Challenges for European Fintech Industry Amid Economic Slowdown

Shares of companies in the European fintech industry experienced a significant decline on Wednesday following a warning from France’s Worldline about a slowdown in the German market. Germany, known as the economic powerhouse of the continent, has been facing challenges that are now impacting the fintech sector.

Worldline, a payments company, reported third-quarter revenue below analysts’ expectations, causing its shares to lose more than half of their value. Additionally, the company lowered its guidance for the year, reflecting the deteriorating macro environment.

According to Worldline Chief Executive Gilles Grapinet, “After a solid start to the year, we are now entering a second semester where the macro environment deteriorates, especially in Germany.”

The changing spending patterns of consumers have had a negative impact on Worldline’s profitability. More consumers are directing their spending towards nondiscretionary expenses such as housing and food, rather than discretionary expenses like entertainment or luxury goods.

European consumers are currently dealing with inflation and high interest rates, which are challenging their spending habits. Many individuals are prioritizing essential items like food over occasional indulgences. These factors are contributing to Germany’s projected contraction of 0.4% in its gross domestic product for 2023, as forecasted by the European Commission in September.

Worldline Shares Plummet as Revenue Falls Short of Analyst Expectations

At 1010 GMT, Worldline shares traded 57% lower at EUR9.90. Shares of Italy’s Nexi are down 20%, while shares in Dutch payments company Adyen trade 11% lower. Shares of London-listed fintech group CAB Payments Holdings are down 9.5%.

Worldline reported revenue of 1.18 billion euros ($1.25 billion) for the third quarter, a 4.8% increase on a yearly basis in organic growth, primarily driven by the growth of its core merchant services business. However, Citi analysts had anticipated revenue of EUR1.22 billion, as stated in a recent research note.

Analysts at Jefferies noted that Worldline’s performance indicates that its merchant services business has been affected by the macroeconomic slowdown in Germany, which serves as Worldline’s largest end-market. The revenue for this unit increased organically by 7.6% to EUR868 million, falling short of Jefferies’ forecast of EUR887 million.

As a result, Worldline has revised its annual organic revenue growth expectations to a range of 6% to 7%, down from the previous projection of 8% to 10%. Additionally, the group’s operating margin before depreciation and amortization is expected to remain stable in value terms or decline by approximately 150 basis points compared to 2022. Previously, Worldline had anticipated an improvement of over 100 basis points.