The pain faced by fintechs in the payments space is expected to continue throughout 2024, according to an analysis by Jefferies.
Billing 2024 as a 'year of inflection', the firm says the bigger downturn expected in 2023 failed to fully materialise as consumer spend mostly held up on a combination of wage inflation, increased credit or BNPL usage and a resilient travel sector.
"However, with most of those drivers starting to slow with signs of economic slowdown in Europe, we see limited upside from market dynamics next year," the broker note states.
As 2023 fared better than expected, Jefferies analysts say they are even more cautious on 2024, with some caveats: "Given equity markets are 6-8 months ahead, we believe macro concerns are mostly priced in with focus being on 2025 acceleration as macro improves (e.g. lower rates) along with easier comparatives."
Jefferies is expecting market growth of 5-6% for European payment fintechs next year, with a renewed focus on M&A and IPOs by mid-year as the outlook for 2025 becomes clearer.
The note concludes: "How to play European Payments in 2024: Given the difficult macro backdrop in Europe, we see Adyen (Buy) and Boku well-placed due to their global diversification and Eurowag on execution, while we avoid Worldline (UNPF) with multiple company specific headwinds ahead. On Wise (Hold), we see long-term growth opportunity ahead, offset by punchy valuation and risk on Net Investment Income normalization."