Finch Capital recently released its State of European FinTech report, which revealed that 2020 is looking up for fintechs, but there will be a fallout in 2021. The main reason is that governments provided support for fintech startups, but in 2021 this report will dry up, according to a press release.

Although funding for fintechs by firms was down by 10% in the first quarter, overall fintech funding is up by 20% due to government funding. The report suggest that the next year will be difficult for many fintechs as fundraising becomes more selective and sporadic.

"A shakeout of the European FinTech is not necessarily bad. In the last five years Europe has seen 100,000s of new companies raise massive amounts of capital, build and start selling new products to meet a market need," Radboud Vlaar, managing partner, Finch Capital, said in the release. "Sometimes hundreds of companies are trying to solve a similar problem in different countries. This creates an opportunity for investors to consolidate and back winners at attractive prices and make profitable companies, these companies then can become acquisition targets for private equity firms and large industry incumbents."

The report also found that the fintech market in Europe has been held back by both a lack of large buyers and fragmentation.