Trends and Predictions: The Next Wave of Fintech Innovation in Europe

The fintech sector is brimming with exciting trends for 2024 and beyond. These innovations redefine financial services and unlock a wealth of opportunities for entrepreneurs. From streamlined invoicing to next-generation treasury solutions, fintech startups are tailoring their offerings to address your specific needs.

Drawing on our experience in software development and partnerships with industry leaders like Solaris and Aazzur, we'll delve into these emerging trends, highlighting their potential to optimize your financial operations and discussing any challenges you might encounter.

AI in Fintech: The Game Changer

Artificial Intelligence (AI) continues to be a formidable force in fintech, with applications ranging from enhancing operational efficiency in risk management and compliance to personalizing customer service experiences. Europe, leading in AI regulation, anticipates widespread adoption of AI in financial services. Noteworthy developments include Klarna and Stripe's integration with OpenAI, showcasing the potential of AI in support, onboarding, and fraud detection.

Stripe has partnered with OpenAI to become the payment platform for OpenAI's advanced ChatGPT and DALL·E generative AI technologies. This collaboration will see Stripe integrating OpenAI's latest GPT-4 technology into its services, aiding OpenAI in monetizing its products through a variety of payment methods, including subscriptions and pay-as-you-go options for DALL·E credits. Stripe's solutions such as Billing, Checkout, and Tax are streamlining OpenAI's sales, tax compliance, and financial operations, enhancing customer transactions with faster payment processing through the Link network.

Similarly, Klarna has recently unveiled its AI assistant, developed in collaboration with OpenAI, showcasing impressive results just one month post-launch. The AI assistant has managed 2.3 million conversations, representing two-thirds of all Klarna customer service interactions, effectively doing the work of 700 full-time agents. It has matched human agents in customer satisfaction and outperformed them in resolving issues, leading to a 25% reduction in repeat inquiries. Customers are resolving their issues in under two minutes, a significant improvement from the previous 11-minute average. The assistant, available in the Klarna app, supports over 35 languages across 23 markets, operating 24/7, and is projected to contribute $40 million USD in profit improvements for Klarna in 2024.

Companies like Resistant.AI and HAWK:AI are also innovating AI solutions for compliance, automating KYC/AML and transaction monitoring processes, marking significant advancements in regulatory technology.

If you’re looking to start or grow a business in the fintech sector in the next years, here are some predictions that might come in handy:

1. Personalization is key

Prediction: AI will enable hyper-personalized financial products and services. 

Our recommendation: Develop AI-powered tools that analyze customer data to offer personalized financial products, investment advice, and budgeting plans. This can lead to increased customer satisfaction, loyalty, and revenue. 

2. Automation - the new norm

Prediction: Repetitive tasks like fraud detection, loan processing, and customer service will be increasingly automated by AI.

Our recommendation: Embrace AI automation in fraud detection, loan underwriting, portfolio management, and other processes to improve efficiency, reduce costs, and free up human resources for higher-value tasks like customer relationship management and strategic planning.

3. Robo-advisors with a human touch

Prediction: AI-powered robo-advisors will become more sophisticated, but human oversight will remain crucial.

Our recommendation: Consider a hybrid model where AI handles portfolio management and risk assessment, while human advisors provide personalized guidance and expertise for complex financial decisions.

4. Democratization of financial services

Prediction: AI can help expand access to financial services for underserved populations.

Our recommendation: Develop AI-powered tools that use alternative data sources for creditworthiness assessment, potentially reaching new customer segments and promoting financial inclusion. 

5. Explainable AI

Prediction: There will be a growing focus on explainable AI - users understanding the reasoning behind AI decisions related to their finances.

Our recommendation: Invest in AI solutions that are transparent and explainable. This builds trust with your customers and helps navigate potential regulations around AI bias. 

In addition to these predictions, it’s important to keep in mind some basic principles that can be applied across all these trends:

  • Start small and experiment: Don't try to overhaul everything at once. Begin by integrating AI into specific areas and measure the results.
  • Focus on the user experience: Ensure AI-powered solutions enhance, not replace, the human experience.
  • Prioritize data security and privacy: Implement robust data security measures and be transparent about collecting and using customer data.
  • Stay informed about regulations: The regulatory landscape surrounding AI is evolving. Keep up-to-date on relevant regulations to ensure compliance.

Overall, AI has the potential to revolutionize the fintech industry by making financial services more accessible, personalized, and secure. However, navigating the ethical and regulatory challenges will ensure responsible and sustainable growth in this exciting field.



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Tackling Fraud with Technology

With the increasing sophistication of fraudsters, the need for advanced fraud prevention tools has never been more pronounced. European fintech startups, such as Lynx Tech, Cable, and Salv, are at the forefront of combating financial crime, leveraging AI to detect and predict fraudulent behavior.

Just last year, Lynx Tech, a Madrid-based AI firm specializing in fraud detection and prevention, has secured $18 million in Series A funding led by Forgepoint Capital, alongside continued support from Banco Santander, a current investor and client. Founded 20 years ago by AI specialist Carlos Santa Cruz, now the CTO, Lynx leverages cutting-edge AI and machine learning to offer real-time, scalable solutions against digital fraud and money laundering. Its technology, which provides predictive behavioral analysis and risk scoring, is utilized by prominent financial institutions like Santander and Brazil's Cielo to safeguard against fraud across cards, digital banking, e-commerce, branches, and ATMs.

The imminent enforcement of regulations like the Digital Services Act and (Payment Services Directive 3 (PSD3) underscores the growing importance of these solutions in protecting consumers. The Digital Services Act (DSA) is all about creating a safer and fairer online environment within the European Union. It aims to tackle the spread of illegal and harmful content online, including hate speech and the promotion of illegal activities. PSD3 strengthens the PSD2 regulations on transparency, security, and open banking practices. This means clearer information for consumers about payments, enhanced security measures to protect transactions, and continued support for third-party providers who offer account access and payment initiation services with user consent.

If you’re looking to create a new startup or to grow your business in this space, here are some predictions for the next years:

1. Predictive analytics for proactive fraud prevention

Prediction: AI will move beyond simple anomaly detection to predictive analytics. This will allow for anticipating and preventing fraudulent activity before it occurs.

Our recommendation: Invest in AI-powered fraud detection systems that analyze historical data and identify patterns indicative of future fraud attempts. This proactive approach can significantly reduce financial losses. 

2. Multi-layered defense with AI and Machine Learning (ML)

Prediction: The future will see a combination of AI and machine learning algorithms working together to create a robust, multi-layered defense against evolving threats.

Our recommendation: Don't rely solely on AI. Look for solutions that combine the power of AI with machine learning's adaptability to handle the ever-changing nature of fraud tactics.

3. Automation of manual review processes

Prediction: Repetitive tasks like reviewing flagged transactions will be increasingly automated by AI, freeing up human analysts for complex cases.

Our recommendation: Implement AI-powered automation to streamline your fraud detection workflow. Look for repetitive tasks that follow a set of predefined rules, and involve large amounts of data analysis, such as KYC (Know Your Customer) document verification, AML (Anti-Money Laundering) transaction monitoring, loan application eligibility checks or account activity review for suspicious behavior. This can improve efficiency, reduce costs, and allow your team to focus on high-risk scenarios. 

4. Integration with biometrics and behavioral analytics

Prediction: AI will be integrated with other technologies like behavioral analytics and biometrics for a more holistic approach to fraud detection.

Our recommendation: Innovate your fraud detection by exploring the integration of AI with biometric authentication (fingerprint, facial recognition) and behavioral analysis. This includes evaluating cutting-edge features like liveness detection, AI-driven risk scoring for multi-factor authentication, continuous behavioral adaptation, and personalized authentication with behavioral biometrics.

5. Explainable AI for transparency and trust

Prediction: As AI plays a bigger role, there will be a growing emphasis on explainable AI. This means understanding the reasoning behind AI flagging specific transactions as fraudulent.

Our recommendation: Choose AI solutions that provide clear explanations for why transactions are flagged as suspicious. This transparency builds trust with your customers and helps comply with potential regulations around AI bias.

By proactively embracing AI and these predictions, you can equip your fintech business with a powerful arsenal against fraudsters. This will not only protect your financial bottom line but also enhance customer trust and loyalty in your services.

The Evolution of Payments

The landscape of payment methods is undergoing significant transformation, driven by the demand for alternatives to traditional transaction methods. The rise of e-money, BNPL, and digital currencies reflects a broader shift towards more flexible, secure, and user-friendly payment solutions. With regulatory developments like Open Banking and PSD3 on the horizon, the stage is set for further innovation in payment experiences.


E-money is essentially digital cash. It's a form of currency stored electronically and used for online or offline transactions. Unlike cryptocurrency, e-money is typically backed by a traditional currency (like the Euro) and is regulated by governments or financial institutions.

What started in the 1990s with prepaid cards and online payment systems has exploded
over the past few decades, leading to regulations like PSD2 to ensure security and consumer protection. It is now a mainstream payment method for online transactions, mobile wallets, and even some physical stores. E-money is expected to play an even bigger role in business payments, especially cross-border transactions and supply chain management. 

The rise of open banking allows e-money solutions to connect seamlessly with traditional bank accounts, offering greater flexibility and innovation for businesses.  This opens doors for new e-money services that leverage open banking features.

There's also a growing trend of businesses using e-money for faster, cheaper transactions. This is particularly attractive for cross-border payments and supply chain management.

Established financial institutions like Revolut and Wise are expanding their e-money offerings, potentially creating a more competitive landscape for startups. This means fintech startups need to find a clear niche or value proposition to compete.

Buy Now Pay Later (BNPL)

BNPL started in the retail sector, allowing customers to purchase items and spread the cost over several installments. In recent years, it has seen explosive growth, expanding beyond retail into sectors like travel and healthcare.

Today, BNPL is a widely accepted payment option, especially among younger generations. This presents a significant opportunity for fintech businesses. Offering BNPL can attract new customers who prefer the flexibility of deferred payments. It also encourages larger purchases, potentially increasing sales for businesses that integrate it. In a crowded fintech market, BNPL can be a differentiator,  giving your business a strategic advantage.

If you’re not already experimenting with it, perhaps you should consider it. Established players and large retailers are also entering the BNPL space, so finding a niche market or unique value proposition is crucial. There's potential to innovate in BNPL by offering features like financial wellness tools or integrating BNPL with other financial services.

As with all new fintech trends that hit a critical mass, regulatory bodies are looking more closely at BNPL, focusing on potential consumer debt issues and ensuring responsible lending practices. Currently, Buy Now, Pay Later (BNPL) providers aren't covered by consumer credit laws. But that's changing with the new European Consumer Credit Directive (CCD) (2023/2225/EU), which came out on October 30, 2023, which will be implemented in EU countries by November 2026. Under the new directive, some BNPL providers will need a license and follow stricter rules. To prepare, several BNPL providers in the Netherlands have adopted a voluntary code of conduct.

Here's a glimpse into what the future holds for fintech payments, along with recommendations for entrepreneurs:

1. Frictionless payments and open banking

Prediction: Payments will become even more seamless and invisible. Open banking will play a key role, enabling secure data sharing between financial institutions and fintech providers, allowing for faster and more convenient payment options.

Our recommendation: Develop innovative payment solutions that leverage open banking APIs. Imagine one-click payments directly from user bank accounts or real-time account verification for instant credit approvals.

2. Biometric authentication

Prediction: Biometric authentication like fingerprint or facial recognition will become more widely used for secure and convenient payments.

Our recommendation: Integrate biometric authentication options into your payment solutions, offering users a secure and touchless payment experience. AI can analyze various factors like transaction amount, location, the device used, and user behavior to determine risk in real time.

3. Digital currencies and Central Bank Digital Currencies (CBDCs)

Prediction: Digital currencies, both private and central bank-issued (CBDCs), will gain traction, potentially impacting traditional payment methods.

Our recommendation: Develop user-friendly wallets and exchanges for both private and CBDCs.
Partner to enable seamless cross-border transactions and micropayment solutions using digital currencies.

4. Focus on security and fraud prevention

Prediction: As payment methods become more sophisticated, so will fraud attempts. Enhanced security measures will be crucial for maintaining user trust.

Our recommendation: Implement robust security protocols and fraud detection systems powered by AI and machine learning for your payment solutions. Prioritize data security and user privacy to build trust with your customers.

5. The globalized payments landscape

Prediction: Cross-border payments will become faster, cheaper, and more accessible.  Regulations will likely adapt to facilitate smoother international transactions.

Our recommendation: Develop payment solutions that cater to a global audience. Consider partnerships with international players and ensure compliance with evolving cross-border payment regulations. 

By staying informed about these predictions and focusing on innovation, security, and user experience, fintech payment entrepreneurs can shape the future of how we pay and ensure a more inclusive and efficient financial system.

Climate Fintech: A Growing Force

The CommerzVentures 2024 Climate  Fintech Report highlights the rapidly expanding intersection of climate action and financial technology. In 2023, Climate  Fintech investments reached $2.3 billion, underscoring the sector's resilience and potential for impact. Notably, European Climate  Fintechs have outpaced their US counterparts in funding, pointing to Europe's leadership in this emerging field.

Sub-sectors such as Carbon Markets and Energy Management are attracting significant investment, indicating a strong market appetite for solutions that address climate challenges through innovative financial services. Companies like Opna and Cloover are revolutionizing carbon financing and renewable energy adoption, respectively, showcasing the diverse applications of fintech in driving environmental sustainability.

Innovative waste management, though not strictly a part of climate tech, plays a crucial complementary role in combating climate change. Unlike climate tech's direct approach to cutting down greenhouse gas emissions, smart waste management strategies contribute indirectly to this mission. Our recent partnership with Resourcify highlights this synergy. As a trailblazer in waste management and recycling, Resourcify offers more than just solutions; it's a guiding light for organizations aiming for sustainability. Their platform equips these organizations with the tools they need to efficiently move towards zero waste. By embodying the transformation they advocate for, Resourcify leads the waste management industry not only with its innovative services but also through its commitment to real change.

Climate fintech is a rapidly growing field, and here are some predictions for its trajectory in the next 10 years, along with insights for climate fintech entrepreneurs:

1. Proliferation of sustainable investment products

Prediction: We'll see a surge in innovative financial products supporting sustainable businesses and green infrastructure projects. This could include green bonds, carbon offset marketplaces, and impact investing platforms seamlessly integrated with traditional investment options.

Our recommendation: Develop user-friendly platforms for sustainable investing, allowing individuals and institutions to easily allocate funds towards environmentally conscious projects. 

2. Data-driven risk assessment and climate risk management

Prediction: AI and big data will be leveraged to assess climate risks more accurately. This will inform investment decisions, insurance pricing, and loan approvals, taking into account factors like extreme weather events and rising sea levels.

Our recommendation: Build solutions that integrate climate risk data into financial decision-making. This could involve AI-powered risk assessment tools or climate risk insurance products tailored for specific sectors.

3. Blockchain for transparency and traceability

Prediction: Blockchain technology can ensure transparency and traceability in sustainable supply chains. This will be crucial for tracking the environmental impact of products and verifying the authenticity of green certifications.

Our recommendation: Explore how blockchain can be integrated into climate fintech solutions. You could develop platforms for tracking sustainable resource sourcing or creating tamper-proof carbon credit records. 

4. Increased regulatory push for sustainable finance

Prediction: Governments are likely to implement stricter regulations promoting sustainable finance practices. This could involve mandatory climate risk disclosures for businesses or tax breaks for green investments.

Our recommendation: Stay informed about evolving regulations and ensure your climate fintech solutions comply with all sustainability-related requirements. Participate in industry conferences, workshops, and webinars hosted by regulatory bodies, industry associations, or research institutions. These events offer opportunities to learn from experts, network with other entrepreneurs, and gain insights into the latest regulatory developments.

5. Democratization of climate action

Prediction: Climate fintech solutions will become more accessible, enabling individuals to participate in the fight against climate change. Imagine micro-investing platforms dedicated to renewable energy projects or gamified carbon offsetting tools.

Our recommendation: Develop inclusive climate fintech solutions that empower individuals to contribute to a sustainable future. This could involve user-friendly mobile apps or gamified experiences that incentivize environmentally responsible behavior.

By capitalizing on these predictions and prioritizing both innovation and impact, climate fintech entrepreneurs can play a vital role in driving positive change toward a sustainable future.

Embedded Finance: Bridging Gaps in Digital Ecosystems

Another key component in the Fintech landscape, embedded finance is reshaping the way consumers interact with financial services by integrating them into non-financial platforms. Imagine purchasing on an e-commerce site and being offered a loan at checkout, seamlessly funded by a fintech solution. This blurs the lines between financial and other digital services, offering a cohesive and intuitive user experience.

The roots of embedded finance can be traced back to loyalty programs and co-branded credit cards, where financial services were integrated with non-financial businesses. The growth of fintech companies offering APIs (Application Programming Interfaces) made it easier to seamlessly integrate financial services into non-financial platforms.

Today, embedded finance is experiencing explosive growth, with applications across various sectors like:

  • Retail (buy now, pay later at checkout)
  • E-commerce (seamless in-platform financing options)
  • Accounting (integrated bill pay and expense management)

A study by OpenPayd, a major company in global payments and banking services for businesses (BaaS), predicts a €626 billion revenue boom for European brands over the next five years. This growth is expected to come from integrating features like payments and banking directly within their platforms. The UK is projected to capture nearly half (49%) of this market.

This ecosystem is maturing, with established players, fintech startups, and traditional financial institutions all vying for a piece of the pie. Even traditional financial institutions like HSBC are actively entering the embedded finance space through joint ventures and strategic partnerships.

By integrating financial services directly into existing platforms, embedded finance offers a seamless and convenient user experience. This can lead to increased customer engagement and loyalty. Fintech companies can leverage the reach of established non-financial platforms to access new customer segments they might not have been able to reach before. Moreover, embedded finance allows fintech companies to partner with non-financial businesses, creating new revenue streams through transaction fees, referral programs, or other models.

Our white-label core banking solution, Ivory, empowers any company, from retail to e-commerce, to seamlessly integrate financial services into their existing platform. This translates into a powerful advantage:

  • Expand Your Service Portfolio: Offer financial services like payments, loans, or money management directly to your customers, increasing their engagement and loyalty.
  • Reach New Customers: Leverage Ivory to tap into entirely new customer segments that you might not have been able to reach before.
  • Unlock New Revenue Streams: Generate additional income through transaction fees, referral programs, or other revenue models associated with embedded finance.

If you're curious how Ivory works, you can book a demo here.

In terms of regulations, they are still evolving, but the EU's PSD3  is a major factor. PSD3 strengthens open banking practices, which are crucial for embedded finance to function effectively. Data security is paramount, as embedded finance solutions often involve sensitive financial information.

Here's a glimpse into what the future could hold, focusing on how you, as a fintech entrepreneur, can capitalize on these trends:

1. Hyper-personalization and seamless integration

Prediction: Embedded finance will become hyper-personalized. Imagine financial services seamlessly integrated into a user's workflow, automatically triggered based on their specific needs. For example, an embedded budgeting tool suggesting spending adjustments after an online purchase.

Our recommendation: Develop embedded finance solutions that leverage user data (with consent) to personalize the experience. Integrate your services with popular platforms and tailor them to complement existing user workflows.

2. Industry-specific solutions

Prediction: Generic embedded finance solutions will give way to specialized offerings tailored for specific industries. For instance, an embedded invoice financing solution for e-commerce platforms.

Our recommendation: Focus on a niche market and develop embedded finance solutions that address the specific financial needs of that industry. Partner with industry leaders to create win-win collaborations.

3. Evolving regulatory landscape

Prediction: Regulations around data privacy, security, and consumer protection will continue to evolve. Open banking will play a crucial role in enabling embedded finance.

Our recommendation: Stay informed about regulatory changes and ensure your embedded finance solutions comply with all relevant regulations.  Build partnerships that prioritize data security and responsible data practices.

4. Focus on financial wellness and inclusion

Prediction: Embedded finance solutions will increasingly incorporate features promoting financial wellness. Imagine budgeting tools or micro-savings options embedded within everyday platforms.

Our recommendation: Integrate features that promote financial health and well-being within your embedded finance solutions. This can differentiate you from competitors and attract a wider customer base.

5. AI and Machine Learning

Prediction: AI and machine learning will play a significant role in the future of embedded finance.  Imagine AI-powered fraud detection or personalized financial recommendations embedded seamlessly.

Our recommendation: Explore integrating AI and machine learning into your embedded finance solutions. This can enhance security, personalize user experiences, and optimize service delivery.

In addition to these predictions, it’s important to keep in mind some basic principles that can be applied across all these trends:

  • Focus on strong partnerships: Building strong partnerships with non-financial platforms and potentially traditional financial institutions is key for success.
  • Prioritize user experience: Design embedded finance solutions that are user-friendly, intuitive, and integrate seamlessly into existing platforms.
  • Maintain a data-driven approach: Leverage data analytics to understand user behavior and continuously optimize your embedded finance offerings.

By embracing these predictions and focusing on innovation, you can position your fintech business as a leader in the evolving embedded finance landscape. Remember, the key lies in creating solutions that are personalized, industry-specific, and prioritize both security and user experience.

Looking Ahead

As we navigate the complexities of the fintech landscape in 2024 and beyond, the integration of AI, stringent fraud prevention measures, business-centric financial solutions, and a growing emphasis on climate Fintech stand out as key trends shaping the future.

For fintech business owners and startup founders, these trends underscore the importance of staying at the forefront of technology adoption and innovation. Embracing embedded finance, exploring the potential of CBDCs, leveraging AI and cloud technologies, prioritizing cybersecurity, and investing in personalized customer experiences are not just strategies for growth but necessities for survival and success in the competitive fintech ecosystem.

As Thinslices, we are committed to partnering with fintech firms to navigate these trends, harnessing our expertise in digital product development to create solutions that not only meet the current needs of the financial sector but also anticipate future challenges and opportunities. Together, we can forge a path towards a more inclusive, efficient, and secure financial future.

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