Global: Challenges Persist for European Payments Firms Amid Economic Concerns

A recent analysis by Jefferies suggests that the challenges faced by fintechs in the payments sector in Europe are likely to extend into 2024.

Labeling 2024 as a ‘year of inflection,’ the analysis notes that the anticipated significant downturn in 2023 did not fully materialize, primarily due to factors such as wage inflation, increased credit or buy now, pay later (BNPL) usage, and a resilient travel sector supporting consumer spending.

However, as these drivers begin to slow down and signs of an economic slowdown emerge in Europe, Jefferies anticipates limited upside from market dynamics in the coming year.

While 2023 performed better than expected, Jefferies analysts express even more caution for 2024, although they acknowledge that macro concerns are likely priced in, with a shift in focus towards 2025 acceleration as macroeconomic conditions improve, including lower interest rates and more favorable comparatives.

Jefferies forecasts a market growth of 5-6% for European payment fintechs in 2024. They expect a renewed emphasis on mergers and acquisitions (M&A) and initial public offerings (IPOs) by mid-year as the outlook for 2025 becomes clearer.

In conclusion, the note provides guidance on navigating the European payments landscape in 2024. It highlights Adyen and Boku as well-placed entities due to their global diversification, Eurowag for its execution capabilities, while advising caution on Worldline (UNPF) due to multiple company-specific challenges. For Wise (Hold), Jefferies sees long-term growth opportunities but notes concerns about valuation and risks associated with Net Investment Income normalization.