A Fintech ecosystem with a vision for excellence

This article was originally published on Focus on Business

Author: Evelina Verbickė, a Senior Investment Advisor for Business services & ICT at Invest Lithuania

If you have ever paid for anything online, I can almost guarantee that a Fintech company was involved in the process. From acquiring payments to facilitating cross-border transactions, hundreds of often invisible providers make our financial lives easier and safer. This is especially true in Europe, where the wide adoption of Open Banking principles means that traditional banks are actually required to provide APIs to authorized and regulated third parties. And while EU-level rules apply to all countries of the bloc, the role of local governments in fostering innovation in Finance is paramount. In this article, I would like to outline the strategic approach Lithuania has been taking in bringing its Fintech ecosystem to the next level.

A Fintech hub with a concrete action plan

With more than 260 Fintech companies across all imaginable verticals, Lithuania can already claim the title of Europe’s largest Fintech hub. Such a position has been achieved thanks to the concentrated efforts of the country’s government, the Bank of Lithuania, and numerous institutions and associations that believe in the transformative potential of innovative tech. Lithuania offers Fintech companies a hard-to-beat combination of a business-friendly regulatory environment with efficient licensing processes and a rich talent pool in software development, AML / Compliance, customer support, and operations.

Lithuania’s strategic goal is now to further strengthen its position as a high-value-added European Fintech hub by promoting the qualitative growth of the sector. This involves opening up to even more companies creating innovative solutions, building the needed skill base, strengthening risk management procedures, and raising awareness. And recently all of these ambitions have actually been set in stone with the introduction of the 2023 – 2028 Fintech Strategy of Lithuania. The strategy, developed by the Lithuanian Ministry of Finance with the country’s Fintech community, has 5 guiding principles:

• Principle 1: Supporting the qualitative development of the Fintech sector in Lithuania.
• Principle 2: Attracting innovative Fintech solutions to Lithuania.
• Principle 3: Ensuring that Lithuania is the Centre of Excellence for Fintech.
• Principle 4: Ensuring that Lithuania is a safe and reliable jurisdiction.
• Principle 5: Ensuring that Lithuania is universally recognized as a European Fintech hub.

Each of the principles has a mini-road map with responsible stakeholders, easy-to-track, and ambitious KPIs, like growing the number of clients served by Lithuania-based Fintechs from 25 to 35 million. It embodies the good practices of co-creation and the cooperation between public and private sectors that have been crucial to the sector’s success so far.

Building on a solid foundation

One of the advantages of a small country with huge ambitions is how agile and fleet-footed it can be, especially with a solid plan in place. The strategy builds upon years of development, growth, and experimentation that led to an already burgeoning sector, with over 7,000 specialists and more than 260 companies. The strategy also incorporates all the steps already taken by the sector to increase its resilience and attractiveness, including the Bank of Lithuania’s Newcomer Programme, the first AML/CTF specialist certification program in the Baltics, and the official application to host the Anti-Money Laundering Agency (AMLA) in Lithuania.

Further development of the sector will have a positive impact on the conditions enjoyed by Global Business Services centers operating in Lithuania. The country is already a trusted location for such financial institutions as Western Union and Nasdaq, alongside much of the Scandinavian banking sector. Finance-focused centers here not only run day-to-day functions but also develop and launch products, like Danske Bank’s online banking app MobilePay, now used by 90% of Denmark’s smartphone owners. With even more action and talent in the Fintech space, Global Business Services centers will gain access to novel opportunities for co-creation.

It is worth noting that the majority of both Global Business Services and Fintech operations are clustered in Lithuania’s capital Vilnius, which has topped this year’s Business-Friendly City Perception Index in Emerging Europe. Next year, the city will also become home to Europe’s largest tech campus, worth €100 million. Upon completion in late 2024, Tech Zity is set to house 5,000 digital ecosystem workers, many of whom undoubtedly will be working in Fintech.

Even more synergies down the line

Worldwide, the Fintech industry is anticipated to expand sixfold by 2030, reaching $1.5 trillion in revenue and accounting for a quarter of all banking valuations, according to BCG. The competitive pressure from digital banks and other Fintech enterprises is reshaping the sector, pushing traditional banks to innovate and keep up with the trends. The future of Finance looks exciting, and I am confident to say that Lithuania is going to be one of the places where it is forged!