Europe fintech sector is approaching a decisive moment as innovation accelerates under a tighter regulatory framework. By 2026, the industry is expected to be more mature, more consolidated, and more closely supervised, as digital finance becomes embedded across payments, lending, and identity.
After years of rapid growth, fintech funding contracted sharply between 2022 and 2024. According to SeedBlink, global fintech investment fell to $29.5 billion in 2024, the lowest level since 2017. In Europe, the downturn has started to ease, with more than €6.3 billion invested by mid-2025, already exceeding 70 percent of the previous year total.
Investors are increasingly backing business to business models, embedded finance, and AI driven infrastructure rather than consumer focused growth at all costs. Higher interest rates and geopolitical uncertainty are forcing startups to prioritise profitability and cash generation earlier in their life cycles.
Regulation reshapes the fintech landscape
Regulation will be a defining factor for European fintech by 2026. The Digital Operational Resilience Act (DORA), which took effect in January 2025, introduces harmonised rules on cybersecurity, ICT risk management, and incident reporting across the financial sector. According to the European Insurance and Occupational Pensions Authority, DORA establishes a common EU framework for operational resilience and third-party oversight.
At the same time, the European Parliament has agreed on the PSD3 and Payment Services Regulation package, which strengthens fraud prevention and consumer protection. Payment providers will be required to verify payee details, offer spending limit tools, and assume greater liability when fraud prevention systems fail. The reforms are also designed to lower barriers for open banking and open finance services.
These measures sit alongside the Markets in Crypto-Assets regulation, which governs crypto asset service providers and stablecoins. Together, DORA, PSD3, and MiCA (Markets in Crypto‑Assets) signal a shift toward what policymakers describe as innovation under supervision.
Artificial intelligence is becoming core infrastructure for fintech firms. Research cited by Trinetix shows that more than 40 percent of banks already use AI in risk management, compliance, and fraud detection. By 2026, AI is expected to underpin real-time payments monitoring, personalised financial products, and automated customer service, while also raising new questions around explainability and data governance.
Digital currencies are also moving closer to the mainstream. Reuters reported that several major European banks plan to launch a MiCA-compliant euro stablecoin in the second half of 2026, aiming to reduce reliance on dollar-denominated tokens. At the same time, central banks worldwide continue to explore retail and wholesale CBDCs, adding momentum to Europe digital money debate.
Digital identity is emerging as a critical link between regulation and innovation. Worldline expects the EU Digital Identity Wallet to play a central role in payments, onboarding, and compliance. By 2026, digital wallets could become essential infrastructure for seamless cross border payments while meeting know your customer requirements.
The outlook points to a more consolidated fintech sector with fewer but stronger players, often working closely with banks. Payments are likely to be largely real time, digital identity wallets widely adopted, and AI driven personalisation standard. The challenge for Europe will be ensuring that trust, security, and resilience keep pace as digital money becomes part of everyday economic life.