IT Services providers have long been the thread that weaves new technology into the fabric of companies large and small. Last decade, that meant the (very) long road to the cloud. AI is up next. Accenture’s huge $5 billion in GenAI bookings for Q1 2025 indicates the magnitude of new projects that we expect to soon filter down to the SMB and midmarket – and these companies will need IT Services to deliver them.
AI will of course also disrupt the IT Services space itself – it is highly fragmented and ripe for transformation, and is natural territory for “service-as-a-software”.
We believe AI agents will soon automate full workstreams beyond just enabling them. (We covered this approach in depth in our previous AI Agents piece here). Nvidia co-founder and CEO, Jensen Huang, recently talked about IT becoming the “HR for AI agents”. We agree: as a role for both in-house IT and third-party providers alike.
The opportunity ahead is enormous. We estimate that Europe alone spends €200 billion directly on IT Services, and providers also indirectly influence even more customer spend through distributing and implementing software.
To create our Horizons market map, we spoke with IT Services providers, end-customers, and players in the current software and reseller ecosystem to find out what the innovators and buyers on the ground expect to see happen as AI advances.
A new wave of more sophisticated tooling and AI will unlock radically more profitable operating models. This includes preventing a deluge of tickets, automating security operations, and building custom apps like CRM or ERP integrations. Examples of leading innovators include Primo and Deeploi, who are are rebuilding the full employee IT journey; Way, which is clarifying, triaging, and autonomously resolving IT issues; Qevlar, whose AI SOC analyst reduces the time to remediate alerts dramatically; and Cogna, which helps users discover and define opportunities for software, then deliver them.
We believe IT Services providers will act as a force multiplier for AI and its disruption of all services industries, and start-ups can act as an incredible channel to distribute through providers to end-customers.
The team spoke to IT Services providers, end-customers, and their current software and reseller ecosystem to find out what the innovators and buyers on the ground expect to see happen as AI advances — and the emerging map of European software that will enable this opportunity too. Read their insights into the AI x IT Services opportunity in Europe here.
If you are a founder in this space, we have wider lessons from our research and portfolio company insights. Please do reach out, and we’ll be happy to share more.
To monitor the performance of their systems, enterprises need to gather data from a fragmented set of sources including applications, network, server logs and system logs. This data needs to be ingested and analysed by Observability platforms so that appropriate action can be taken downstream – for example to fix a security issue or to repair infrastructure.
The Observability market is large and well-established, but nonetheless remains dynamic and innovative, with significant opportunity for new entrants to carve out valuable adjacencies – or even take on the behemoths directly. As a backdrop, Cisco’s landmark acquisition of Splunk in 2024 is a catalyst for buyers and innovators to revisit their tooling and strategy.
Across the value chain, the growing expectations around realtime data and hybrid cloud/on-prem infrastructure represent an opportunity for the latest entrants to displace older competitors.
Market trends / What we’re seeing:
AI agents present a new iteration of automation. Founders are rapidly standing up agentic applications that can solve specific needs in functions like sales and customer success – without a human in the loop. Meanwhile, software buyers seeing real opportunity to quickly improve their P&L are quickly building or purchasing agentic products. In recent months, investors have been pouring hundreds of millions of dollars in capital into startups in the space, including previously unthinkable $200 million seed rounds.
Europe is home to many of these exciting companies, including Cogna, Lovable, Gradient Labs AI, 11x, and Zylon, as you can see from our market map. (We also interviewed the founders of these five companies – for their insights read our piece here.)
AI agents mark a step-change from Robotic Process Automation (RPA) bots, which have several limitations due to their deterministic nature. Next-generation AI agents can learn from mistakes and adjust their series of tasks, which means that they can transform the journey from intent to implementation in software development through delivering “pure work”, rather than acting only as a helpful co-pilot. We believe that the rise of AI agents is not only an opportunity to expand automation beyond what is possible with RPA, but to more broadly redefine how knowledge work is performed. These agents are about to revolutionise the world of work as we know it, and they are already getting started. For example, Klarna recently revealed that its AI agent system handled two-thirds of customer chats in its first month in operation.
There has been an explosion in the number of software firms targeting the office of the CFO in the past few years. In the enterprise and upper mid-market, we have seen an unbundling of the financial functionality that previously formed a large surface area of ERP (enterprise resource planning) systems.
Organisations are shifting a larger portion of their investment into best-of-breed vendors that can help drive efficiency, control and automation through their finance functions – from planning, through operations to tax and reporting. For Europe’s SMEs, there is also an increasing range of choice between payables, receivables and cloud-native accounting systems.
Whilst many of these vendors in this space have started with an entry wedge product, they have generally sought to expand into adjacent functional areas over time to build broader platform offerings. A good example are expense management players that have broadened into broader spend management, payables and later procurement.
At the same time, the role of the CFO is evolving. Finance leaders are poised to take a wider strategic role in data-led organisations. Where success was historically measured by the efficiency of the month-end close, the potential to move towards a more real-time financial view – with insights driving the wider organisation and operations – seems increasingly realistic.
And yet, on the ground, finance teams in organisations of all sizes are still struggling with first order problems including fragmented data, inefficient processes and limitations in underlying financial infrastructure that create the need for burdensome manual interventions. This all prevents them from spending time on higher-value work or realising automation at scale. To that extent, we expect AI to become increasingly central to both the mechanics and user experiences of platforms building in this space delivering improvements in forecasting, financial decision-making and automating those many workflows in the finance department that require both unstructured and structured data processing.
And we’re also excited by the value that will be created by companies that can successfully address the wide and diverse mid-market in the coming years. In this segment, companies have grown significantly in complexity but lack the scale or resources to deploy, integrate and maintain enterprise-focused platforms. An increasing need to handle multi-entity and multi-geo operations are more often additional challenges to be addressed. These businesses remain underserved by the current landscape of vendors, but we are starting to see a cohort of platforms and talented founders building with this segment in mind in areas including the general ledger, treasury, procurement and financial planning.
We’ve all been stuck waiting on hold or for that call-back. Voice workflows might have been streamlined and digitised but, until now, still have a critical bottleneck: manual human interventions. This is expensive, slow, and a poor user experience.
Voice AI has reached a level of sophistication to finally change this. And so unlock a huge TAM of the labour required in much of customer support, sales, recruiting, and appointments scheduling.
Solutions exist across Voice-to-text, helping to boost productivity with meeting and healthcare appointment notes, Text-to-voice, allowing for conversations especially in simple Q&A or receptionist call solutions, and Voice-to-voice, becoming dominant as more sophisticated voice AI agents have full conversations.
We see an emerging market across the relevant user profiles:
Models: The broadest impact is felt from innovations at the model layer. Advances here are an enabler across the stack, improving underlying quality of both transcription and the voice experience. One of the recent European breakout successes is ElevenLabs, establishing themselves as leaders after achieving unicorn status in 18 months.
Middleware: The middleware layer enables businesses, from enterprises to SMBs, to create custom voice AI solutions with the confidence that they have the latest and greatest technology from the model layer, integrated, updated, and working smoothly. In this layer, business models are largely usage-based (for example, dollar per minute).
Applications: Finally, the application layer provides businesses with tailored voice solutions for specific vertical or functional use cases such as sales, recruiting, or health appointments transcription. This layer has the largest number of players, reflecting the sheer diversity of use cases and the value of having an out-of-the-box solution. Over time, these businesses may adopt more outcome-based business models (for example, charging per qualified lead) reflecting their ambition to replace employees with fully agentic technologies.
Quality of voice experience and transcription has been an important factor today to build customer trust and prove reliability (for example, with latency, emotionality, context-relevance). However: this is likely to become commoditised table-stakes.
Instead, we believe winners at the application and middleware layers will excel on product UI, seamless integrated workflows, and post-call workflow automation. Advantage at the application layer can come from delivering vertical-specific workflows, and at the horizontal middleware layer from seamless and intuitive voice-bot builder experiences.
Commercial focus is also key in this competitive market. The market is large, but a land grab is already underway, and there is a narrow window of time to establish a position before the customer base saturates. An enduring business will require strong customer retention, currently a common challenge among businesses in voice AI. Optimizing for leading indicators of end-customer satisfaction such as resolution rates or call terminations, can get ahead of the problem.
The marketing automation space, particularly for small and medium-sized businesses (SMBs), represents a compelling opportunity for growth and innovation. This category is valuable due to its ability to bridge the gap between marketing and customer relationship management (CRM), empowering businesses to deliver superior digital customer experiences. As companies continue to embrace digital transformation, expenditure on marketing automation solutions is expected to rise significantly. Gartner projects the market to reach $18.6 billion, making it the third-fastest-growing segment in CRM. The sector’s recovery from the pandemic and its resilience through economic challenges highlight its long-term potential. Key drivers include the adoption of artificial intelligence (AI) and machine learning (ML), which enhance personalization, audience segmentation, and analytics—all crucial for driving marketing efficiency and effectiveness.
Market landscape
Despite its promise, the marketing automation space poses significant challenges for startups. The market is crowded, with over 5,000 vendors vying for attention. Differentiation becomes difficult in a landscape dominated by well-resourced incumbents like Klaviyo and Mailchimp. Omnisend, for instance, has positioned itself as a contender in B2C marketing automation, emphasizing ease of use and the integration of email and SMS workflows. However, to further stand out, startups must address gaps in product depth and scalability, particularly to compete against enterprise-focused players like Salesforce.
Dawn’s PoV on how to win
Winning strategies in this space hinge on innovation and focus. One opportunity lies in leveraging generative AI for advanced personalization and streamlined content creation. For example, tools that offer a Canva-like experience for email design could attract users seeking greater simplicity and creativity. Enhanced data and reporting capabilities, such as a single customer view, would also address a critical pain point for businesses managing complex customer journeys. Moreover, integrating social media functionalities could provide a unique value proposition, given the increasing importance of multichannel marketing.
From a customer segmentation perspective, startups should evaluate whether to move upmarket or concentrate on SMBs. While enterprise clients promise higher annual contract values (ACVs) and increased support expectations, they also demand deeper product capabilities and robust partnerships. Alternatively, focusing on digitally native brands and growing mid-sized businesses allows for faster time-to-value and scalable sales motions. To succeed, startups must balance ease of use with feature depth, continually iterating on their roadmap to meet evolving market demands.
As companies and their customers grow and mature, the ability to provide a price that works for everyone becomes increasingly important. However, maintaining a grasp on which customer has been offered what, when, where, and how long for becomes increasingly complex, especially when usage-based or linked pricing comes into effect. For some companies, this is so important that they have dedicated internal resources to build and maintain their own pricing and billing engines. However, typically it’s not what developers joined a company to do, and it isn’t really driving the value of the business forward, but it is fundamental in allowing the company to do business. Even then, the sprawl of different pricing agreements and arrangements can be hard to manage internally and it can lead to over or under-billing – a situation where one side of the equation always loses.
Enter the next generation of pricing and billing engines looking to give companies the flexibility to price as needed to drive customer and company value without getting tied up in knots.
Whilst the need to solve this challenge grows as a company grows, the desire to rip out the software that gets a company’s revenue in the door decreases. Given this, we have seen two core strategies be effective as companies come to the market: (1) land with a smaller business and grow with them or (2) partner with an existing solution to enhance it and grow within the company over time as trust builds.
These strategies lend themselves best to the different types of approaches we see in the market. On the one end of the spectrum is the metering intelligence providers that focus on capturing precise and accurate usage data in order to facilitate billing as well as providing other insights. This is a perfect addition to an existing billing solution that may not have the native capabilities to track usage-based pricing. With this type of go-to-market the company can also serve larger companies where the complexity of mapping usage and utilisation is likely to be more urgent, however willingness to entrust the full money-driving machine to a challenger is lower. On the other side of the spectrum are solutions looking to provide an end-to-end pricing and billing engine focused on, for example, providing a mechanism to push through pricing changes end to end more easily. Here, entry into a smaller and earlier customer base is more likely to be efficient, and then growing with the customer, embedding and integrating into other core systems like ERP and CRM.
A common frustration we hear from customers of all sizes is integration of the billing system with other core systems. This maps back to the same two core strategies either needing (1) product roadmap to build out a full end-to-end solution, balancing deep product in critical modules with lighter touch modules catering to price sensitivity particularly in smaller customers, or (2) tight integrations with other modules in the billing value chain as well as the wider software stack such as ERP and CRM.
The Revenue Cycle Management (RCM) market, valued at $115 billion, is vast yet largely untapped in terms of automation, with less than 15% of processes currently automated. This low penetration underscores the immense opportunity for technological innovation to transform how hospitals handle coding, billing, and collections. The stakes are high: claim denial rates have risen significantly in recent years, increasing financial strain on health systems. Additionally, resource constraints—exacerbated by a post-COVID workforce exodus—pose operational challenges. Advancements in technology, particularly large language models (LLMs), are enabling solutions for previously unsolvable problems, such as automating complex inpatient coding. This is a “why now” moment for RCM, driven by the convergence of urgent financial pressures and cutting-edge AI capabilities.
Market landscape
The RCM space is fragmented, with distinct layers of players addressing different parts of the value chain:
These segments highlight both the specialization and competition within the market, with overlapping ambitions driving innovation but also crowding the space.
Key Challenges Facing Startups in the Space
Winning Strategies for Success
The RCM market represents an extraordinary opportunity for innovation, but success requires navigating its complexities with precision and a focus on delivering measurable outcomes for healthcare providers.
Robotic Process Automation (RPA) revolutionized B2B software by automating repetitive, high-volume tasks such as transaction processing, data management, and communications. However, traditional RPA is constrained by brittleness and high maintenance costs. For example, a bot processing claims may fail if the data format changes, requiring costly manual reconfiguration.
Enter generative AI (GenAI), which addresses these limitations by leveraging large language models (LLMs). Unlike rigid RPA bots, GenAI agents autonomously plan, execute, and adjust tasks. They learn from mistakes, prioritize workflows, and adapt to changing environments, eliminating dead ends. Open-source projects like GPT-Engineer and HyperWrite exemplify this leap, signaling a shift toward more dynamic, resilient automation solutions.
Now is the time to accelerate this transformation. Enterprises are under pressure to modernize legacy systems, reduce costs, and enhance efficiency while navigating economic uncertainty. GenAI presents a compelling opportunity to bridge these needs, offering scalability, adaptability, and continuous improvement.
Market Landscape
The $5 billion RPA market remains one of the fastest-growing enterprise software categories, with significant room for disruption. RPA’s early success in regulated industries like finance and healthcare demonstrated its potential but also underscored its limitations. Today, traditional players like UiPath and Automation Anywhere are integrating GenAI to enhance resilience, expand workflows, and improve features like optical character recognition (OCR) and process mining.
Meanwhile, new entrants such as Robocorp, DeepOpinion, and Automaited are building AI-native automation solutions that go beyond task-based bots. These innovators focus on end-to-end workflow automation for use cases like document processing, eCommerce, and order management. At the same time, orchestration platforms like C TWO are emerging to address the complexity of managing hybrid automation stacks, ensuring scalability and seamless human oversight.
Despite these advancements, 70% of the potential value from automation remains untapped, presenting a significant opportunity for market players to innovate and capture demand.
Dawn’s PoV on Winning Strategies
To succeed, automation companies must prioritize enterprise-grade solutions that combine the adaptability of GenAI with robust guardrails for security, quality assurance, and regulatory compliance. Winning in this space will also require simplifying integration with existing systems and delivering measurable ROI.
We at Dawn believe the future lies in AI-first automation solutions that enable enterprises to fully unlock automation’s potential. By addressing current pain points and building resilient, scalable platforms, this new wave of innovators is poised to redefine how businesses operate across industries. Agents have a huge role to play here, and are already transforming automation as we know it.
A strong credit supply is the lifeblood for economic growth – but Europe’s SMEs, that make up 99% of all businesses, still face a persistent gap in available financing estimated at some €400bn. Whilst a potentially highly profitable segment, currently these businesses are too difficult to reach and too costly to serve for traditional banks given those lenders’ structural costs; and for the SMEs, credit products from undigitized alternative lenders are still too often inflexible and ill-suited to their use cases.
We have therefore seen strong growth in demand for digital disrupters that address these challenges to support this underserved segment. We are seeing innovation at the product level with providers offering more flexible credit solutions and repayment plans that better suit the needs of SMEs; and at the distribution level, where disrupters are increasingly meeting SMEs through platforms and channels that are more closely tied to their operations.
There are a range of players in the space that offer different credit solutions, focusing on a variety of segments and channels from traditional offline businesses and sole-traders to digital-native e-commerce brands. Many players tend to start in one product and vertical focus with a as a wedge, expanding their footprint over time into different areas. Broadly we are seeing greatest demand in B2B BNPL, supplier and inventory financing, revenue-based financing and flexible revolving credit facilities.
Many funds find SME lending a more challenging area in which to invest given the complexity of the operating model and capital stack, as well as the valuations of scaled lenders that tend to trade on book multiples. We recognise these challenges, but also see lending as one of the highest-potential areas for fintech to scale profitability and create value over time.
We believe that successful disrupters will win by owning scalable channels that give them proprietary access to borrowers and data, driving efficiencies in their cost of distribution and cost of risk.
It’s for that reason that we are particularly keen on embedded credit models that display strong network effects. For example, we are proud to have invested in Billie, the leading European B2B BNPL player, that is already serving hundreds of thousands of unique SME buyers through scalable PSP distribution channels such as Adyen and Stripe. As a result, Billie not only sees the same buyers across multiple merchant stores but has an extremely low cost of acquisition, with and can monetise these buyers through additional payables product such as credit cards or receivables lending over time to drive a best-in-class LTV/CAC.
A treasury management system (TMS) provides a company with a single, real-time view of all cash balances across different accounts and currencies. They aid businesses in optimizing cash management, reconciling payments, and maintaining liquidity across accounts and entities. They forecast cash needs, facilitate better decision-making, and help manage currency risk in cross-border transactions. By optimizing payment timing and routing, a TMS can also reduce banking and FX fees, ultimately improving a company’s financial efficiency and risk management.
This market is established with an incumbent presence from both bank-owned treasury portals and TMS software players. Each solution currently has its own limitations, and the mid-market remains underserved.
On the one hand, corporate banks have developed treasury portals across their international first-party account network to support simplified cash management for their customers rather than needing to manage and keep track of a wider variety of third party international bank accounts. This approach is typically unavailable to smaller SMEs, and is insufficient as a standalone for complex international businesses that require diverse local banking relationships for tax, regulatory, or yield-seeking purposes. These businesses also typically need to work with various external cross-border payment solutions for comprehensive coverage resulting in complex reconciliation processes.
On the other hand, standalone software TMSs have largely targeted the enterprise market to date, to help them control cash and manage liquidity across a range of third party banks and across group entities. Payments are initiated by the software platform, but processed by the underlying banks – as such, these platforms have been out of the flow of funds. Typically, these platforms required a heavy lift in terms of integration to the company’s ERP, AP/AR, and banking partners to correctly configure. This has been too heavy for the majority of companies to take on, and our survey of European mid-market businesses suggested 45% of companies are still using Excel or pen and paper.
We have seen an inflow of new entrants and investment into businesses that are looking to either improve the user experiences and flexibility of treasury systems for enterprise, or bring treasury management solutions to a broader set of mid-market customers. This includes notable scaleups like Kyriba and Agicap; and startups like Atlar, Embat, Palm and Payflows. Each of these platforms differs in product emphasis and target vertical, but broadly they are providing enhanced user experiences, analytics and insights via SaaS-deployed platforms to manage accounts and payments through third party banks (typically either via mapped STFP connections or open banking). Demand for these solutions is increasing as companies are increasingly international earlier at smaller scale, and cash management and yield optimization have come into greater focus after banking crises, and in a higher interest rate environment.
Separately, a number of the cross-border players in the market – including Rapyd and Airwallex – have also started to market ‘treasury management’ as one of many use cases for their existing payments platform. In practice, they operate more similarly to bank-owned treasury portals, sitting in the flow of funds and supporting the cash management across a first party account network, facing similar limitations as the traditional treasury portals.
We believe that new TMS should be more accessible, easy to use and adaptable to individual businesses as they benefit from other fintech innovations, including payment infrastructure, open banking, cross border rails and more. Here at Dawn Capital, we are actively looking for the next winner. If you’re a founder in this space, we’d love to hear from you.
Embedded finance is transforming how end customers access financial services, with the modularisation of financial products that can be delivered via API. This is enabling non-financial platforms – such as vertical SaaS businesses – to embed financial products such as payments, lending, or insurance into their products and customer offerings to enhance their product, improve customer retention, and often dramatically expand their monetisation potential.
The opportunity is vast with an estimated $320bn revenue pool by 2030 (BCG), and embedded finance platforms have quickly emerged across financial product ecosystems including payments, credit, insurance, investment brokerage, and banking to capture the opportunity.
Even within product ecosystems, platforms vary significantly by target customer vertical, product breadth, and deployment model – and we are even starting to see increasingly verticalised embedded propositions emerge. And across the space, managing regulatory and compliance complexity – for themselves and their customers – has often proved one of the most significant hurdles for platforms to manage and has become a key point of competitive differentiation in execution for the most successful platforms.
We are proud to have invested in a number of leading embedded finance players in Europe including Billie (B2B BNPL), Cover Genius (embedded insurance) and Brite (instant payments) and expect this to remain a productive area for value creation in the years to come.
Changing patterns in spend categories, increasing focus on supply chain control and compliance, and increasingly decentralised business operations are creating an opportunity for new entrants in the ‘intake-to-pay’ category – the set of workflows that cover the procurement of goods and services from the initial request for a purchase (intake) to the final payment to the supplier/vendor (AP).
We think this is a c.$3bn market opportunity addressable in the next 5-10 years by new entrants, as procurement and finance functions take an increasingly strategic and business-critical organisational role, with demand from the mid-market for appropriate solutions.
First generation players including Ariba and Coupa have made headway in the enterprise segment, but for most organisations the intake-to-pay process and corresponding spend/vendor data has been fragmented across the ERP, spreadsheets, and point solutions. This makes it challenging for procurement and finance leaders to collaborate, manage vendors, and control spend – and makes purchase requests a significant painpoint and time-consuming overhead for the wider organisation.
We are seeing a wave of startups emerge in both Europe and the US looking to address these challenges, with a variety of different flavours to the emphasis and direction in which they are building their product suites. Some – like Zip and Pivot – are seeking to take on the entire intake-to-pay process with a clear focus on managing the full end-to-end workflow for finance teams, extending as far as card issuance for expense management, or treasury management in the case of Payflows. Others – like Omnea – are more clearly focused further upstream on intake, vendor management and supply chain risk and compliance, working alongside third party accounts payable systems.
For a more extensive view of the mid-market ERP landscape today, see our pieces from 2024 here.
The insurance ecosystem still lags behind in the financial services ecosystem on the digital transformation journey, we believe the pace of new tech adoption will accelerate in the coming years with generational change in management teams, evolving risk environments, and the revenue and cost opportunities that will be opened up through the adoption of AI across the customer journey, from underwriting to distribution.
However, there are naturally barriers to change to overcome to sell into this market. Industry practices are well-entrenched, messy data is often siloed, and startups need to build trust with insurers to support mission-critical operations.
We see a number of pockets that are high value and a priority for insurers to address:
A number of Dawn horizontal portfolio companies touch the core insurance stack with FlowX allowing for core insurance applications to be modernised, Quantexa supporting risk decisioning, and Dataiku with pricing and claims modelling.
Embedded insurance represents a transformative opportunity by meeting consumers directly at the point of need, a significant shift for an industry traditionally reliant on direct, PCW or broker-intermediated sales. By integrating insurance products seamlessly into existing platforms—whether travel booking sites, e-commerce platforms, or health services—customers are offered tailored, relevant policies that align with their intent.
For insurers, being in the channel allows them to leverage rich contextual customer data, leading to more accurate underwriting and pricing decisions and reducing fraud. Avoiding price comparison websites or brokers also lowers Customer Acquisition Costs for insurers, and improves consumer satisfaction. For platforms, embedded insurance introduces high-margin revenue streams, with some verticals such as ticketing driving up to 30% of their bottom-line from insurance sales.
Lines like travel, health, and commerce are particularly compelling for embedded insurance with deep addressable markets, shorter time-horizon policies, definitive outcomes, and manageable loss ratios of 30-50% that create economic breadth for both carriers and distributing partners.
The key to success lies in delivering best-in-class customer journeys; insurers should offer a full stack proposition from quote to claims, ensuring customer experience is carefully managed throughout. Building a digital first platform gives a fundamental advantage in this customer experience as well as enhancing the insurer’s cost-to-deliver. Platforms with international audiences also tend to benefit from globally integrated solutions that can maintain product consistency and compliance across regions, often enabled through a carrier-agnostic platform approach.
Dawn are delighted to be investors in Cover Genius, collaborating with well-known brands, including Uber, Booking.com, and eBay to offer a best-in-class customer-centric embedded insurance proposition across multiple lines in countries around the world.
The asset management vertical has the potential to nurture significant venture-backed outcomes in the coming years.
Conditions are ripe for a broad technical re-platforming in this sector, still being largely served by monolithic front-to-back technology providers and outsourced asset services firms. Cost-income ratios have continued to rise as asset managers face fee and cost pressures. Customers are demanding differentiated products and increasingly personalisation. And the value creation to be unlocked through the promise of market consolidation still requires success in complex post-merger technical integrations.
As a result, we are starting to see a shift away from front-to-back platforms and siloed application-specific data architectures towards a more composable technology stack founded on open data ecosystems and cloud-native infrastructure. This is allowing enterprise managers to more easily work with best-of-breed software across asset classes and functions, reduce their cost-to-serve, and more rapidly innovate at a product level.
As the category is unbundled, we see a particular depth of opportunities in several areas:
According to McKinsey, approximately 70% of banks globally are pursuing core modernization initiatives as a rapidly evolving banking landscape makes new cores a necessity to delivering competitive customer experiences and cost reductions.
A few years ago an initial wave of cloud-enabled core banking disrupters emerged on the European scene, typically going after one of two approaches:
As a result, there remains a need for tier 2-5 banks that have struggled for choices when looking for core technology that is sufficiently flexible, functionally rich and cost-effective to maintain. We are now seeing a new generation of core banking platforms emerging to fill this gap.
These providers are offering:
There are manifold challenges for providers in the space, not least the complexity of managing implementations, partner ecosystems, long sales cycles, and localisation requirements. New platforms must also gain trust and credibility to thrive in a mission-critical software category.
But the ongoing spend on modernisation by banks is vast for players that get this right.
At Dawn, we’re proud to have backed FlowX, a platform that sits adjacent to the core banking market that allows banks to achieve progressive modernisation between core systems over time. Read more about our investment here.
The European banking-as-a-service (BaaS) landscape is a key enabler for embedded financial services. By abstracting away regulatory, compliance and infrastructure complexities, BaaS providers lower the barrier to entry for non-bank companies to incorporate regulated banking activities (such as holding funds and making payments) into their platforms.
It is a significant product and revenue opportunity for platforms and marketplaces – for example, an accounting software provider that wants to offer invoice payments and payroll, or an e-commerce platform that is helping merchants to collect funds and pay suppliers across international markets. The total opportunity is estimated by McKinsey to be worth €100bn by 2030.
Given the diversity of use cases, financial products and customers, we are seeing the market segmenting across a few dimensions:
Well-documented news stories have highlighted some of the key challenges facing providers in this space, not least of which is the complexity of managing compliance and regulatory risk. Modularising financial products has lowered barriers to entry for platforms and increased product flexibility, but has also compartmentalised financial operations and risk across providers. Managing risk through multiple interconnected parties has proven difficult to manage for providers that are reliant on the licenses of third-parties in both Europe and the US, putting increased regulatory scrutiny on the BaaS model.
However, the depth of opportunity in this space is vast for those providers that can combine the right compliance and regulatory operating model with a flexible and modern core financial infrastructure to drive fast time-to-value for customers, stickiness and strong net revenue retention.
Paying by card and via payment terminals (card machine) is something we encounter throughout our daily routines, whether a visit to a restaurant, the barista or the dentist. Trillions of dollars are processed by cards every year all around the world resulting in a multi-billion dollar addressable market with over seven million small and medium sized-merchants transacting in Europe alone. These merchants can be segmented into two categories: They have either been locked up by legacy players, including the likes of Nexi, Concardis or Barclaycard which dominate up to 80% of the SME market. Or they have been small enough to only switch from cash-to-card over the last decade.
At Dawn, we have been fortunate to back players disrupting those exact two market segments. Firstly, we backed Izetlle, which successfully exited to Paypal for $2.2bn in 2018. Izettle was part of the cash-to-card movement and helped transition a large amount of small (nano) merchants from cash-to-card (merchants less than €100k TPV). Izetlle lowered the barriers to adopting card machines and offered easy-to-use digital products as a next-gen technology player.
Secondly, we are fortunate to have recently backed Flatpay’s €45M Series B and €100m Series C growth funding rounds. Flatpay is one of Europe’s fastest-growing companies that is tackling the second segment, the replacement cycle of incumbents serving medium-sized merchants (over €100k in TPV). Flatpay identified a significant challenge faced by merchants across Europe: restrictive contracts characterized by opaque pricing, unsuitable products for daily operations, and subpar customer service. In response, Flatpay set out to disrupt this space by offering an all-in-one payment solution designed around transparent pricing, intuitive products, and superior customer support.
We recognize that next-gen players have leveled the playing field in terms of product differentiation and innovation, particularly across the nano segment. Yet, compared to the legacy players that dominate the majority of the mid-market, there is still a substantial gap among underserved merchants who need to modernize their technology. With the market’s vast size and the large number of merchants, success will depend on efficiently reaching these customers and presenting a compelling value proposition. Flatpay has addressed this by implementing a highly effective distribution strategy through its field sales organization, recognizing the importance of in-person interactions for customers in this segment.
At Dawn, we are proud to have invested in Flatpay and iZettle – two leaders in the payments space – as we believe that merchants of all sizes deserve next-gen products, affordable solutions and freedom from the hidden costs and fees imposed by traditional providers.
We expect non-bank payment providers to capture a significant share of the B2B cross-border payments market in the coming years.
For businesses, particularly SMEs and mid-market companies, these providers offer a more accessible and efficient alternative to traditional bank wire transfers or SWIFT network transactions. They provide faster settlement, greater transparency through the payment process, and are often lower-cost. These benefits are particularly valuable for businesses that regularly transact with emerging markets in illiquid currencies, deal with high-value transfers, or require frequent international payments for operations such as paying suppliers, managing international payroll, or facilitating treasury flows between company entities.
The B2B cross-border payments market represents a $500 billion revenue pool with $37 trillion in annual processed volumes. It is, nonetheless, a crowded and noisy category. But while providers’ offerings may appear similar at face-value, there are often considerable differences in their banking relationships, licensing structures, risk tolerance, liquidity coverage, and technical integration capabilities. The complexity of managing currency volatility, liquidity, and regional regulations has led these networks to develop specific strengths by region and customer type. As a result, they often find themselves both competing and partnering with one another in this diverse market landscape.
We’ve broken out the landscape broadly based on the primary regional strength/focus/brand of the network owned by the provider. It is a significant opportunity for startups as the space is structurally fragmented, but deep enough to nurture multiple winners – and we expect fintech success stories will continue to emerge in this space.
As the landscape evolves in the coming years, we expect to see several trends play out:
We believe that the most successful players in the coming years will offer comprehensive solutions for businesses, combining technological innovation with robust financial infrastructure to support global transactions, liquidity management, and regulatory compliance. Building strong regional expertise and partnerships will be crucial, enabling providers to offer truly global coverage while maintaining local market knowledge.
Here at Dawn Capital, we are actively looking for the next winner. If you’re a founder in this space, we’d love to hear from you.
We expect instant account-to-account (A2A) payments to gain a meaningful share of the online payments market in the coming years.
For consumers, A2A payments are already a seamless and secure alternative to debit card transactions, with a user experience increasingly on a par with wallets such as Apple Pay. And for merchants, the benefits are even more significant: instant settlement of funds, lower rates of fraud (as transactions are bank-authenticated), and at lower cost than either wallets or traditional card rails. These benefits are most keenly felt where instant settlement is integral to their customer experience (such as financial services use cases), for high-value transactions, or in higher-risk categories such as travel where transaction costs and fraud rates are higher.
A2A payments have already been widely adopted in certain European markets in the form of local, regional or privately-owned schemes like iDEAL (which has a nearly 75% share of all Dutch e-commerce TPV), SOFORT, and Vipps. We believe that standardisation – in open banking frameworks and real-time schemes such as Faster Payments and SEPA – will unlock broader adoption across European markets, allowing merchants to provide unified payment experiences across a much wider region. Indeed, the replacement cycle for products such as SOFORT and Giropay that are currently being deprecated is already accelerating demand.
As the landscape matures in the coming years, we expect to see several trends play out:
We believe that the most successful players in the coming years will be offering end-to-end payment solutions for merchants and PSPs, combining tech and financial infrastructure to support collections, reconciliation, and pay-outs and lower the barriers to adoption. Operating with a proprietary network infrastructure will also be important, allowing providers to maintain control over the payment experience as well as their margins. Finally, we believe significant value will be gained in future from having built a trusted consumer brand to increase merchant and consumer loyalty, and to build a platform for additional post-purchase revenue opportunities.
Dawn has already backed two players operating in this market – firstly open banking pioneers, Tink, on the journey to their $2bn acquisition by Visa – and more recently, Brite, whose $60m Series A round we led in 2023.
$1.8 trillion of B2B e-commerce volumes in Europe are growing 10% a year as business spending increasingly shifts online into web stores and marketplaces.
This surge in B2B online spending has created fertile ground for the emergence of B2B Buy Now, Pay Later (BNPL) platform that address the complex payments and credit needs of businesses in online checkouts. For businesses, working capital is so often an integral part of the payment decision process – in the offline world, paying on terms is the norm rather than the exception.
B2B BNPL platforms offer a host of advantages for both buyers and sellers versus alternative payment and working capital financing solutions such as corporate credit cards, bank loans, invoice discounting or factoring. These include:
For any B2B BNPL to succeed, they must at the very least be able to offer a variety of flexible payment terms (such as 30, 60, or 90-day extensions and instalments), sufficient credit limits to support a breadth of trade finance use cases, and – of course – robust risk management. Advanced fraud detection and credit risk systems are essential to enabling real-time credit-decisioning, maintaining high acceptance rates, and minimizing margin erosion from fraud and defaults.
However, the leaders that will emerge in the B2B BNPL category will stand out by:
At Dawn, we are proud to have invested in Billie, a leading B2B BNPL platform available across the UK, Western and Northern Europe, and available across top PSPs including Adyen, Stripe, Mollie, and Klarna delivering better payment experiences for B2B buyers and sellers.
Workplace safety is a critical crisis: In 2021, 5,190 workers died and 3.2 million suffered work-related injuries in the US, but taking into account underreporting, the actual number could be as high as 8.1 million. It’s not just a health problem, the economic impact of injuries and illnesses is estimated at $174-$348 billion annually in the US alone. Regulation has attempted to address this with OSHA (US) coming into play in 1970 and HSWA (UK) in 1974. These require employers to offer employees workplaces that do not have serious hazards and to identify and rectify health and safety issues. Despite this, the problem persists, causing massive production losses, liability costs, and employee turnover. Employee turnover contributes to a vicious cycle of undertrained employees who are more at risk of health and safety incidents that may then cause them to leave the workplace due to lack of care and protection.
We see a range of approaches to solve this challenge broadly split across training, tooling to encourage compliance with safe processes, and hazard detection to uncover blind spots. Whilst training is fundamental and there are innovative technological solutions to deliver this training that take into account the nuances of frontline activity, here we focus on the tools that aid compliance and detection of unsafe practices.
Historically, the market has relied on EHS suites that require individuals to self-report incidents or non-compliance. Although outdated and reliant on individuals and managers to report, potentially even despite their own interests, these have become the backbone and source of truth for organisations driving change and investment to improve workplace safety. As such, we are most excited about companies that, at least initially, can supercharge those solutions.
The first set of companies help to remove the need for employees to remember every single detail of a safe process by providing digital checklists that remind employees of what is required. They then also ease any manual work associated with collecting and analysing the data to drive insights. They do assume that the process that is set in place is the best process and they cannot adapt automatically to changes in an environment that might mean there is a better process.
The second set of companies we are excited about are those that uncover blindspots in an organisation. Even with the best will in the world, it’s impossible to track every ‘near miss’ precisely because it was a miss and therefore, to the human eye, didn’t happen. Solutions like Protex, Intenseye and Voxel are using computer vision to capture these near misses allowing companies to better train or change processes to avoid the miss ever becoming a hit.
As with many companies tackling the worlds of manufacturing, production, and logistics, there are two main ways to enter a company – at the local site level or at the corporate level. Although the site approach might be faster initially, it doesn’t help expanding from site to site. On the other hand, the corporate approach might take longer initially but then can help accelerate the site-to-site jump. Having said that, gaining love on the frontline, with or without a corporate-level contract, is essential to success.
Europe’s Blue-Collar Economy: The Next Frontier for Vertical Software
Blue-collar industries in Europe are a massive, underserved opportunity. While white-collar sectors have been transformed by software, Europe’s 80 million blue-collar workers—representing over 25% of GDP—have seen little innovation.
Why now? We believe the blue-collar economy is at a tipping point. Labor shortages are pushing productivity to the top of the agenda, while regulatory frameworks like the Net Zero transition demand new reporting capabilities, workflow automation, and operational transparency. These shifts are reshaping industries such as Construction and Trades, where the ability to collect, analyse, and act on data is quickly becoming a critical differentiator. At the same time, a generational shift in leadership is ushering in digital-native decision-makers who are more open than ever to adopting new technologies. Finally, GenAI is unlocking the vast amounts of unstructured data—handwritten notes, invoices, photos, and voice recordings—that these industries rely on but have historically struggled to harness.
Taking Construction for example, it is a €2 trillion industry that spends just 1% of revenue on IT, compared to a 3% average across sectors. As use cases like solar panel and heat pump installation grow, so does the appetite for purpose-built tools. But to succeed, we believe software needs to be practical, intuitive, and designed to complement workflows where the intellectual property still lives in human hands.
We are seeing innovators prove it’s possible. Kraaft one of our recent Dawn investments in France, is showing how engaging site workers directly can drive adoption from the ground up, turning them into advocates for change. Comstruct is tackling the biggest budget pain point—material costs—by helping construction firms reconcile invoices and manage resources in real time. Meanwhile, Reonic empowers renewables installers by focusing on sales enablement, allowing them to scale their operations and deliver on growing demand. We are looking for companies that succeed by solving specific, high-impact problems and embedding themselves deeply and easily into existing workflows.
What does it take to scale successfully? We think winning the blue-collar market in Europe will require an approach tailored to the complexities of fragmented geographies, languages, and regulatory environments. Focus on a concentrated market or sub-segment can help accelerate initial scaling as being close to customers allows for tighter feedback loops, faster iterations, and better adoption. A city-by-city or region-by-region strategy can enable businesses to build density and network effects in a sustainable way.
Second, localisation is critical—not just in terms of language, but also cultural and regulatory understanding. Vertical software companies need to deeply understand the workflows, pain points, and decision-making processes of their target segments. Messaging that speaks directly to customers’ industries or even trades can make all the difference in building trust.
Finally, successful scaling demands operational efficiency. SMB customers expect affordability but still require some personal touch in onboarding and support. A finely tuned Go-To-Market strategy that balances automation with tailored customer engagement is critical to capturing this market.
The blueprint exists, and at Dawn we have seen portfolio companies like Flatpay and iZettle show that Europe’s challenging market can be won through relentless focus, proximity to customers, and disciplined execution.
Real-time experiences are increasingly becoming a cornerstone of modern digital interactions, spanning industries and use cases—from tracking parcels and online gaming to querying inventory and managing business-critical infrastructure. While consumers and businesses expect seamless, real-time functionality, delivering these experiences is inherently complex. It requires the near-instantaneous transfer of massive amounts of data across locations, in the correct order, and with extreme reliability.
Developers are currently forced to piece together open-source solutions that often fail to scale, leading to operational inefficiencies, customer frustration, and lost revenue. The managed real-time infrastructure market, estimated by Gartner to exceed $2.5 billion, is projected to triple in size over the next three years. Key drivers include the ongoing shift to cloud infrastructure, the rise of distributed devices, and the increasing need for interoperable tech stacks within organizations.
Use cases for managed real-time platforms are diverse and growing rapidly, including enterprise messaging, application messaging, edge data, and data streaming. Notably, edge data—though it currently represents just 5-10% of the market—accounts for approximately 30% of Forrester analyst inquiries, reflecting a strong forward-looking interest.
Market landscape
The managed real-time infrastructure market is still nascent, with significant confusion about categories and solutions. For example, analysts and customers often conflate managed Pub/Sub platforms like Ably with other data streaming technologies such as Kafka and Confluent.
Emerging subcategories include:
Edge data is a particularly dynamic segment, as enterprises increasingly plan for IoT and connected device implementations. However, the lack of standardization and awareness around managed Pub/Sub platforms poses both a challenge and an opportunity.
Challenges for Startups in the Space:
Because of the opportunity in the space, we at Dawn are proud to have invested in Ably, who are a market leader due to their scalable solution that delivers a high amount of abstraction to developers.
It is relatively inconceivable today that a developer would build all parts of an application from scratch. Very often, developers rely on external software packages, which are all the files required to run any given application. Over the last few years, the number of packages developers use has exploded, and as such, organisations need a centralised repository – called an artifact management service – to provide access to screened and approved packages.
Growth Drivers
Several factors are fueling the urgency and expansion of this market:
Market Size and Monetization Gap
Despite its pivotal role, the market for artifact management is still in its early stages of monetization, with spending currently estimated at just over $1 billion. This represents a significant gap given the market’s potential, which spans both the SMB and enterprise segments. SMBs (100–3,000 employees) present opportunities with average contract values (ACVs) around $10,000, while enterprises (3,000+ employees) offer larger deals with ACVs averaging $100,000. We believe the total market opportunity is >$12b.
Market Segmentation
Challenges Facing Startups
Dawn’s PoV on Winning Strategies
By addressing these challenges and focusing on strategic differentiation, startups in the artifact management space can capture meaningful market share in this high-potential, growing category.
$1.8 trillion of B2B e-commerce volumes in Europe are growing 10% a year as business spending increasingly shifts online into web stores and marketplaces.
This surge in B2B online spending has created fertile ground for the emergence of B2B Buy Now, Pay Later (BNPL) platform that address the complex payments and credit needs of businesses in online checkouts. For businesses, working capital is so often an integral part of the payment decision process – in the offline world, paying on terms is the norm rather than the exception.
B2B BNPL platforms offer a host of advantages for both buyers and sellers versus alternative payment and working capital financing solutions such as corporate credit cards, bank loans, invoice discounting or factoring. These include:
For any B2B BNPL to succeed, they must at the very least be able to offer a variety of flexible payment terms (such as 30, 60, or 90-day extensions and instalments), sufficient credit limits to support a breadth of trade finance use cases, and – of course – robust risk management. Advanced fraud detection and credit risk systems are essential to enabling real-time credit-decisioning, maintaining high acceptance rates, and minimizing margin erosion from fraud and defaults.
However, the leaders that will emerge in the B2B BNPL category will stand out by:
At Dawn, we are proud to have invested in Billie, a leading B2B BNPL platform available across the UK, Western and Northern Europe, and available across top PSPs including Adyen, Stripe, Mollie, and Klarna delivering better payment experiences for B2B buyers and sellers.
Telco is one of those rare industries that has largely resisted disruption, especially at a structural level. Mobile network operators (MNOs) such as BT and AT&T still own the underlying telecoms infrastructure. Meanwhile, customer-facing mobile virtual network operators (MVNOs) like Tesco Mobile, which are carried on MNO infrastructure, have until now led on providing products to businesses and consumers. However, this established telco setup is undergoing a seismic shift, and this is creating a significant opportunity space for pioneering startups in a huge $3 trillion market, including next-generation B2B software companies.
The catalyst for this shift was Apple’s release of its first eSIM-only phone in 2022. For the first time ever, billions of people no longer needed to go to a mobile provider for their SIM cards.
This “unbundling” created a new opportunity for businesses to provide data plans and fundamentally moved the dial on who can own the customer in the telecoms space. The manufacturer? The MVNO? Potential ‘superapps’ selling users an in-app data plan?
Widespread e-SIM adoption is already challenging the status quo. Well-funded new providers have emerged over the past four years, with companies already showing impressive traction including eSIM marketplace Airalo, the world’s first telecom-as-a-service platform, Gigs, and eSimGo, a startup enabling travel companies to offer data to customers globally. Some of these startups also offer novel “MVNO-as-as-service” offerings, which have created a new B2B2C opportunity. These companies are proving successful because they provide enterprises with a cheaper and easier way to deliver mobile connectivity to their customers.
The future looks bright for these next-gen startups, although we do see a few reasons to be cautious. There is direct competition from incumbents to consider, and the fact that the product-market fit of new-age D2C eSim providers is yet to be fully proven. An entire ecosystem is being reimagined, and we’re closely watching the exciting disruptors emerging. Here is our market map of the space today:
European startups are leading the way in the Generative AI revolution. Unlike past technological shifts dominated by the US, startups on the continent are pioneering market-leading foundation models and B2B applications that will underpin next-generation GenAI tech stacks. We believe that the trifecta of good regulation from the outset, superior technology talent and outstanding fundamental research will mean Europe will emerge as the winner over time.
European governments’ focus on privacy and GDPR compliance is likely to establish an important standard for the world in AI regulation. Most European companies and governments are thinking critically about how to make AI “ethical”, and over time these standards will structurally affect how applications are built in the space. In the long run, European Generative AI startups will benefit, with such standards being built into offerings from day one, providing a competitive advantage.
Furthermore, deep technical and research talent in Europe will contribute to advancement on the AI front and there will be European winners that go on to compete and win globally. For example, there are several market leading foundation models based out of Europe, including Stability.ai, an open source LLM that was originally ideated at LMU Munich. Aleph Alpha, are building a large LLM in Germany as well, and are a strong contender in the space. Hugging Face, the world’s largest machine learning model hub, is a Paris-based business. There is, in fact, a potential geopolitical advantage to having local European LLMs in order to ensure reliability at all times, coupled with the reality that Europe has a better grid and infrastructure than the US and as such, can support a large amount of GPUs.
We have identified key areas of opportunity in the GenAI tech stack, and a handful of companies we believe are on stellar trajectories.
These key areas are:
B2B Applications: Innovative startups are embedding GenAI into products in specific verticals, tapping into large markets with quick proof of concept. Examples include our portfolio companies Omi and Swimm, plus Supernormal, Raycast, Synthesia, Colossyan, Hour One AI, ElevenLabs, Corti, and Cradle.bio.
LLM Infrastructure & Ops: Many European companies are developing infrastructure to support AI-driven products, addressing challenges including limited model knowledge, access to AI, costly inference, and AI governance. Notable emerging players include Nuclia, Deepset, Weaviate, Qdrant, MindsDB, Humanloop, dust.tt, klu.ai, Qevlar, TitanML, Nebuly, Holistic AI, Context, and Enzai.
Foundation Models: These underpin the GenAI tech stack, and market-leading models are currently being scaled by European startups including Aleph Alpha and Mistral.AI.
We are conscious that all companies innovating in these areas face challenges. For example, those developing B2B Applications face intense competition and need a ‘data moat’ – a large, unique proprietary data set – to help prevent easy replication of features by competitors. Meanwhile, LLM Infrastructure & Ops companies face huge pressure to reduce running costs, optimise inference, and build community for their products in order to create long-term defensiveness and trust. Foundation Models present a huge opportunity, but are also expensive and time-consuming to produce and take to market. Moreover, hallucination continues to be a concern for many LLM applications, and existing solutions like vector databases aren’t fit-for-purpose for all data sets.
The companies we identify in the market map below are making significant strides across all areas of the emerging GenAI tech stack through creating revolutionary software products and robust infrastructure solutions.
‘Industry 4.0’ — a term first coined in 2011 — describes the step change from manual industrial machinery to the all-singing, all-beeping factories of the future. Fully connected factories can drive efficiency, sustainability, faster time to market, and true mass customisation, and yet the supposed ‘big bang’ has not yet truly materialised.
At Dawn, we believe we’re still in the foothills of the Industry 4.0 opportunity. Today there is a renaissance in home-grown manufacturing in both the US and Europe, with $196bn invested in the US and at least 500 mid-large factories built in Europe in recent years.
There is a huge opportunity in the emergence of new and natively connected factories but the opportunity in existing factories, many of which have been operating without pause for decades is enormous. To put it into perspective, we estimate that at least 73,000 mid-size manufacturing businesses in Europe have yet to fully embrace the potential of Industry 4.0, which translates into up to $3 trillion a year for digital transformation investment and they are ripe for transformation.
Transforming a factory is no mean feat and requires significant investment and a great deal of time. We’re excited about the many innovative companies that have recently emerged to tackle this challenge head-on – in particular those solving
For more details, and to read some of the top scaling tips shared by manufacturing executives, founders, and researchers, read our three-part series:
The companies in the above market map are addressing inefficiencies across the manufacturing process, and paving the way for the digital transformation of the factory. We’re delighted to see this breadth and depth of innovation across the continent and are interested in hearing from companies in this space. If you’re a founder looking for support, please get in touch with: evgenia@dawncapital.com, daniela@dawncapital.com and skye@dawncapital.com.
Know Your Customer (KYC) software has become a cornerstone of modern compliance operations, leveraging biometrics and database checks. Know Your Business (KYB) on the other hand still remains relatively unsolved by software. Most KYC players have settled for outsourcing responsibility to third-party managed services, showing some reluctance to venture into this offering. It reflects key differences between KYC and KYB: more chaotic and varied datasets, the lack of “finality” in the evidence, and the amount at stake if elements are left ambiguous. Due to this ambiguity, KYB cannot be easily outsourced as a managed service. Because of its importance, enterprises cannot ignore it and are looking to work with innovative start-ups to find a solution.
Engaging with business entities presents unique fraud considerations: who is in control, where they operate, their credit history, and how they are structured. KYB processes have to both deliver reliably during onboarding and on an ongoing basis as they consistently change and evolve. Failing to get this upfront onboarding and monitoring right is a major financial, regulatory, and reputational risk. Increasingly sophisticated fraud — for example, synthetic identities — and a more turbulent global geopolitical environment has only made such firms’ KYB processes more urgent and complex.
We believe unlocking this KYB opportunity will be massive: the annual impact of global fraud now exceeds $1 trillion, according to LexisNexis. $46 billion is already spent on financial crime compliance in the US alone. KYB compliance also extends into many other sectors, such as marketplaces.
We’re seeing an array of emerging companies rising to this challenge. Today, next-generation providers are differentiating across several dimensions: the quality and flexibility of their workflows, the depth of their analytics and risk capabilities, as well as access to and standardisation of underlying business datasets. The strength of these platforms lies in both their usability for compliance analysts and configurability to map to specific processes, risk frameworks, and customer sets.
Europe is at the forefront of this KYB innovation. In the market map above, we have highlighted some of the exciting new solutions on our radar. While KYB represents a complex and multifaceted challenge, the right solutions will transform the compliance landscape and seize a multi-billion dollar opportunity.