Germany, Austria, and Switzerland, also known as the DACH region, have been early adopters and proponents of fintech in Europe. This early support has enabled the region to establish one of the world’s most vibrant and dynamic fintech ecosystems.
In 2021, Switzerland was named the fifth biggest fintech hub in the world by Findexable, while it ranked Germany the ninth largest. Its advanced technical infrastructure, strong human capital, and longstanding banking and asset management industries have enabled the region’s growth.
Fintech Funding Activity Remains Strong
Despite a pullback in VC dealmaking, fintech funding in the DACH region remained strong in 2022, registering its second-best year to date, according to data from Pitchbook.
A total of 191 deals worth EUR 3.2 billion had been completed in the sector across Germany, Switzerland, Austria, and Liechtenstein as of November 2022.
Although the figures fell short of 2021, fintech still accounted for 9.2% of overall deal value and 7.5% of the region’s total number of rounds, making it one of the most active verticals for VC dealmaking.
Soaring fintech funding activity in DACH over the past years has pushed valuations to new heights, with the region currently home to eight fintech unicorns.
Growing Appetite for Fintech Investments
In 2022, strategic investors in the DACH region started accelerating their involvement in fintech and were bolder in their investments and acquisitions, a trend set to continue in 2023.

According to a report by PwC, wealthtech and blockchain/crypto were identified as the most attractive fintech verticals to invest in, while insurtech, lending, and payments/billing were named as the least interesting options.
The survey conducted as part of the report found that the banking sector’s main reasons for investing in fintech companies were to gain access to new technology or enter new markets and business models.
More market consolidation in 2023
Looking at fintech funding trends observed in DACH last year, PwC expects an ongoing or even improved deal flow in the course of 2023. The consultancy also predicts an uptick in M&A transactions, a sentiment that’s shared by Yusuf Ozdalga, partner at QED Investors.
“I think all fintech sectors will see M&A activity increase: payments, wealth management, lending, and neobanks, just to name a few,” Ozdalga told Sifted in a statement.
“The dynamics driving M&A apply broadly — and while there are nuances across subsectors, the overarching theme of M&A will be a constant.”
Nick Sando, principal at Octopus Ventures, noted that the BaaS vertical, in particular, was primed for consolidation in 2023.
“2021 saw a great deal of funding into the BaaS category,” Sando told the media outlet.
“Many of the BaaS providers have customer bases heavily skewed towards very early-stage fintech companies, some of which will likely continue to find it difficult to operate and raise in 2023. This will likely lead to increased customer churn and revenue per customer falling for some of the BaaS providers.”
Digital payments on the rise
Though cash has long been the preferred method of payment in the DACH region, digital transactions are catching up fast, a trend that was accelerated by the COVID-19 pandemic.

In June 2019, overall contactless adoption in DACH was at just 40%. This figure rose quickly to 71% by June 2020 and by June 2021 more than three quarters of cashless transactions in Germany, Austria and Switzerland were contactless, according to data published by Nets Group, a leading paytech firm from Denmark.
As of September 2021, the average contactless rate was 77% in Germany, 82% in Austria and 80% in Switzerland.
“The pandemic has significantly accelerated a steadily growing trend in the DACH region,” said Robert Hoffmann, CEO of Nets Merchant Services.
“It was inevitable that Germany, Austria and Switzerland would ultimately achieve high levels of contactless payment adoption, but without this catalyst, it would have taken years to reach where it is today. An increasing number of merchants here are now offering and actively encouraging tap-and-go, which is becoming the norm for consumers.”
The 2022 Finexable and Mambu report noted that the rise of e-commerce in DACH has fueled usage of digital payments, and most particularly, digital wallets, open invoicing, and buy now, pay later (BNPL) arrangements.
Interest in embedded finance on the rise
In 2023, embedded finance will continue to gain further momentum, Jennifer Heathfield-Lee, head of partnerships of ClearBank, said in a statement to Mambu. This growth will be driven by rising demand from non-financial companies looking to tap new revenue streams and increase customer engagement, as well as fintech companies looking for alternatives to BaaS.

“Fintech companies are increasingly reliant on their BaaS providers to speed up time to market, boost revenues, and meet compliance demands,” Heathfield-Lee said. “However, as fintech companies scale and look to offer more complex services, many BaaS providers are struggling to keep up with this demand. This is resulting in lost revenues, significant resource requirements, rising costs, and at worst intervention from the regulator.
“Because of these issues, we’re seeing an appetite from across Europe for embedded banking as it’s more than just licensing, it’s the ability to create fit-for-purpose, targeted services supported by an API-enabled technology infrastructure in full compliance with regulatory requirements.”
Final Thoughts
The DACH region’s fintech ecosystem continues to grow and mature, driven by increased consumer adoption, solid fintech funding activity, and growing interest from strategic investors.
In 2023, industry stakeholders and observers expect more innovations in burgeoning domains like climate/green fintech, an uptick in merger and acquisition (M&A) transactions, as well as increased demand for embedded finance solutions.
As the region continues to invest in fintech and capitalize on its strengths, it is well-positioned to maintain its position as a leading fintech hub in Europe and the world.