Fintech Review 2024: Navigating Trends and Innovations in Startups
Updated: Nov 6
Explore fintech trends for 2024, including AI, DeFi, and compliance, with insights for startups, investors, and entrepreneurs
What Is This About?
The Fintech Review 2024 navigates the trends and innovations reshaping startups in the DACH financial sector. From AI-powered banking and embedded finance maturation to regulatory shifts and funding recovery, this annual review maps where fintech is heading next.
Introduction
The 2024 fintech review captures a year of navigating new realities — from tightened regulation and compressed valuations to emerging AI applications and embedded finance maturation. This comprehensive review covers the trends, innovations, and setbacks that shaped financial technology across Germany, Austria, and Switzerland, providing the analytical foundation for strategic planning heading into 2025.
The 2024 fintech review captures a year defined by tightened regulation, valuation compression, AI integration acceleration, and embedded finance maturation across the DACH region. Key themes include enforcement actions reshaping compliance priorities, AI-driven products gaining mainstream adoption in lending and risk management, and neobanks shifting strategy from growth to profitability. The review provides the analytical foundation for fintech strategic planning heading into 2025 and identifies which business models have proven durable through the correction cycle.
What Is This About?
The Fintech Review 2024 navigates the trends and innovations reshaping startups in the DACH financial sector. From AI-powered banking and embedded finance maturation to regulatory shifts and funding recovery, this annual review maps where fintech is heading next.
Explore fintech trends for 2024, including AI, DeFi, and compliance, with insights for startups, investors, and entrepreneurs Startuprad.io brings you independent coverage of the key developments shaping the startup and venture capital landscape across Germany, Austria, and Switzerland.
This founder interview is part of our ongoing coverage of Scaleup Founder Interviews from Germany, Austria, and Switzerland.
Table of Contents
Introduction to the 10th Annual Fintech Review
Key Challenges for Fintech Startups in 2024
AI and Machine Learning: Transforming Customer Experiences
The Role of Regulations in Fintech Innovation
Competing with Traditional Financial Institutions: Strategies for Startups
Decentralized Finance (DeFi) and Blockchain Applications
Expert Insights: Quotes from Industry Leaders
Conclusion: What Lies Ahead for Fintech in 2025
Introduction to the 10th Annual Fintech Review
Welcome to Startuprad.io’s 10th Annual Fintech Review! This milestone edition reflects on a decade of fintech evolution and dives deep into the groundbreaking innovations, emerging trends, and challenges faced by startups in 2024. From AI-driven customer solutions to decentralized finance (DeFi) and regulatory shifts like DORA, this review equips startup founders, entrepreneurs, and investors with the insights needed to navigate the dynamic fintech ecosystem.
Key Challenges for Fintech Startups in 2024
Economic Pressures
2024 has seen a tough macroeconomic environment, marked by high interest rates and reduced funding opportunities. Startups faced significant hurdles in securing capital, making operational streamlining a necessity.
Funding Challenges
Fintechs struggled to adapt to investor demands for profitability. Layoffs and operational adjustments became common strategies for survival, as traditional funding sources dried up.
Competition and Cybersecurity
The year also saw intensified competition and increased cybersecurity threats, underscoring the need for robust data management and compliance with standards like DORA and NIS2.
AI and Machine Learning: Transforming Customer Experiences
AI and machine learning have been pivotal in 2024, enhancing customer experiences through personalization and operational efficiencies. Key developments include:
AI-Driven Chatbots: Providing 24/7 customer support.
Credit Scoring Improvements: Leveraging AI for better lending decisions.
Predictive Engagement: Anticipating customer needs to offer tailored solutions.
As noted by Pascal Lauria, CEO of Cogia, AI adoption has redefined productivity and customer engagement across the fintech landscape.
The Role of Regulations in Fintech Innovation
DORA and the European AI Act
Regulations such as the Digital Operational Resilience Act (DORA) and the European AI Act are shaping the fintech ecosystem. These frameworks emphasize cybersecurity, data privacy, and operational resilience, pushing fintechs to innovate responsibly.
Compliance as a Driver for Innovation
Frank Schwab, Co-Founder of Fintech Forum, highlights how compliance can spur innovation by demanding transparency and accountability while allowing flexibility for business model development.
Competing with Traditional Financial Institutions: Strategies for Startups
SME Banking: The Next Frontier
Small and medium enterprises (SMEs) represent a significant market for fintechs. Strategies include:
Niche Targeting: Addressing underserved markets.
Technological Leverage: Utilizing blockchain and DeFi.
Collaborations: Partnering with traditional banks for mutual growth.
Simplification and Customer-Centricity
Simplifying financial products and enhancing user experience remain key differentiators for fintech startups.
Decentralized Finance (DeFi) and Blockchain Applications
DeFi and blockchain continue to disrupt traditional financial models by offering transparency and efficiency. Highlights include:
Tokenization of Assets: Enabling fractional ownership and improved liquidity.
Global Adoption: Cryptocurrencies like Bitcoin gaining traction as universal digital assets.
Luca Frignani emphasizes that tokenization could revolutionize illiquid asset markets, bridging gaps between traditional finance (TradFi) and DeFi.
YouTube Video
Expert Insights: Quotes from Industry Leaders
Paolo Sironi, Global Research Leader:
“Regulation is an engine for innovation, as long as it corresponds to principles of transparency and accountability.”
Frank Schwab, Fintech Forum Co-Founder:
“Simplicity adds value. Overengineering often leads to inefficiency.”
Pascal Lauria, CEO of Cogia:
“AI and predictive engagement can revolutionize customer relationships, maximizing operational efficiency.”
Conclusion: What Lies Ahead for Fintech in 2025
As we conclude this year’s Fintech Review, the industry’s resilience and innovation stand out. Key takeaways include:
The growing importance of compliance and cybersecurity.
AI’s transformative role in customer engagement.
The potential of DeFi to reshape financial ecosystems.
Looking ahead, fintechs must continue to adapt, innovate, and collaborate to thrive in an increasingly competitive and regulated landscape. Here’s to another decade of fintech excellence!
Discover 5 Years of DACH Fintech Evolution
For an in-depth look at the evolution of financial technology across Germany, Austria, and Switzerland, explore our comprehensive DACH Fintech Trends 2020–2025 review — your go-to resource for funding patterns, regulatory shifts, and innovation breakthroughs shaping the region’s startup ecosystem.
Automated Transcript
Welcome to Startuprad.io, your podcast and YouTube blog covering the German startup scene with news, interviews and live events. Music. Hi everybody, this is Joe from Startuprad.io, your startup podcast and YouTube blog from Germany. Today, I'm bringing you incredibly the 10th edition of our annual FinTech review by Startuprad.io. This milestone edition marks a decade of exploring the dynamic FinTech landscape, offering insights into groundbreaking innovations, emerging trends, and the challenges shaping the industry. For 10 years now, we have accompanied you during the holidays, and I'm happy to say many frequent guests came back. This year's review is especially significant as it reflects on the evolution of fintech over the past 10 years While addressing the transformative developments of 2024.
Namely AI and the regulations, especially DORA and indirectly the AI Act, from the rise of AI-powered solutions and sustainable business models to the increasing convergence of digital assets and traditional banking, the fintech sector continues to redefine itself in the face of economic and technological shifts. In this comprehensive review, we'll bring you exclusive insights from industry leaders, in-depth analyzers of key trends, and thoughtful predictions for the year ahead. Whether you are an entrepreneur, an investor, an industry enthusiast, an analyst, this episode is designed to equip you with the knowledge to navigate the fintech ecosystem in Germany, Austria, and Switzerland with confidence. Join us as we celebrate a decade of fintech excellence and look forward to the opportunity and challenges that lie ahead.
Let's dive into the innovations and narrative shaping the financial future of the DACH region and beyond. Therefore, I would like to welcome Paolo, the global research leader, banking and financial markets, bestselling author, as well as a fellow podcaster. Buongiorno a tutti quanti. Buone feste e buon anno. Most likely I'm an aficionado and I just like it, so I'm happy to be here this year too. I would also like to welcome a frequent guest, professional board member, strategic advisor, and the co-founder of the FinTech Forum, Frank Schwab. Thank you, I'm fine. How are you? I would like to welcome back Luca Frignani, the CEO and co-founder of Frankfurt-based fintech Exaloan. Hey, Jörn. Hey, it's great to be back. And I would like to welcome for the first time Pascal Lauria, CEO and co-founder of Cogia, as well as Coin Analyst.
Hi, Jörn. It's a pleasure. Let's start with the first question. What are the biggest challenges fintech companies faced in 2024? And how are they adapting to these challenges? So what we see over not only in 2024, but over the last couple of years that, let's say, the spirit of the beginning is over, the economic slowdown and reduced finance can be experienced. So we have seen another couple of fintechs closing the door. And therefore, for the surviving ones, it's very important to get the funding or to enter a stage where they actually become profitable. And therefore, what we have also seen, a lot of fintechs starting to streamline their operations. We see more and more layoffs of staff in order, let's say, to be able to survive. So I would argue 2024 was for many fintechs a tough year.
And probably as long as the interest rates are as high as they currently are. Investors have much more options, let's say, to invest their monies. And therefore, let's say the FinTech investments and the FinTech funding will probably stay at a significant lower level compared to what we were used before. That's definitely a tough question that you're asking right there. So I would say probably you can summarize it specifically with a view on lending. I would say it was a combination of a changing macro environment, which was certainly pretty challenging for a lot of lenders because, you know, we've had significantly higher interest rates since 2022. too. And I mean, the expectation was that the rates will be coming down fairly quickly. They didn't.
And in our estimates, they won't be coming down very quickly as or as quickly as many people expect. So that means cost of funding is pretty high for a lot of lenders. And that was certainly something that was also one of the one of the challenges. I would say that had its implications, A, on equity fundraising, but also B, in general, if you're, you know, a lending fintech, then basically trying to manage your cost of funding and cost of capital. And so we have seen that pretty much this combination of a tough macro environment and then also the difficulties of actually raising additional equity capital in particular for debt facilities. That was one of the main issues that affected kind of the ability to lend at affordable rates for a lot of balance sheet lenders or lending fintechs.
And that was kind of the overarching theme that we see and that we work with a lot of these lending platforms to rethink how to actually build alternative funding sources, how to actually access new ways of capital in order to be able to continue lending and to be a bit more resilient. And that was that is certainly also one of the things or one of the themes that we expect to be continuing when we enter 2025. And I mean, that is also accompanied with, you know, VCs or investors expecting a clear path towards profitability and reduced dependency on essentially equity fundraising. So that's what we've been seeing. And yeah, that was a pretty tough environment to operate in. Especially in all aspects, you know, within fintech lending verticals that we've seen.
And yeah, so there is a lot of movement going on and definitely what we see a lot of different approaches on how to mitigate this going forward. Well, I think it's a peculiar challenge in the sense that we are coming to the realization that fintech innovation is making a big impact, and that comes through the innovation of artificial intelligence. It was on everybody's desk, the discussion about the generative AI, and now we're moving from large language models to large reasoning models. The only issue with this one is that this type of technology is owned by a few big companies that basically demand others to use their services, which comes with sort of complexities also for the fintech. So they're not owning the AI per cent anymore. They need to rely on bigger ones.
There is a pricing point. There is also a privacy point that has to be considered. So this is, to me, a shift in the way technology will be deployed from the fintechs to the bank. So it will be interesting to understand how the ecosystem around generative AI will take shape because that will influence the configuration of the fintech world going forward. So, Paolo, you think AI regulation will have an impact on fintech? Well, regulation always have an impact on the way the fintech operate because in the end, it takes the boundaries under which the banks have to work, and the fintechs that become banks have to operate. On the one side, when regulation is too clear, sometimes it's too, if you like, restrictive, it's too precise in a world that requires flexibility.
On the other side, when regulation is not there yet, there is sort of a gap between the art of possible, as many might not be comfortable to put down their investments if it is not clear what will be allowed and what will not be allowed. So I think that there has to be a new rethinking about how regulation is impacting financial services, at least thinking first principles instead of thinking roles, because many things are really happening in the realm of technology. And I'm a feeling that, you know, too narrow, if you like, rails might not allow the innovation to be competitive, especially on the European continent. At the same time, you know my work in literature. I'm an institutionalist. I do believe that regulation is an engine for innovation as long as it corresponds to the key principles asking for transparency and accountability and leaving the industry somehow to identify what is the best business model to work with.
Well, we have several challenges. Number one, of course, cybersecurity threats are increasing, right? So you might have heard about the Evolve Bank that has been attacked by ransomware. So this is definitely something we, especially as startups and the fintech side, have to watch for and be more cautious about, right? Security is a very important topic. Regulatory compliance is a big thing. So since this year, NIS2, DORA are becoming set in stone, and companies are the big fintechs needing to apply DORA and NIS2 standards. So if you want to play in the same field as a fintech, you need to make sure that you kind of keep the same standards, right? Even with the traditional players. So this is definitely very big. Resilience in communication, for example, stuff like that.
There's a lot of things that you need to worry about. Well, data management issue is a big thing as well. Like fintech struggle with data silos, right? They need to connect all those data. And that is a big challenge. And of course, to be honest, we have intense competition. So it's not like an easy walk anymore. So we have a tough competition. I think these are the main challenges, to be honest, in 2024. AI and machine learning have been definitely the buzzword of this year. So how are artificial intelligence and machine learning transforming, especially the customer experiences in fintech and banking? Yeah, AI and machine learning, that was kind of the buzzword of 2024, right? I mean, so we've seen a broader use of AI, both internally and externally, which is pretty interesting.
We as well, we're a big user of generative AI, particularly internally, to actually increase productivity, particularly on coding and on essentially summarizing content, creating content. But we've seen also some elements around customer support, where you have AI-enabled chatbots to be reachable 24-7 and just to improve the customer relationships, borrower relationships, and the like. And we've also seen, again, with a focus on lending, we've seen, you know, enhanced models and tendency to start implementing AI in credit scoring, basically aggregating more and more data, trying to come up with ever more creative ways to assess probabilities of default and ultimately, you know, make better, faster lending decisions. And that's certainly the name of the game, but it's in fairly early stages so far.
Well, I think that you can think of the latest 10 years of innovation in banking this way. And I'm simplifying a bit. Taking from my 2024 global outlook for banking and financial markets. And in a few weeks, I will release a 2025 global outlook for banking and financial markets. So what did we say at the beginning of 2024 is that 10 years ago is when the banks understood that their cost-income ratios were not sustainable as a consequence of the global financial crisis, very low interest rates, high cost of capital, they needed to, if you like, the risk. And therefore, the marginality in the core revenue pools of banks started going down. And so in order to rationalize and cut costs, what did banks do? Well, they could close branches, in essence.
And at the same time, knowing that consumers were more and more inclined to use mobile or websites to do banking, they started lifting and shifting on cloud. A lot of their operations in order to power up this, if you like, mobile technology, okay, in different forms, are getting a bit more flexibility to do so. But those were years of, let's say, outranted digitalization. So there primarily was cloud or infrastructure transformed to put a branch on mobile. However, banks realized that that was not enough because it is not easy to self-direct yourself on a mobile bank and therefore banks started learning through time that machine learning was relevant in order to create personalization. So what about you go to your app and you see the things that you care the most?
So you have a lot of things happening on your app. It could be confusing. So with machine learning, you can basically receive a service which is a bit more personalized, cleaner, if you like, and easier to use it. However, even if banks apply machine learning at best, that doesn't necessarily mean that mobile banking is generating enough revenues that basically cover the cost of running mobile banking. And that's very interesting because I've been talking to a lot of banks and new banks worldwide, and a lot of them got trapped into the situation where they turned the core banking architecture into a variable cost structure using a cloud or cloud native, which is okay, as long as you can control that variability. And through the pandemic, volume skyrocketed because everybody went on their ramps to check the bank account.
But every time you click on something, there's an API that hits a cloud resource, which means dollars you have to spend. So they ended up with a lot of activities on the mobile banking, but not enough revenues because most of those activities, don't you, their margins. And the reason is because there is typically distance between the consumer and the bank. That requires a relationship. I discussed that length in my literature, especially the latest bestseller, Banks and Fintech and Platform Economies. But things started to change now because if generative AI is known for something, it's about language. So now this is the time where communication becomes effectively the core element of business transformation. You may remember that years ago I was already talking about conversational banking.
So we went from outright digitalization, that is AbriCloud, through personalization, which is AI in terms of machine learning, into generative AI, which is now the elements of communication. Still to be seen how AI will be effective in doing that. There are a lot of concerns. Of course, there is risk management that needs to be created. Just because you can access it doesn't mean you can use it if you don't have a strong platform to enable you governance of the AI. But this is basically the way AI is now reshaping the focus of banks' investment and therefore where fintech will focus to be successful. Not me, but a friend of mine. Is it another in fintech? Or let's say startup, not fintech. Let's call him startup. He has applied it. Unfortunately, because of the rules, he always has to say, be careful, customer, this is an AI, making your support.
So you have to be transparent. I would love just let Otto, let's call him Otto, you know, speak frankly and not have, like, you know, scare the people. AI is now responding to you. Like, I would rather have, you know, not having to have to mention that. But, oh, well, these are rules and regulations. Yeah, so I know people. I'm thinking of using it. Right now, my business is just in the start, you know, with my copy trading and my quant algorithm, as you know. and I am thinking of applying those cool accents for the targeted regions that we want to go after, right? All right. Another very interesting part is you can do proactive engagement by predicting customer needs. So using the data, having the AI, the AI can help you like having predictive engagement, like I see that now this and this could be useful for the customer.
So that is another revolutionary thing that you can maximize on your lead pool and the engagement possibility by being proactive and not, you know, reactive, right? So being proactive to see, you know what, now a change of loan would be useful for you, right? We have better terms than you could benefit from. Proactively looking at your situation and your data. The AI could be very valuable for this. And, of course, I mean, the operational efficiency, right? AI, you know, automating routine tasks, all this kind of stuff. This is really fun. I mean, let's not just talk about it. It's basically machine learning in combination with AI, right? Certain tasks are not ideal for generative AI. So for that, you want to have clean machine learning that does very precise tasks.
But then the generative AI will take that result and make it in flowery words. And like I said, OpenAI, and I'll just release Sora, right? Also there, we could provide even cool help videos. Like amazing. Imagine, I could even give the person attractive help videos and give them guidance. The possibilities are just tremendous. So AI is going to be revolutionary. You will be very efficient. You can have very lean teams and be very effective to do quite a broad task, like bandwidth of tasks, using those AI agents and bots. So whether that's now specific to fintech or not, I think that's a very own question. For sure, we experience, let's say, the chatbots and the improvement of the chatbots in order to interact with the customers in an automated way.
That's not only due to generative AI, but in general applying, let's say, machine learning and, let's say, grading an insightful but automated contact center with the customers. So that's something which has significant influence. However, we will also see, let's say, general banking themes like AML, fraud, cybersecurity, the impact not only on the fintech, but also on their customers. So in terms of balancing convenience with security empowered, let's say, by AI. So these are basically, let's say, what we can see. Going forward, I would also expect that we see much more personalization. That's probably due to the fact that AI has the algorithms and has the capability to cater products and service offerings to individual needs i would argue we are still at the very very beginning of that.
Whole new theme of artificial intelligence so i would expect much more to come going forward, what do you think what role do regulations and compliance play in shaping the fintech innovation this year, 2024, and looking in the future, 2025, thinking about the AI, Ag, DORA, and so on? Well, as I have mentioned before, right, we have DORA and NIS2. It's right here. It's happening right now. So this is going to influence us, right? And there's the European Digital Operational Resilience Act coming as well, right? That will also force companies and fintechs to come up with solutions, ideas innovative ideas how to be able to comply to regulations but keep the costs low that is our opportunity our chance to try to see how to make it possible to have compliance but without a big overhead by using automation and intelligent you know solutions right this is the key because compliance and regulations always produce costs and overhead that's the thing right um so this is one and.
What else can I say to you about this? Yeah, so it will drive innovation, right, as I said. And there's going to be a higher focus on data privacy. So we got to be careful about privacy. Also, when using AI, we have to be very sensitive on the regulatory, you know, about data privacy. You know, so it's not as, you know, we have to be careful not just to use any model out there. You know, we have Gemini, we have Cloud AI, we have Mistral, we have all these things, all these players. and we have to watch, is this GDPR compliant? Are we moving data out there? Or do we have to take LLM models internally, train them in order to compensate and have this same kind of service in order to fulfill the regulatory requirements? So this is going to be very interesting to see what they will accept, especially on the privacy part in the fintech space because privacy is everything, right?
Fintech is about trust. So privacy is one of the key areas, right? That needs to be watched for. Now, you know, as we just said, the regulation is super important because it glues all things together. I think that what is the most interesting to me in terms of regulation is what will happen when money will become more digital. So everything that moves around the money movement, that is the digital euro, for example. So the next year is the year where the first phase of the project definition will be done, and therefore the European Central Bank will have to define what is the next course of action, which also requires, if you like, to create the legal and the regulatory framework around the data that make it all effective, not just for technology, but also regulation.
So that is the one piece of the rulemaking that makes me more curious. Also, the intersection of all of this with the monetary policies. I keep on seeing, for example, up from the VAS, a lot of wonderful papers that are very technical, but not much discussions about the business implications in terms of the monetary policies and so on and so forth. And I think that is needed. So I hope there will be more research and discussions around that. I wouldn't necessarily say that, you know, regulation and compliance is actually shaping innovation. I don't really have a lot of conversations where these are actually the two most favorite and most popular topics when I talk to other people. But I think, yeah, in terms of regulation, the two big ones out there are DORA, so the Digital Operational Resilience Act, which is going to be phased in from actually January 1st.
So this is something that we, but also other fintech lenders, have had on their minds because it particularly touches elements of cybersecurity and just making sure that you're, you know, that you're operationally resilient. And in a way, we think it's kind of a good thing because similar to, you know, other regulations like crowdfunding service provider regulation and so on, it's aimed at effectively leveling the playing field a bit and additionally also improving kind of the resilience of fintech lending business models. So in a way, it's a good thing. On the other end, obviously, additional processes that need to be designed and just additional sort of checks and balances around, you know, how secure is your whole IT infrastructure with respect to cyber threats.
So in a way that is going to probably also lead to additional focus for a lot of players to reinforce kind of their processes and their infrastructure, which I think is going to help overall the maturity of a lot of players. Of a lot of fintechs. But that's probably one of the regulations that's going to shape whatever's happening in the fintech space in 2025. And then on a longer time horizon, obviously, also the European AI Act, although our view is that there are still quite a few clarifications needed, especially in terms of, you know, the overarching kind of impact this regulation is going to have on the use cases and how also data processing is going to be affected by the regulation. And so we're not expecting this to be, to have an imminent impact, but that's certainly like over a two to three year time horizon.
This is also going to be one of the elements to think about. So probably one of the biggest impacts we are currently facing is DORA. So the digital Operating Resilient Act, especially here in Europe. But we also see that kind of thinking from the regulators all over the world. So let's say digital and cyber resilience is becoming more and more important. The same is true for everything around money laundering and let's say know your customer exercises and compliance. The requirements grow steadily. And what you have seen with some of the well-known neobanks, so not only established traditional banks, but also the neobanks and fintechs, they have faced significant fines on being not compliant. Therefore, let's say, Regulation is becoming a key competence for every player in the banking and the Fintech scene.
Because if not, compliance will make sure that they cannot, let's say, create and increase their business. As we have seen with N26, they were not allowed to onboard new customers for quite some time. Um and but but they are not alone other players not only the traditional banks they they got uh let's say their problems as well as they grow significantly uh and not complying with all regulations so so and and long message short going forward regulations will increase and increase and increase and you need to generate strategies that you can fulfill them efficiently and effectively. What strategies should fintech startups adopt to remain competitive against traditional financial institutions and the other way around? If you also have an answer for that.
I did a fintech too. Okay, I tell you what happens and I really tell you what happens. I saw it coming, then the pandemic sort of delayed that. But most of the competition in fintech applied to the very symmetrical businesses like payments, okay, because there you can get volumes or retail where you can get simplifications around the way you deal with large cohorts of people. Yes, you can divide them into wealthy, not wealthy, older and younger, or maybe be more personalized, but, largely speaking, is a mass market that got commoditized. So now that happened, the commoditization happened. What is left out of this are large corporate, for example, that not many can do, that is strong relationship-based. You could do trade finance, but strong relationship-based.
World management, which is still a bit difficult and complex to digitalize because of, if you like, the distances that are always discussed between what people need and what banks offer and the relationship in between. Remember, the iPhone is a technology to demand. Most of these, instead of businesses, operate as an offer industry. So you need to put an offer industry on demand technology. Possible, not easy. But there's a big segment, which is super important, that banks forgot, like a forgotten child. And the reason is because it is too varied for them to systematize easily. And that's the small and medium enterprise market. Those of the Middlostend in Germany would be. Now, guess what? 90% of firms worldwide are SMEs. In Japan, 99.7%. Just to say it's not just an emerging market.
70% worldwide of the workforce work for an SME, and 50% of GDP worldwide is produced by SMEs. So that's a huge market for banks to serve. However, there is a high cost to serve because all of these are different. There's a lot of manualities. They're very risky. So banks transfer all of these risk management, if you like, less comfort and complexities in onboarding clients. Into costs that the SMEs have to pay. And so in the Western world, the SMEs pay up to 3% more than a large corporate when they borrow money, and up to 10% more in the emerging markets. Now, after 10 years of innovation, especially with AI, we're at the point where banks can tackle the complexities of the SME market. And that's the reason why I'm seeing a lot of competition between banks and the neobanks in banking for SMEs.
To give you an example, I just released a research from the IBM Institute for Business Value Banking for Small and Medium Enterprises. And I got not only large banks discussing the topic, but also unicorns like Nubank. Nubank is a 100 million retail customers, a new bank in Brazil with 30% return on equity this year. And they're now stepping into the SME market, basically, you know, stepping up the competition with banks where there is more, if you like, presence because all of these manualities require, if you like. Branches, back offices and people. And so that is where the competition is intensifying in 2025 and for the next five years. So all of the fintech that listen to this year-end review get this one clear. SME banking is the next battlefield of competition between banks and unicorns.
Well, you know, it's the same as me. I mean, I see myself as a mini fintech startup, you know, also embracing crypto. So I think there is a lot of opportunity. Number one, I think you need to do niche targeting. For fintechs, nowadays, we've got to find your niches. That's a key aspect, definitely. Leveraging our technological benefit, being a startup, using the latest tech, but also being open-minded to the latest development. I think blockchain is a big part and DeFi is a big part of it. Embracing that is going to be big. And this can help fintech companies to compete against traditional organizations that might be not as open for it, not as agile to those changes and trends, right? So there's a lot of benefits coming with blockchain, and it's very beneficial, especially for the fintech space.
And I would recommend, you know, the strategies for fintech startups should be also trying to build partnerships, either with additional other fintech companies to, you know, together you're stronger, right? Or with solution thinking, right? For the customers. But also, I believe in this kind of hybrid models. If you can have an entry and leverage with a traditional bank, leverage their customer base, leverage that experience that they have, and then have them benefit from your innovation and your agility, that is, I think, the best combo. I mean, me as a fintech starter, I would love to have like a UBS as my customer and offer, let's say, because of my product, my quant solution, their wealth management, my product to their customers. Imagine, that would make me fly, right?
So this kind of combination of having the power of the traditional with the customer base, with the financial backup, and then the innovation and fintech startup on the other side, I think that would be beautiful. And I would love to see more of that, by the way. And, of course, having customer-centric approaches. We need to differentiate. This should be the strategy for fintech startups. Making finance is complex. Take away complexity. Make it easy. Make the entry easy. Take away the complexity. That's the key thing. Make the user experience as simple as possible. And this could be our benefit for startups and our advantage towards those traditional institutes. Honestly, I think it's not really about being... Competitive or competing between incumbents and fintechs, I think the future really is going to lie more in cooperation, at least as far as lending is concerned.
If you want to simplify it, the way we look at it is incumbents like banks, asset managers, and so on, they sit on a lot of assets. Fintechs have a great tech stack, but ultimately it's the combination of the two that is really yielding promising results and ultimately also attractive, you know, economics and attractive ways to actually generate revenue. So we actually think that, you know, building out partnerships is going to be a name of the game. Also going forward, especially in lending verticals, just because, you know, having balance sheets or deep balance sheets is just really difficult to come by or like, you know, building out a deposit base. It's just such a tricky thing to do for a lot of fintech lenders. And so if you can partner up with a financial institution that can kind of give you the firepower so that you can ultimately satisfy the borrower demand, then that's probably an important way to go.
And I think one of the great examples here was kind of the Unicredit slash Huffer Bay and Banksware transaction. Where you can definitely see, you know, You have a digitally enabled player, a fintech that is able to essentially create a lending product for smaller businesses, and they can lend with more attractive unit economics. And ultimately, they have an institutional backer that provides access to the funding, and you can create a great partnership model out of that. So that will be kind of our expectation of what's in store also in 2025 when we're talking about how is the landscape going to evolve and what's the dynamic going to be between incumbent institutions and fintechs going forward. So unless you are already a super large fintech, we may remember PayPal at the beginning or 10 years ago, which we call the fintech, right?
So the super large players, they keep trust their strategy and grow. So for them, basically, I believe, of course, they need to stay competitive. Have but with established business models they just follow their strategy going forward however for a small sized medium sized fintech player in very crowded markets for me it's very important that they solve a real problem so they really need to solve an urgent problem, uh where people suffer or where they enable something which was not before and that basically, they need to follow a niche strategy so having a very narrow product or very narrow service which really solves the problem or caters a need. And then they take it from there. And it's this famous 10x. You somehow need to be 10x better or perceived as being 10x better or 10x cheaper, or promising something which is, let's say, very different from what it's already available in the market.
And ultimately, I think the biggest challenge is also to develop your business. So let's say having a great product and service is good, but being able to sell it with, let's say, a reasonable margin in order to generate at some point in time profits. I think that is the other side of the metal where many, many fintechs struggle. But that's where they have to compete. How is decentralized finance, DeFi, impacting traditional financial models and what's next for blockchain applications? Yeah, that's a pretty interesting question. You see the Bitcoin sign in my background. So I'm participating in that community from a very early stage since 2013. With respect to DeFi, itself, I still believe there is a long, long way to go. So what we are currently experiencing is that we have here and there, let's say, some early projects with, if you look at top down, very limited view and reach with limited reach.
So let's say tokenization of any kind of assets, projects are launched, but volumes are still very, very low. So totally different to, let's say, the cryptocurrency space, where if you look at the, let's say, top 100 cryptocurrencies or blockchain projects or platforms, they have at least reached a significant market volume and market capitalization. You also see significant transaction volumes, whether it's for speculation or not, that's something we can discuss. But it's actually growing volumes and growing transactions and more and more users and more and more wallets available beyond Bitcoin, Ethereum, Solana. Bitcoin, I would argue, it's step established itself as a kind of. Universal digital asset accepted across the world while at the same point in time we see significant global shifts in terms of trade so we see that trade actually is much more regional we have from a politic political point of view, let's say globalization, is at the point where we go back to some extent it's from pure globalization back to regionalization and localization and we also see a decrease of the dollar in terms of relevance when it comes to global trade it's still the most relevant one However.
Let's say that the dominance reduces year by year. And we may end up in a situation where especially Bitcoin is, let's say, the only digital asset which is accepted by all parties from China, Russia to Europe and the US. And that's very interesting because if you would have argued something like that 15 years ago, people would have called you nuts. But if you now look at that, China already has 0.9 of all the Bitcoin. The US has, even before Trump, the US have 0.99% of all Bitcoin, basically 1% of all Bitcoin. And that other governments and central banks also starting discussing the concept of a Bitcoin reserve. Then we see a total different development, right? So if we count that also as part of being DeFi, then you see that Bitcoin as an asset class somehow has established.
Also, almost all banks globally work on some kind of integration or have already done some kind of integration. And also companies by now. So it's not only micro strategy who, let's say, have a clear Bitcoin strategy as, let's say, in the treasury function, but also many other companies are currently discussing that. So that's basically for Bitcoin. But if you then look at the, let's say, classical platforms like Solana, like, of course, Ethereum, we may even discuss Ripple as being a platform. At least they have some traction also in the real world with, let's say, providing a solution to selected problems where, let's say, a blockchain platform is a proper solution. Still speculation significantly higher than real business, but real business comes.
And I think if we look at what's happening now in that whole space, the focus will turn significantly more to providing applications and use cases to leverage, let's say, the assets already generated in these different digital currencies, asset class, you name it. So that's something which I believe will come next, so probably, but not only next year that's something that's a development over the next three to five or seven years which basically means from concept to implementation into let's say. Daily processes so i really believe in 10 years from now we have a total different situation and And we are now at the terminal point because there's so much money, volume and assets into that, let's say, digital asset space that you now can actually start leveraging on.
And also the number of players increased significantly from, let's say, at the beginning, a million now to a couple of hundred million. So that's a pretty new dynamic on all fronts. So I expect that we are soon on a turning point where we say, okay, it's not only about the innovators or the early adapters. We go now early mass into that segment. And basically the numbers confirm that we have in many developed and developing countries, 5% to 10% of people who somehow own. Let's say, cryptocurrencies or crypto assets. Even if it's now many for speculation reasons, it can be transformed into, let's say, more day-to-day relevant themes. That basically is my view on that. Still also early days. However, the theme will find its place in the financial world.
Global system uh so i'm gonna that that's such a vast field so i'm gonna boil this down really to again our our area of expertise um we're a big believers in in the tokenization of assets and and real assets so we really think that in particular in in illiquid asset classes private equity private debt um there is so much uh efficiency that can be gained when you create like fungible wrappers around these assets in order to make it possible to reduce friction of trading these assets going forward. So tokenizing illiquid or real assets and reducing or removing intermediaries in the process, that is going to add transparency, reduce cost and so on. So we think that's really the areas where tokenization slash by extension DeFi, can add a lot of value or is going to impact traditional markets.
And so, yeah, I mean, that's kind of the focus area where we see kind of immediate impact as a low-hanging fruit. So basically, you know, tokens kind of being the next level of wrappers or next level of securities. And we see them also the medium term, you know, a tokenization to replace traditional fund structures or maybe you know even being a more efficient wrapper for securitization that's that's kind of what we would see is on the horizon um because there are definitely and benefits in terms of costs that can be reaped very efficiently um and ultimately it's going to lead to a bit of a conversion or to a bit more seamless connection between between trad fi and DeFi. So, yeah, it's also essentially going to then enable, you know, more traditionally DeFi-minded investors to access, you know, real-world assets if you have a wrapper that kind of works for the new ecosystem.
And yeah, so ultimately, we think that's going to lead to a bit more connectivity and more exchange between the two ecosystems. But yeah, that will be pretty much the most imminent development that we see. I have a lot of friends working in the DeFi, and I know that I'm a bit of a contrarian here. First of all, DeFi doesn't necessarily change the business model for most financial institutions, yet in the capital markets, maybe when they look at the professional businesses. But largely speaking, the biggest bulk of banking is about relationship with clients. And the business model is about how you demonstrate the value and get clients to pay for that. So DeFi has not yet clear understanding of what it means basically to justify the value for money, which is not the DeFi per se.
However, DeFi can bring some transparency, which is clearly relevant for me because transparency will be, if you like, a key element and a competitive advantage going forward. However, what for me has happened in the recent years is that there is too much overengineering. When something is overengineered, it never works. Even think about the rockets of Elon Musk, they look simple and neat, right? So over-engineering does not work, does not generate enough value. Now, what does it mean? I'll give you an example. You can have a project for $1 billion to develop a central bank digital currency, which might generate some benefit and most likely is interesting and, you know, has value. But then you can spend less than $10 million, like the Brazilian central bank, to release PIX, which is a framework for instant payment.
It got adopted in two years by 160 million Brazilians. So now simplicity adds a lot more value to the world needs today compared to the complexity of some technology elements, which are, if you like, overwhelming in terms of the cost, the effort, and the result. So I think that in the DeFi world, I've passed the crypto craze, which is something else. they have to really go back to principles, first principles, and understand that if it's not simple, it will not fly. By the way, you know what, even if let's talk about something a bit different than the five are still in banking, talking to so many new banks and banks, when they offer products on mobile, those products needs to be simple for people to understand them, okay, and to basically get the value proposition right.
I'll give you an example. But there is this bank that told me recently, they have two loans on the app. And that's the same loan, but one contains an option, which basically is an insurance for the loan, which is good for the client. It's also good for the bank because they add extra revenues. Now, when they sell these two products in the branches, 90% of people buy the one with the option inside with insurance. On the mobile, 90% buy the one without. Because a mobile like simplicity convenience is what people get trapped into immediately so, digital brings in any case the simplification of the product framework the problem is that banks are used to prop up products with features in order to add fees around that and that doesn't work well on digital so the transformation of the business model is is is going around basically the way people perceive the value and therefore the way you get monetization out of that.
And that is the key element that everybody needs to consider. So simplification is a part of the digital framework. It is not bad per se, as long as you throw away the unwanted features and keep those which are the most important for the customers and you're capable of explaining So across the board, on the business model, in the technology stack, simplicity is a key principle, pairing transparency. I think decentralized finance is, I think it's a revolution coming, right? And it's growing. It's been a bit slow during the crypto winter. But right now with the, you know, Bitcoin 100,000, with the euphoric, like right now people being euphoric again, with Trump coming into the leadership and being pro-crypto, I think crypto is going to just roll into the, it's going to come.
I mean, think about it. Decentralized finance takes away the immediate, immediate, immediate race. It is a beautiful and critical part, especially for unbanked and the emerging markets. So, yes, if you live in the Western world, you might not see it. But if you're in the emerging market, decentralized finance might be already there. Right. It's the best way to, you know, offer, you know, to lend money, to borrow money, right, to invest, to trade. All this is possible with decentralized finance. So there's this possibility to quickly get in, because we have this kind of discriminatory, you know, set up that it's not easy. Not everybody can have a bank account, right? So all these billions of unbanked right now with decentralized finance can, you know, it democratizes the financial system and lets them be part of it.
Because now it's easy on your smartphone. Everybody has a smartphone. You have a wallet. Bam. You're a member of a financial community. You can now borrow money. You can lend money. You can trade. You can even invest all on crypto. So I think decentralized finance needs to be watched for. And it's a good way, you know, to actually, you know, substitute banks and, or, you know, basically the traditional banking role is under attack, especially in emerging markets, if they don't watch and maybe embrace also decentralized finance. Friends of Startuprad.io, as this year comes to a close, we want to take a moment to thank you for your incredible support throughout 2024. before. It's been an exciting journey and we're truly grateful to have such an engaged and inspiring community of listeners, readers, and partners.
We wish you joyful holiday seasons filled with love, laughter, and relaxation. Merry Christmas, Happy New Year. O Weihnachten, guten Rutsch! May 2025 bring you success, happiness, and plenty of exciting opportunities. We'll be taking a short break to recharge and reflect, but we'll be back in January with brand new episodes of Startuprad.io, packed with insights, stories, and updates from the startup world. Thank you for being a part of our journey. We can't wait to connect with you in the new year. Thank you very much. happy holidays enjoy your time off and thank you for having me and to all the audience out there merry christmas and a happy and healthy new year 2025 appreciate it jern yeah thanks so much you too have a lovely christmas happy holidays and a happy new year merry christmas happy new year and look jern always beat me with his christmas jumper i have a red one but you know i can't compete.
Okay. Merry Christmas, Happy New Year, Buon Natale, I was just thinking of how to say it, Frohe Weihnachten, Xinyankoile is Happy New Year in Chinese. I forgot how to say it in how to say Happy Christmas in Chinese, but Xinyankoile and Buon Novano, Felice, Feliz Novidad in Spanish. So, frohes neues Jahr. Ich wünsche euch allen was. Thank you very much. Greetings from Frankfurt. Pascal. That's all, folks. Find more news, streams, events, and interviews at www.startuprad.io. Remember, sharing is caring. Music.
Links to Resources
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📌 For a complete overview of startup activity, VC trends, and regulatory shifts across Germany, Austria, and Switzerland, explore the DACH Startup Ecosystem 2025: The Ultimate Hub. This regularly updated index includes monthly news wrap-ups, unicorn trackers, sector deep dives, and expert insights into the policies shaping Europe’s most dynamic innovation economy.
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Dive deeper into this year’s most important developments across Germany, Austria, and Switzerland in our full analysis: DACH Startup Ecosystem 2024: Trends, Funding & Breakthroughs – https://www.startuprad.io/post/dach-startup-ecosystem-2024-trends-funding-breakthroughs. It’s your go-to resource for startup trends, VC activity, and tech insights across the DACH region.
Relationship Map
Pascal Lauria → CEO → Cogia
Innovation Frank Schwab → Co-Founder → Fintech Forum
Luca Frignani → CEO → Exaloan
Jörn "Joe" Menninger → Host of → Startuprad.io
What is this article about: Fintech Review 2024: Navigating Trends and Innovations in Startups?
Explore fintech trends for 2024, including AI, DeFi, and compliance, with insights for startups, investors, and entrepreneurs
What are the main takeaways from this discussion?
The Fintech Review 2024 navigates the trends and innovations reshaping startups in the DACH financial sector. From AI-powered banking and embedded finance maturation to regulatory shifts and funding recovery, this annual review maps where fintech is heading next.
How does this topic connect to the broader startup ecosystem?
The 2024 fintech review captures a year of navigating new realities — from tightened regulation and compressed valuations to emerging AI applications and embedded finance maturation. This comprehensive review covers the trends, innovations, and setbacks that shaped financial technology across Germany, Austria, and Switzerland, providing the analytical foundation for strategic planning heading into 2025.
About the Host
Joern "Joe" Menninger is the host of the Startuprad.io podcast and covers founders, investors, and policy developments across the DACH startup ecosystem. Through more than 1,300 interviews and nearly a decade of reporting, he documents the evolution of the European startup landscape. Follow Joern on LinkedIn.
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