Revolut transformed the market of everyday finance by eliminating unnecessary intermediaries and banks with outdated offers a few years ago. Later, another revolution in the financial market, this time in the embedded finance sector, is being prepared by a French startup, Swan. Although the two companies are currently light years apart, they have one common element. They both received early financial support from the European venture capital (VC) market giant, Lakestar.

After Revolut, Lakestar Looked for Another Unicorn. It Found Swan Instead

Lakestar invested in Revolut a year after it appeared on the market when the company was still in the early stages of being a startup. As it turned out, the VC giant had a good feeling, as the neobanking company is worth $33 billion seven years later.

Now, when things were going bad on the European fintech market and funding had frozen, Lakestar went looking for a new, potential unicorn. The giant decided to give a chance to the French startup Swan, which raised €37 million in a Series B funding round . The first funding round took place two years ago and was led by Accel. In total, Nicolas Benady, the CEO and Co-Founder of the startup, raised €58 million for development.

"Swan is on a mission to build the leading tech-driven bank in Europe. The simplicity and scalability of our BaaS technology is what drives our success," Benady commented.

Swan has already made significant strides in Europe, with offices in France, Spain, and Germany. The new funding will accelerate its international expansion, including upcoming launches in the Netherlands and Italy. The company has garnered over 100 customers and processed more than €7 billion in transactions across 30 European countries. Swan's workforce is also expected to expand in the coming years to support this rapid expansion.

Embedded Finance. What Is It?

What exactly does Swan do? The startup operates in the embedded finance industry, allowing institutions to combine banking services with their products. Thanks to simple API interfaces, European companies can quickly and easily integrate banking services (accounts, cards and payments) with their own products.

The Series B investment will enable Swan to double down on its enterprise strategy. Previously, the company has collaborated with large organizations like Carrefour on successful projects. Swan plans to launch new product lines tailored for larger organizations, including more payment collection methods and additional lending capabilities. These new offerings will allow Swan to enter new sectors, such as travel, insurance, and B2B marketplaces.

According to Swan, embedded finance is poised to revolutionize the financial services sector. About 40% of financial services, especially payments , are expected to be delivered through embedded solutions. The market for embedded finance is projected to reach $384.8 billion by 2029.

"The benefits we bring to our customers speak for themselves, with customers seeing up to 200% ROI on projects just three months post-launch, and others able to get up and running with a financial product in a matter of days. With Lakestar's support, we can bring our technology and its benefits to businesses of all sizes, and in all sectors, as we continue to shape the future of financial services," Benady added.

Europe's FinTech Sector Faces Funding Drought

The European fintech sector is facing a challenging situation. The funding for the first half of 2023 dropped by 70% compared to the same period last year. In response to this, the industry is shifting its focus towards profitability and long-term sustainability. The cryptocurrency industry is leading the way and currently attracting the most capital.

According to a recent report by Finch Capital, the European fintech sector raised only €4.6 billion in H1 2023, which is a sharp contrast to €15.3 billion in H1 2022. This decline is attributed to a return of investment discipline, which has led to the end of mega funding rounds.

This is consistent with another report, 'The Pulse of Fintech' by KPMG in July. The report showed that the EMEA region experienced a significant decline in funding, falling over 50% from $27.3 billion across 963 transactions to $11.2 billion across 702 transactions in H1 2023.