Digital lending (2024)
These startups are on the money
Last updated: 28 Nov 2024
Market 101
When interest rates started to rise at the tail end of 2022, digital lending fintechs found themselves in a Catch-22. As fintechs saw an increase in income from lending, the cost of borrowing went up, decreasing the number of potential borrowers.
That can be particularly seen in the 2023 revenue profiles of Europe’s fintechs. For instance, while lending made up the majority of neobank Zopa’s revenue last year, CEO Jaidev Janardana told Sifted in June that once interest rates start to come down again more borrowers will start to return to the platform.
“We’ve had this behaviour where some of our best borrowers have postponed their discretionary spending,” he said. “If rates were to come down, they would come back into the market which would help our business.” In the months after his comments, interest rates in the UK and Europe started to come down from historic highs and are now at 4.75% and 3.25% respectively.
Continued uneasiness about the long-term financial sustainability of lending fintechs may have translated into the levels of VC funding for the subsector. European digital lending startups have raised $549.3m in funding so far this year — a close to 50% drop in funding year-on-year.
A huge chunk of that came from consumer lender Abound, which raised a £400m Series B in May this year. Other banner fundraises this year include climate fintech Cloover’s €105m seed round in May and January’s $48m Series B round for UK-based Bumper, which helps drivers split repair costs into interest-free payments.
This year has also seen some of Europe’s brand-name lending fintechs mature. BNPL lenders like Zilch say they are set to report full-year profitability for 2024. Earlier this month, Klarna also filed for an IPO in the US after it posted a H1 2024 adjusted operating profit of €52.7m.
Europe’s big-name challenger banks leaving their mark in lending may have also put off fledgling fintechs from building in digital lending. Sifted identified 65 pre-seed to Series A startups in Europe building in the vertical. In comparison, there were 104 early-stage companies in the CFO tech stack and 76 in the digital banking sector.
Early stage market map
Deals
Key facts
$2.1bn
is how much climate fintechs have raises in Europe this year
£2.3bn
is the size of UK neobank Starling's loanbook
$549.3m
is how much VC financing has gone to European digital lenders so far in 2024
Trends to watch
Neobank push into lending pays off
This year has also seen the results of neobank’s push into lending largely pay off. UK neobanks Starling and Monzo, for instance, both reported profitability this year with the latter driving almost a quarter of its revenue from lending.
This is the culmination of both neobank’s early dive into expanding their lending books. Starling started lending to SMEs back in 2018 and has since grown its loanbook to £2.3bn. Monzo began offering personal loans in 2018 and introduced its own BNPL product Monzo Flex in 2021.
Lending fintechs jump on the AI bandwagon
Fintechs have long deployed machine learning tools in the credit underwriting process. So it’s perhaps unsurprising that digital lending startups are building AI-powered tools — and one of the biggest proponents of this is Klarna. The Swedish BNPL fintech’s CEO Sebastian Siemiatkowski has said advances in AI will enable the company to halve its workforce.
Fellow BNPL lender Zilch also uses AI to improve credit underwriting, personalise affordability limits, detect fraud and analyse buyer intent. During last month’s Sifted Summit, Abound’s cofounder Michelle He also told an audience the lender uses a combination of AI and open banking technology to assess customer affordability.
Climate fintechs
Last year, Sifted reported on the wave of founders turning away from fintech to build in climate tech — and this year, some of the results of that switch have come to fruition. According to an October report on climate fintechs by German VC firm Commerzventures, climate fintech startups have so far raised $2.1bn in 2024, nearly equalling funding for the entirety of 2023.
Digital lending is a natural home for founders looking to build at the intersection of climate tech and fintech. Some banner fundraises this year — in addition to Cloover’s €105m seed round in May — included Hometree, which offers financing options for renewable energy systems, raising £50m in debt last month and B2B solar lender Candi’s $38m Series C in June.
Startups tracked by Sifted
Sifted take
The new normal of high interest rates may have put lending into the spotlight but VC investors aren’t exactly showing love for the sector. No one expects a return to 2019 levels of funding — when digital lending startup raised more than $3.1bn in Europe — on the horizon anytime soon. Still, that’s not to say there aren’t any green shoots for the sector. Many of the lending players that rose in the 2010s such as Klarna and Zilch are reaching maturity and there’s also activity in more niche markets, such as lending fintechs catering to green energy.
Rising stars
A vertically integrated solution that enables every lender and loan investor to operate smartly and cost-efficiently with funding from ff Venture Capital, Plug and Play, DFF Ventures, HV Capital and Albion Capital.
Round
Seed
Valuation
Undisclosed
Date
2023
Size
€11.3m
Backed by investors such MCJ Collective, Atomico and Pale Blue Dot, Opna helps carbon removal project developers secure financing from buyers.
Round
Seed
Valuation
Undisclosed
Date
2023
Size
€5.9m
Early stage startups to watch
Acre
Mortgage platform
€13.2m
€7.4m
-
AlbaCo
Business loans
€6m
€6m
-
Algoan
Credit Assessment
-
-
-
Altitude
DeFi loans
€5.5m
€3.6m
-
Ayan Capital
Personal loan
€5.9m
€3.4m
€24.4m
Banxware
Infrastructure Providers
€29m
€15m
-
Belong
Personal loan
€3.5m
€3.5m
-
Bislab
Credit Assessment
€1.7m
€1.7m
-
Bloom
Business loans
€360m
€360m
-
BridgeFund
Business loans
€21m
€20m
-
Cloover
Personal loan
€5m
€5m
-
CreditLogic
Infrastructure Providers
€8m
€3.5m
-
Debite
Business loans
€1.5m
€1.5m
-
Defacto
Business loans
€221m
€10m
-
doddl
Mortgage platform
€1m
€1m
-
Euler XYZ
DeFi loans
€36.4m
€29.1m
-
faire.ai
Credit Assessment
€4.5m
€3m
-
Ferovinum
Business loans
€27.8m
€20.8m
-
FinMatch AG
Business loans
€1.5m
€1.5m
-
finmid
Invoice financing
€35m
€23m
€100m
Fintern
Credit Assessment
€1.6b
€923m
-
Flowpay
Business loans
€7.8m
€2.1m
-
Fulfin
Business loans
€19.3m
€6.6m
-
Gilion
Business loans
€34.1m
€10m
-
HeavyFinance
Business loans
€5.2m
€1m
-
Hero
Invoice financing
€18.3m
€11.3m
-
Hydr
Invoice financing
€400k
€400k
-
HYPOTEQ AG
Mortgage platform
€830k
€830k
-
Incredible
Infrastructure Providers
€910k
€910k
-
Jeff
Credit Assessment
€4.5m
€1.8m
-
kennek Solutions
Infrastructure Providers
€16.6m
€11.4m
-
Kintai
Business loans
€1.3m
€1.3m
-
Krea
Infrastructure Providers
€770k
€770k
-
Kredium
Mortgage platform
-
-
-
Lemonero
Business loans
€6m
€4m
-
Levenue
Business loans
€8.5m
€8m
-
Mast
Credit Assessment
€2.5m
€790k
-
Mifundo
Credit Assessment
€11.2m
€10m
-
Moneybounce
Business loans
€1.5m
€1m
-
Monthio
Credit Assessment
€12.1m
€11.4m
-
MQube
Mortgage platform
€21.4m
€10.8m
-
neoshare
Infrastructure Providers
€19m
€19m
-
Noggin HQ
Credit Assessment
€920k
€850k
-
Nordstreet
Business loans
€310k
€310k
-
Oper Credits
Mortgage platform
€14.4m
€11m
-
Opna
Business loans
€5.9m
€5.9m
-
Perenna
Mortgage platform
€83.6m
€47.3m
-
Prestalo
Personal loan
€1.5m
€1m
€20m
Prestatech
Credit Assessment
€8m
€4m
€23m
Qomodo
Invoice financing
€4.5m
€4.5m
-
RE-Lender
Business loans
€1m
€1m
€12.1m
re:cap
Business loans
€38.3m
€13.3m
-
RUUF
Mortgage platform
€450k
€360k
-
SAPI
Infrastructure Providers
€9m
€9m
-
smeGo
Business loans
€5m
-
-
Softloans
Infrastructure Providers
€1.1m
€1m
€5m
Sprive
Mortgage platform
€2.4m
€1.7m
-
Swoop Funding
Business loans
€21.9m
€6.5m
€32.4m
TeklifimGelsin
Credit Assessment
€2.2m
-
-
Tembo Money
Mortgage platform
€9m
€6m
-
TRIOTECA
Mortgage platform
€2.4m
€1.4m
-
Two
Invoice financing
€28.8m
€18m
-
Viceversa
Business loans
€33m
€10m
-
Virgil
Personal loan
€20.1m
€15m
-
Wollit
Credit Assessment
€4.8m
€3.6m
-
Europe’s success stories
Who early stage startups are up against
(Pre-)Seed
Series A
Series B
Series C
Series D+
IPO/Exit
London-based bank for entrepreneurs which provides accessible debt finance and counts SoftBank and Tech Nation, among others, on its cap table.
(Pre-)Seed
Series A
Series B
Series C
Series D+
IPO/Exit
Citi and GSR Ventures-backed lending platform that aims to increase access to affordable loans.
Sources
News articles
Digital bank Zopa to expand into current accounts, investments and SME lending | June 2024 | Sifted
AI FinTech Abound raises mammoth £800m | May 2024 | BusinessCloud
Zilch considers secondary share sale after first profitable quarter | November 2024 | Sifted
Klarna files for IPO in the US | November 2023 | Sifted
Europe's profitable startups | July 2024 | Sifted
Klarna: AI lets us cut thousands of jobs - but pay more | August 2024 | BBC
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