Hardly any other sector has experienced the ups and downs of capital market cycles as intensely as fintechs. Driven by euphoria about the gigantic possibilities of digital banking, start-ups such as Adyen, N26 and Stripe achieved high valuations– and also attracted imitators in their wake. The money was practically thrown at the fintechs. This changed abruptly when the bubble burst amid the turmoil of the Japanese Softbank Group and the stock market was barricaded off.

Since then, there has been a lull in funding and IPOs. However, many fintechs were able to keep their heads above water and continued to scale with improved cost management. The existing shareholders, i.e. founders, employees and venture capitalists, were often only able to raise capital at a lower valuation of the company, which would have led to far too much dilution.

However, a new path gradually opened up, at least for secondary placements: From 2022, an increasingly liquid secondary market for start-up shares emerged, allowing existing shareholders to gradually sell their shares in order to bridge the gap until an IPO. In the good times, many employees had been prepared to work for comparatively low salaries in order to receive share options.

In order to keep the workforce in line, giants such as Stripe, which had long been ready to go public, arranged large secondary transactions. According to a survey by Launchbay VC, fintech was the most active sector in the secondary market at the beginning of 2024. Revolut, Klarna and Stripe had the highest trading volumes, along with the likes of Space X and OpenAI. Even early-stage tech start-ups such as Stability AI, Copper and Vanta were listed on secondary platforms. This is because it is essential that investors have access to a liquid market in all funding phases – which is also ensured by the launch of secondary funds on the investor side.

With the secondary market, fintechs have found an outlet for exit requirements before the primary market listing – if there is still a need for this at all. As the example of Revolut shows, the pre-IPO process is not so dissimilar to an IPO: The UK neobank engaged Morgan Stanley as the investment bank for the transaction – and it brought in large venture funds such as Coatue, D1 Capital Partners and Tiger Global, which were prepared to subscribe at a valuation of 45 billion dollars. However, it is unclear in private market transactions whether there are side agreements in clauses such as liquidity preferences that make it easier for investors to subscribe at high valuations.

In any case, Revolut can show a rising valuation, as it was valued at 33 billion dollars in 2021. The British company has now received its (provisional) banking licence in its home market, and is showing good sales growth and a healthy pre-tax profit. A listing could be a possibility in the coming year, but the neobank is in a comfortable position and does not need to be rushed.

Klarna is more clearly positioned for an IPO in spring 2025. CEO Sebastian Siemiakowski has streamlined the company as a pioneer with AI functions on the cost side, and decided against an organised secondaries round in early autumn – although Goldman Sachs is said to have already been mandated to arrange a round at a valuation of at least 10 billion dollars.

However, secondary transactions are constantly taking place on various platforms such as Carta, Caplight and Equitybee. The fact that Klarna feels free to forego a large secondary market round is likely to be interpreted as a sign of self-confidence. A going public is expected to take place on the London or New York market.

According to the investment bank Drake Star, there are almost 30 candidates in the European IPO pipeline, although only a few (in addition to Klarna and Revolut) have concrete steps in sight. However, some names are certain: Santander subsidiary Ebury, for example, has already announced its „intention to float“ for next year. Goldman Sachs has already been mandated for the transaction and has estimated the indicative valuation at around 2 billion pounds.

It is quite conceivable that Klarna or Ebury will provide the icebreaker and, if the listing is successful, the next ones will want to go to market immediately. Such issues should also attract interest from ordinary investors, making the task of allocation easier for the investment banks. Fintechs with retail business in particular are likely to be a draw, as they usually have a well-known brand - and can turn customers into co-owners. The US neobank Chime also has IPO plans. It is aiming for a listing in 2025 and has mandated Morgan Stanley. However, Chime will have to cut back on its valuation: Valued at 25 billion dollars in the last funding round in 2021, the valuation on the secondary market was recently in the range of 5 to 8 billion dollars. An internal valuation resulted in 16 billion dollars, an investor told Fortune in January.

Should an IPO be on the agenda for N26, the Berlin-based company would be confronted with the so-called valuation gap. In October 2021, the Berlin-based company had secured 900 million dollars at a valuation of 9 billion dollars. Then the market turned. Neobank had to work on its profitability and remedy deficiencies criticised by BaFin.

However, given that Revolut's valuation had risen by 33% to 45 billion dollars, the Berliners should also be able to regain their old valuation. However, as Revolut is far ahead of the German neobank, N26 cannot hope to achieve the same multiples as the British bank. The British neobank Monzo is more likely to be a benchmark. The fintech raised 320 million pounds in March at a valuation of 3.6 billion pounds. On the secondary market, the valuation recently stood at around 5.9 billion dollars.

There is no reliable secondary market valuation for N26. In any case, the exit mooted by existing shareholder Allianz X in mid-2023 at a rumoured valuation of 3 billion euros did not take place.

Two stock market aspirants are particularly well known in the crypto sector: As the secondary market began to thaw, crypto trader Etoro led the way and publicised IPO plans on the Nyse or in London in March at an indicative valuation of more than 3.5 billion dollars. The Israelis failed with a Spac listing in 2022. A dispute with the SEC was settled in September after Etoro committed to limiting US trading to Bitcoin, Ether and Bitcoin Cash.

Stablecoin issuer Circle emphasised its plans to go public in September by relocating its headquarters from Boston to New York. In January, documents for a listing were submitted to the SEC, but by the middle of the year the valuation had fallen to 5 billion dollars. In the failed Spac listing in 2022, Circle, which is affiliated with Coinbase, was aiming for a valuation of 9 billion dollars; the last funding was at 7.7 billion dollars. Although Circle has lost ground to offshore-based Tether, it is equipped for the regulatory future with its European e-money licence via MiCAR.

From the German fintech sector, only Raisin is expected to go public in the coming year. The Berlin-based deposit broker is profitable, which is currently considered a sina qua non for a listing. The basis for this was the turbocharged growth of 74% to 57 billion euros in assets on the platform in 2023. The US subsidiary in particular attracted deposits – whereby a functioning US business is almost a unique selling point of Raisin. A listing in Frankfurt would be likely – even if it remains to be seen whether Raisin will really go public so quickly.

The two neobrokers Trade Republic and Scalable Capital, on the other hand, are unlikely to be listed until 2026/27 at the earliest. Trade Republic is fully focused on operational implementation after receiving its banking licence and ramping up its own infrastructure as well as the problems in customer service. In addition, the discontinuation of reimbursements for brokered stock exchange business (payment for order flow) must be compensated for from mid-2026, which both neobrokers will probably tackle by setting up their own market makers.

Scalable is also said to be in the midst of applying for its own banking licence. All of this ties up capacity, which is not compatible with an IPO. But in view of the growth in customer and investment volumes and the political plans for a retirement provision portfolio, the neobrokers' IPO story should remain attractive for a long time to come.

If the IPO wheel gets going again, however, strategic buyers could also come onto the scene and buy up stock market candidates. Private equity has already invested in later-stage tech and could be active on both sides: Continue buy-and-build or take the first portfolio fintechs public or sell them to other PE funds. With falling interest rates, such deals are once again easier to realise.