Half of European fintech lenders unlikley to reach profitability, warns investor
Alternative credit fund WinYield says VC liquidity fostered bad habits among fintech lenders
Half of European fintech lenders are unlikely to reach profitability with $550m of VC money at risk, according to WinYield, an alternative credit investor.
WinYield says many European lending fintech models are unviable and lack appropriate credit experience.
Central to Winyeild’s assumptions is that lenders with a single product and one jurisdiction, can only break even with assets under management of €150m for a SaaS lender, €35m for an embedded lender and €160m for a credit card lender. Reaching these levels, it says, may be challenging in many European countries.
"The VC funding drought has actually helped clean a lot of the malpractice in fintech lending, bringing European fintechs to their senses with a degree of discipline and rationality returning to their decision making,” Fabricio Mercier, CEO of WinYield said.
“Now we are entering into the phase of Fintech 3.0, with more experienced founders doing more with less. Although there's still a lot of learning to be done, the fintech sector is reshaping for a better future. By getting serious and institutionalised, fintech will grow again, partnering with credit funds and banks," he added.
Mercier says overly generous liquidity from venture capitalists fostered bad habits among fintech lenders.
"It’s become clear that the bull market of 2020 was creating an irrational bubble in fintech lending," he said.