Fintechs Flock to Latvia, Estonia, and Lithuania


It’s no secret that the Baltic nations are thought-about a hub for fintech exercise. That is very true within the wake of Brexit, given the compliance and regulatory uncertainty surrounding monetary companies between the U.Okay. and the European Union. Entrepreneurs want extra readability. Latvia, Estonia, and Lithuania are more and more bridging that hole, because of a tradition of nurturing tech innovation and embracing digitization that in some ways have made the Baltics the envy of the world.

Fintech is the intersection of finance and expertise. It’s a sector that appears to tech to make monetary companies higher and extra intuitive for shoppers and companies alike. The sector has disrupted legacy monetary techniques by leaning into what shoppers need and the way in which wherein retailers and entrepreneurs can ship. The Baltics take the lead in areas like peer-to-peer (P2P) investing, the place the area has the most important slice of the market within the EU, with France in a distant second.

Fintechs Flock to Latvia, Estonia, and Lithuania

Supply: Fintech Circle/Twitter 

Due to the management position that Baltic nations have taken in fintech, the sector has been largely resilient all through the well being disaster. For instance, funding raised by fintech startups within the area elevated by 3.8x in 2020 to over $175 million. The variety of offers additionally rose throughout the pandemic yr from 41 to 45 in 2019 and 2020, respectively. That momentum began to select up once more later in 2021.

The Baltics have produced main fintech gamers on the world stage, like peer-to-peer (P2P) investing firm VIAINVEST, cash switch firm Sensible, and funds firm Paysera to call a couple of. These firms have altered the monetary panorama within the area and function a mannequin for different jurisdictions to emulate. Let’s check out a number of the key themes for fintech within the Baltics.

Latvia’s Fintech Panorama

Latvia’s fintech sector has made its presence recognized within the EU, evolving because the Nineties when the Baltic nation turned unbiased. With a inhabitants of beneath 2 million, Latvia has advanced from relying solely on legacy expertise to being out entrance for digital integration from cost playing cards to on-line banking.

Legacy techniques nonetheless exist, as shoppers didn’t abandon ship totally. However shoppers additionally turned extra tech-savvy of their expectations, which performs into the choices that fintech delivers. In the end, monetary establishments and fintechs have realized to accomplice, and that has been key to the success of the sector within the nation. The top result’s a fintech sector that could be a power to be reckoned with within the EU.

With a whole bunch of startups mixed domiciled in Latvia, roughly 20% of them function within the fintech sector. That proportion is rising annually, in line with Swedbank. Certainly, the variety of fintech startups in Latvia has steadily elevated from 66 in 2018 to 75 in 2019 and 91 in 2020, most of that are primarily based in Riga.

The celebs have clearly aligned, because of burgeoning expertise, a strategic location, tech infrastructure and authorities coverage together with startup visas and sandboxes that nurture innovation in every part from tech {hardware} to funds. On the expertise aspect, Latvia shines with a talented workforce in finance and innovation, Swedbank explains, and these entrepreneurs have additionally begun to make use of their experience within the space of fintech. Latvia’s workforce is younger and sometimes extremely educated with robust college attendance and a rising variety of college students pursuing info expertise and engineering specialties.

The workforce can also be recognized for being bilingual, which helps to strengthen its enchantment amongst worldwide entrepreneurs and entice overseas investments. The identical may be stated for all Baltic nations. As well as, many Latvia-based fintechs have a presence overseas in locations like Asia, Switzerland, Africa and past.

The worldwide presence of Latvia’s fintech sector makes it potential for these startups to deal with a number of the challenges on a worldwide scale. For instance, options developed by Latvian fintech startups are anticipated to lift the profile for distant monetary companies internationally, in line with Toms Niparts of the Jeff App quoted by Swedbank.

Latvia scores effectively for fintech help with a Regulatory Sandbox and the Innovation Hub, by way of the Monetary and Capital Market Fee (FCMC), the place founders can kick the tires on their innovation and construct in a means that their services might be compliant with regulation. Latvia is thought for having a pleasant regulatory framework towards the fintech sector, which turned more and more vital within the wake of Brexit as founders appeared to fill the hole left by the position the UK used to play. In reality, that is true of all three Baltic nations, which have been crafting regulation that’s considered in a constructive gentle by the fintech trade.

Latvian regulators are centered on fintech and banking, and they’re anticipated to create guidelines that help the wants of the fintech sector, in line with a current dialogue hosted by the FCMC. They’ve proven a willingness to seek the advice of with native and worldwide founders seeking to arrange store in Latvia or revamp their enterprise mannequin in a regulatory compliant means.

Regulators are keen to assist entrepreneurs get the related license they might want to function. By the way in which, VIAINVEST lately obtained an Funding Brokerage Agency License for funding safety and product innovation, making it a completely regulated platform.

So far as the breakdown, lending startups dominate Latvia’s fintech sector, at 27%, and there’s some spillover on this phase with P2P investing. Funds and remittances are available in an in depth second, at 23%. Latvia’s profile within the cryptocurrency and blockchain area was thrust into the highlight with the emergence of BitFury, a serious trade participant whose founders are Latvian.

Fintechs Flock to Latvia, Estonia, and Lithuania

Supply: Swedbank

Swedbank polled fintech startups in Latvia to study what drew them to the Baltic nation. The preferred purpose, at 46%, was how straightforward it’s to do enterprise there. The second hottest purpose at 34% was the expertise pool availability, adopted by pleasant regulation at 31%.

Fintechs Flock to Latvia, Estonia, and Lithuania

Supply: Swedbank 

Beneath is a map of Latvia’s fintech panorama:

Fintechs Flock to Latvia, Estonia, and Lithuania
Supply: Twitter

Estonia’s Fintech Panorama

Estonia is a gem within the fintech world. Having gained a popularity as a digital society, the Baltic nation, which has a inhabitants of 1.3 million, has proven the remainder of the world how digitization is completed. For Estonians, digital life is a lifestyle, from training to healthcare, as the general public sector has made it a precedence to make folks’s lives simpler and of excellent high quality. Just like Latvia, Estonia’s digital integration has unfolded because the nation turned unbiased from the Soviet Union within the early 90s.

In Estonia, residents full their taxes in a couple of brief minutes. Almost all of the nation’s public companies are accessible on-line across the clock. And so they’ve been a first-mover for on-line voting and digital IDs. Tech innovation has been behind all these developments. In response, Estonia was amongst two Baltic

nations to be named among the many main fintech international locations of 2020, rounding out the highest 10. It got here behind Canada, Australia, Sweden, the Netherlands, Switzerland, Lithuania, Singapore, the U.Okay. and the U.S.

By the primary three quarters of 2021, Estonia was liable for 9 out of 10 of the largest offers among the many Baltic nations. The tenth deal occurred in Latvia involving Nordigen, a regulation tech (regtech) startup behind a freemium open banking API platform. Along with regtech, Estonia’s transactions came about throughout wealth expertise (wealthtech), market lending, blockchain/cryptocurrencies, accounting and finance, funds and remittances. The most important deal final yr on this phase was Veriff, a worldwide ID firm that attracted USD 69 million to its coffers in a Collection B spherical. Right here’s a breakdown of the highest 10 offers:

Fintechs Flock to Latvia, Estonia, and Lithuania
Supply: FinTech World

In the meantime, native regulators have fintech on their radar, particularly since Estonia rolled out the welcome mat for cryptocurrency startups early on, as described in a report revealed by TalTech Faculty of Enterprise and Governance and FinanceEstonia. A flood of crypto startups flocked to the nation and over 1,300 exercise licenses to function in Estonia had been granted. With officers taking a light-touch strategy to regulation, firms leveraged their licensed standing to current themselves as reliable.

Lots of these licenses have since been voided because the Monetary Intelligence Unit has sought to rein within the Wild West atmosphere, now requiring firms with the license to be domiciled in Estonia, as one change. Now the Ministry of Finance has stepped in to craft a regulatory framework round crowdfunding, crypto belongings, and unregulated devices with a view towards investor safety. This seems to be a piece in progress.

Estonia’s broader fintech sector is one which by all accounts is rising. Estonia’s fintech sector includes 5 distinct gamers:

  • Corporations
  • The state (totally different ministries, the Monetary Supervision Authority, and Enterprise Estonia)
  •  FinanceEstonia as an umbrella group for the private and non-private sectors.
  • Incubators and accelerators
  • R&D/universities

The tone of the connection between fintech founders and different trade gamers is alleged to be informal and pleasant, with market individuals holding an open-door coverage for each other. That is made potential thanks largely to the truth that Estonia is a small nation coupled with the truth that the nation has produced market leaders like Sensible and Veriff, the TalTech report factors out.

TalTech’s report supplied the outcomes of a 2021 survey wherein individuals expressed a want for larger trade collaboration amongst fintechs in Estonia, one thing that could possibly be facilitated by firms or regulators, for instance. In any other case, the nation’s fintech sector runs the danger of shunning newcomers and stifling progress.

One concern that fintech founders say they’ve confronted of late is wage inflation wherein the price of expertise is on the rise. This dynamic is exacerbated by the small measurement of Estonia and the demand for expert staff. One workaround could possibly be hiring a world workforce, however the downside is their potential lack of familiarity with what Estonia brings to the desk.

As of 2020, Tal Tech recognized 215 fintech firms in Estonia, up from 131 at year-end 2018. Estonia has the best variety of unicorns, or firms with a valuation of a minimum of $1 billion, per capita globally, with seven, two of that are fintechs, Sensible and Zego.

  • Sensible
  • Pipedrive
  • PlayTech
  • Bolt
  • Skype
  • Zego

Extra potential unicorns are additionally within the pipeline, as illustrated under.

Fintechs Flock to Latvia, Estonia, and Lithuania
Supply: Kaido Saar/Finance Estonia Chairman/E-Estonia/YouTube

Estonia’s fintech sector is experiencing progress of greater than 30% annually. One development amongst Estonian startups is that they are usually worldwide companies proper from day one relatively than beginning domestically and increasing their footprints overseas. This has one thing to do with Estonia’s small inhabitants.

Greater than two-thirds of Estonian fintechs function throughout 4 classes. These embody:

  • Digital asset exchanges
  • Digital lending
  • Digital funds
  • Enterprise tech provisioning

Estonia’s fintech sector is full of younger startups. Over half of Estonia’s fintechs are three to 5 years outdated, whereas 15% had been solely based within the final two years or so. As of year-end 2019, Estonian fintechs had whole belongings of EUR 1.03 billion throughout EUR 235 million in income, reflecting trade progress of 1.5x within the final two years. Many of the quantity belongs to fintechs in digital banking and lending. Estonia employs over 2,000 folks within the fintech sector.

Fintechs Flock to Latvia, Estonia, and Lithuania
Supply: Fintech Baltic/Twitter
Estonia Fintech Report.pdf

Lithuania’s Fintech Panorama

Lithuania has a inhabitants of two.7 million, 82% of whom are web customers. Due to a speedy web connection and a strong digital presence together with e-signatures, fintech entrepreneurs can launch a startup in as little as a day.

Over 43% of fintechs positioned within the Baltics area are primarily based in Lithuania, giving it the management place on this entrance. Extra broadly talking, fintechs within the Baltics comprise roughly 7% of fintechs working within the EMEA area, a notable proportion in gentle of the mixed inhabitants of the three Baltic international locations of lower than 6 million.

Most Lithuanian fintechs function within the funds area of interest, at 69 firms. Coming in an in depth second at 64 firms is the class named “different” comprising blockchain, crypto, cybersecurity, and investments. Subsequent is monetary software program, at 46 firms, adopted by lending at 30 and digital banking at 21.

Lithuanian fintechs embody names like SME Finance and TransferGo, to call a pair. Whereas Lithuania has but to crown a fintech unicorn, Paysera’s current Spain growth is predicted to bolster its valuation and make it a contender. The vast majority of fintech startups are usually within the funds and lending classes, although monetary software program together with APIs can also be on the rise resulting from demand because of the comfort the tech gives. Automated credit score companies are one other up-and-coming space. Near two-thirds of fintech firms that function in Lithuania have their headquarters within the nation.

Within the wake of Brexit, it has not been unusual to see UK-domiciled fintechs relocate to Lithuania. In response to the Financial institution of Lithuania, almost two-dozen of UK fintechs possessing e-money licenses moved their headquarters to the Baltic nation, like Revolut and Yapily.

Aalto Capital recognized a few fintech startups to observe in Lithuania:

  • Numai, a rent-to-buy service supplier
  • Heavy Finance, a P2P lending platform for the agriculture trade that makes a speciality of heavy machinery-backed loans

In response to studies, Lithuania has turn out to be so well-liked for fintech startups that regulators have needed to take a step again and hold a more in-depth watch on issues. The Financial institution of Lithuania is cracking down on the sector in response to the Wirecard accounting scandal. Whereas Wirecard is a German firm, Vilnius-based UAB Finolita Unio was allegedly used within the unlawful switch of funds.

Talking of Vilnius, the capital metropolis is tough for entrepreneurs to disregard, with so many alluring options. The price of residing is seen as being enticing whereas the standard of life is tough to beat, with a median commuting time of half-hour and a development towards adopting a four-day workweek. A one-room condominium rental may be discovered for as little as EUR 500 per 30 days, and a fintech founder should buy lunch for beneath EUR 10. The “metropolis in a forest,” because it’s recognized, can also be an ideal place to loosen up with no scarcity of parks and trails.

Native fintechs may even rely massive tech firms amongst their neighbors, together with the likes of Google, Uber, and Revolut, all of which have a presence in Vilnius. Tech startups positioned within the metropolis are recognized for securing overseas investments, even surpassing the degrees of their entrepreneurial friends in London and Tel Aviv within the 2016-2018 interval. As well as, Make investments Lithuania forecasts that Lithuania might be including a whole bunch of fintech jobs earlier than later.


Whereas the fintech sector has not been resistant to the results of the pandemic, it has been resilient because of the strong demand for e-commerce and digital companies. It seems that this momentum is poised to proceed for the foreseeable future, particularly contemplating the way in which that the Baltic international locations have embraced tech innovation. Funding for tech firms in Jap Europe extra broadly can also be anticipated to rise in 2022, all of which bodes effectively for the startup atmosphere. Funds and lending together with P2P investing are the highest areas to observe.

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