A Light From The European Fintech Funding Drought

In the age of European fintech funding scarcity, Solaris’s “grown-up” Series F equity finance round shines like a beacon, marking a turning point in how scale-ups seek financing. But it’s not just any raise—it signifies a pivotal shift toward B2B and infrastructure fintechs in the rapidly expanding Embedded Finance (EmFi) space. As established banks set their sights on this burgeoning sector, the competition heats up, and the future of open finance hangs in the balance.

A “Grown-Up” Raise

According to Baha Jamous, VP of Marketing and Communications at Solaris, the internal raise of €38 million will allow the fully regulated bank to “clean up the deficiencies of the past and make further investments into regulatory compliances.” At the same time, Jamous alluded that Solaris will soon reach the increasingly critical “break-even” mark, which many B2C digital banks are finally attaining. In a sign that both fintech pioneers are growing-up and that the funding drought has quickly led to a new approach in how scale-ups are raising, Jamous stated the recent round “gives us room to breathe. It is not a super exciting round, but it is a necessary raise and we are only raising what we need now.”

EmFi: An Increasingly Crowded Space

The raise from Solaris demonstrates an investment shift towards B2B and infrastructure fintechs, especially in the EmFi space. Niche EmFi providers, specifically operating in the B2B BNPL and Revenue-Based-Financing (RBF) areas, are gaining traction and landing funding. A birds-eye view of the EmFi sector shows modern core banking providers beginning to creep features into ecosystem maps and even a few EmFi integrators entering the market to support integrations, developing and designing for brands looking to make an EmFi play.

Within the European EmFi space, Solaris is uniquely positioned. It has an edge against most digital-first EmFi players because it has a full banking license and an Electronic Money Institute (EMI) license. While the majority of digital-first EmFi players operate with an EMI license only, a full license means Solaris’s offering extends beyond cards and accounts and includes lending, or a “one-stop shop” as Jamous described Solaris. Until recently, Solaris enjoyed this unicorn-like status as a fully regulated BaaS / EmFi provider. However, several European incumbent banks are beginning to make EmFi and BaaS plays.

When asked about the threat from incumbent banks in the BaaS and EmFi space, Jamous stated that the EmFi industry is very nascent and that competition is welcomed and needed. He discussed the “right to win” when talking about the Solaris pitch, and stated, “The license is not the key because incumbents also have a license and even a much more stable balance sheet; they are better capitalized, with less scrutiny from a regulatory perspective because of their history. What makes a difference is the tech stack – you need cost efficiency, and this is where the tech stack is key for Solaris because, in the end, the incumbent banks have greater costs because of their legacy tech.”

The dynamic duo of a full license and modern core will no doubt separate the winners from the losers, with incumbent banks’ success down to how quickly they can turn their newly migrated cores or greenfield projects into a live offering. Incumbent banks are traditionally not known for their agility, and a commercial offering in the B2B space is a new area for many. The recent rumors about the potential divorce between Apple
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and Goldman Sachs in their partnership demonstrate that all incumbent banks may not be cut out for a B2B partnership, especially with large global brands likely to dictate commercial terms.

What The Future Holds

In a world where B2C fintechs once reigned supreme, a changing landscape has put B2B and infrastructure fintechs front and center. As Solaris and other pioneers lead the charge, European incumbent banks want to adapt and embrace the EmFi and BaaS trends. The success of these traditional powerhouses may lie in their ability to shed legacy tech, embrace agility, and forge innovative partnerships. With the open finance revolution on the horizon, the spotlight shifts from the once-sexy B2C pure-play fintechs to a more diversified and promising fintech ecosystem, where non-bank brands powered by leading BaaS and EmFi providers stand ready to shape the financial future.