The country of origin of FinTech companies such as Revolution or the account-to-account payment platform Kevin recently declared a state of emergency in response to Russia’s assault on Ukraine.
Lithuania has become a success story: a country that has created an ecosystem to really attract FinTechs. With less than 3 million inhabitants, Lithuania has grown from 55 FinTechs in 2014 to 230 in 2020. By comparison, Germany had around 1,000 FinTech startups in 2021, according to data from Statista, in a country of 83 million inhabitants. people.
After the UK left the European Union, many UK FinTechs decided to move their operations to Lithuania because the country facilitated the provision of Electronic Money Institution (EMI) licenses. This allowed companies to provide services throughout Europe. This is why Revolut, which initially started in the UK, applied for a banking license in Lithuania which could then be used to provide banking services in other EU countries.
Read more: As Brexit looms, FinTech companies scramble for Lithuanian licenses
Not only is obtaining the license relatively quick, around one year, in Lithuania, but the government and central bank of Lithuania are known to be FinTech-friendly. Bank of Lithuania board member Marius Jurgilas is probably the fintech-friendly regulatory environment’s best advocate, giving regular speeches in London and across Europe.
Companies are also satisfied with the support received from an administrative point of view and in terms of expertise.
“Lithuania found itself in the right place at the right time. It will be difficult for others to follow. Lithuania is now ahead in building a self-reinforcing ecosystem to attract more FinTech – which attracts more talent, which attracts more FinTech investors. It will be difficult, just by copying the model, to obtain the same results,” said Dimitri Gugunava of SumUp.
But this spectacular growth may now be put to the test if Russia’s ambitions do not stop at Ukraine. The Wall Street Journal reported on Friday that Ukraine’s growing tech outsourcing sector could be under threat, given internet outages. Kerry Hallard, chief executive of UK-based trade group the Global Sourcing Association, said that at a member firm in Kharkiv, 80% of computers had no internet access.
Companies are helping their staff to move to other neighboring cities and countries, but the future is uncertain. Wix said it evacuated employees to Poland and Turkey last week, and Revolut said it offered financial support to employees who want to relocate.
However, the situation in Lithuania may be different from that in Ukraine. While its position between Kaliningrad (Russia), Belarus and Russia positions the country in a risky enclave, the small Baltic country belongs to NATO and the European Union, and it would receive military support from all its members. in the event of a military invasion.
Also, unlike Ukraine, the FinTech sector has exploded from a business perspective, with many companies either headquartered in the country or holding an EMI, but with most staff located in different countries across Europe. and the UK.
The three Baltic countries of Lithuania, Estonia and Latvia are the only former Soviet republics to have joined NATO, which was seen by Russia as a provocation.
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