from being dependent on traditional carriers and their costly legacy infrastructure and processes. But they also have strong arguments for targeting the whole insurance market across sectors that are still run by traditional brokers. These startups are directly challenging incumbent risk carriers on their core business and going after their last strongholds. This is the mission of Seyna, a company that has recently joined Elaia’s portfolio. Learn more here.

4) The B2B Fintech revolution continues:

Fintech has proven to be a groundswell that tackles every financial product and service, one after the other. What started with neobanks, focused on renewed B2C consumer behavior and being mostly UI/UX-centric, is now moving to the next level. This is the magic of B2B: customers are sophisticated, and when it comes to disrupt a basic process, let’s say payment, it comes with more complex needs: managing payment delays, adding insurance, FX, factoring…paving the way to a whole new bunch of opportunities, with a multiplying effect. So we continue to see a methodical unbundling of banking offerings, piece by piece, commoditizing a broader range of B2B financial services and products such as P2P transfers, remittances, and lending that have long been provided only by incumbent banks.

The recent rise of the revenue-based lending players is a good exemple. By providing alternative financing solutions to growing companies, they tackle a topic that was still, until very recently, a prerogative of traditional banking: credit lending. Overall, Fintechs are massively changing the way corporates — small, mid, and large alike — are consuming financial services.

But more interestingly, we expect these waves of innovation to accelerate in the coming years, as Fintechs innovate deeper in the stack as well, back-end infrastructure layers being rebuilt, with a modular, light-weight approach. Core banking players and Banking-as-a-service are now bringing to the market modular and off-the-shelf banking-like infrastructures, enabling new-gen players to focus on building new uses cases, offers, and products without the hassle of building the underlying infrastructure. Overall, the increasing use of technology, data, and AI will continue to bring new products to the market, fuelling innovation of B2B services and products.

5) Web3, now in motion:

Web3, and the cryptocurrency market as its first massive use case, have recently attracted a lot of interest, attention and capital. Cryptocurrency is experiencing hyper-growth, from $4Bn in market cap in 2016 up to $2,623Bn in 2021. According to the most recent Atomico State of European Tech, the 10 largest European rounds in crypto/Web3 companies in the first nine months of 2021 totalled $3.2Bn raised. That includes Europe’s largest ever crypto round: Sorare’s Series B in September 2021.

Like so many revolutions before, it has been first embraced on the consumer side, with risk-taker individuals attracted by easy profits. On the other side, traditional financial actors are still reluctant to enter this market, despite the massive upside potential. The current main roadblocks are: Clear regulation, anti-money laundering compliance, lower volatility, access to transparent and free of conflict of interest information, as well as concerns regarding an energy-intensive business model, and potential risks of disruption of their own business model.

But the question is no longer whether it will go mainstream or not. This process is already in motion. It will get structured and regulated over time, and massively adopted eventually, beyond tech enthusiasts. More specifically, with a crypto market that is still fragmented into 700+ exchanges, with investors facing a lack of reliable information and liquidity, our first bet would be on the underlying tools that will support the structuring of this industry and the quality of the exchange. Stay tuned, there’s more to come on this.

On another note, and while we are waiting for Web3 foundations to generate more and more applications, uses cases and models, there is another area that is starting to show real signs of life: Decentralized Finance (DeFi). Just last month, decentralized exchange platforms (DeX) facilitated $50Bn in monthly transactions, more than Coinbase, one of the main centralized platforms. While still being in its infancy, the space shows the first signs of structuring and unbundling the traditional financial value chain. Although there are still several challenges for DeFi — poor performance, limited use due to poor UX, human risks of fraud and error — it also has several strengths that make it unique. It is inclusive in nature, it is incorruptible, transparent, and auditable. But most of all, it allows automated programming of self-executing actions without the need for a third party. As we see the wave growing in terms of number of related projects, their scope and ambition, as well as the quality of the teams tackling the issue, we believe this is definitively a space to keep an eye on.

Part IV— A few challenges to go

Fintech investing may seem like it’s all rainbows, but it’s important to recognize clouds loom as well. None of these are fatal to the overall narrative. But they do have the potential to have some impact that will in turn require some adjustments.

  • Regulation: Always the classic double-edged sword. As we noted above, strong regulatory moves like Open Banking can help stimulate innovation. Still, financial services are all about trust, and smart regulation plays a key role in maintaining confidence among consumers and businesses. Regulators are currently wrestling with how to strike the right balance in such areas as NFTs and cryptocurrencies. Entrepreneurs and investors must understand these conversations, engage with policymakers, and be prepared to adapt.
  • Security: As the value of data and services increases, so does the temptation of increasingly sophisticated hackers. With the surge of regulatory pressure, building a secure tech stack is more than ever one of the main challenges for newcomers. But it also opens the way for new opportunities to tackle challenges like data encryption and DevSecOps, just to name a few (Check Cosmian & CodeNotary in our portfolio). Needless to say, Fintech founders and investors should wake up and go to bed thinking about security.
  • Sustainability: This is a recent but critical trend. It has hit the reputation of such sectors as Bitcoin mining. It needs to be top of mind for the whole financial and insurance sector. In particular, traditional players have not put sustainability at the center of their mission or the design of their services and infrastructure. New players have a chance to make this a core principle, both because it is the right thing to do and because we are seeing consumers increasingly citing this as an important reason for choosing one brand over another.

Of course, none of this sours us on Fintech and Insurtech. The best founders are already aware of these obstacles and have developed strategies for responding. That leaves them free to focus on creating products and services that can reach a global scale and fuel the reinvention of every industry they touch.

”The ultimate reason why we are so bullish on the investment opportunities in Fintech and Insurtech is that it serves as the catalyst that is powering a broader wave of digital transformation. So we’re really just at the beginning,” de Tinguy said. ”And in that respect we are very excited by the potential of the French ecosystem. With so much talent and expertise available, and the growing ambitions of our entrepreneurs, we have no doubt France’s contribution to the next generation of world-class Fintech and Insurtech companies will be massive.”