The Baltic States have again been confirmed as the most vibrant fintech hubs in emerging Europe.
According to the Global Fintech Index City Rankings, a report published by Findexable, which monitors all cities worldwide where there’s a cluster or community of fintech companies, Lithuania ranks fourth globally and Estonia 10th.
Payments, lending and retail banking are the strengths of the Lithuanian market, where companies such as stockinvest.us, Coingate and NEO Finance lead the fintech scene.
Overall, Europe’s diversity, and its commitment to regulatory coordination, continues to be a key strength. The region is second only to the Americas by the number of hubs with 78 clusters in total. Regional fintech also receives an outsize proportion of venture capital relative to other sectors (at 20 per cent of all VC investment): a higher proportion than Asia and the US.
“There are some common features of winning fintech hubs around the world,” says Simon Hardie, CEO and founder of Findexable. “Fintech-friendly regulations incentivise entrepreneurship and encourage investment. A strong talent pool is also key to fintech success together with an ecosystem where people can connect easily.”
When it comes to fintech, it would appear that smaller is better. Smaller countries and cities ranked very well in the index, making themselves bases for a new breed of financial services. In fact, becoming an important fintech hub is increasingly defined by the number of connections countries can enable, not the size of the banks’ accounts.
“Most companies shortlist the easy options but they may be missing out on better options or opportunities – a company from the US wouldn’t immediately write down Estonia or Latvia on that shortlist but if they had the data, they could make a more informed decision,” says Yoni Arbel, head of treasury at leading Estonian fintech TransferWise.
The scale of what can be achieved is best shown by Lithuania, coming in at fourth place globally and the highest-placed small country in the rankings. With a population about a third the size of London, it’s now second only to the UK by the number of fintechs with EU e-money licenses.
According to InvestLithuania, in 2018 the fintech sector in Lithuania grew by 45 per cent to a total of 170 companies employing more than 2,600 people.
“Because of our modern approach to regulation, ICT infrastructure and talent pool, the world sees Lithuania as one of the most prominent countries in fintech,” said Lithuanian Minister of Finance Vilius Šapoka.
And although the other emerging Europe’s countries rank very low (Hungary 53rd, Slovenia 54th, Bulgaria 56th, Romania 57th and Belarus 59th), governments and banking institutions are trying to fill this gap promoting new fintech strategies.
Early in October, the National Bank of Hungary (MNB) was one of the first central banks in the CEE region to publish its new fintech strategy in line with a broader, national strategy which acknowledges that the level of digitalisation within Hungary’s banks and financial institutions is remarkably low. The strategy encourages cooperation between market players and fintech companies to facilitate digitalisation and innovation within banks, which in turn will help to integrate them into the global financial sector.
Also, the National Bank of Romania (BNR) this year introduced the Fintech Innovation Hub project, “a platform for dialogue with companies developing innovative public interest solutions in the area of payment and financial services.”
