Lithuania has been rapidly emerging as a hub for fintech companies in Europe over the last few years.
The country has seen a surge in the number of fintech startups, with several established companies relocating their operations to Lithuania due to the country's favorable regulatory environment and its highly skilled workforce in the technology and financial services sectors.
Yet in a quickly changing market, can it keep up with other contenders across Europe to establish itself as a leading fintech hub in Europe?
Read on to find out why it might well be able to.
The PSD2 reform
While US unicorns have grabbed the lion-share of the European market, which is why there are so many Apple Pay e-commerce sites and Google Pay casinos around, the PSD2 (Payment Services Directive) issued in 2018 made it easier for European startups to access banking infrastructure by creating a single continental market.
The EU directive has helped Lithuanian startups by opening up opportunities for innovation and competition in the financial industry. It does this by mandating banks to provide third-party providers with access to their customers' account data through APIs (application programming interfaces).
Lithuanian startups, then, now have the power to develop new financial products and services, such as payment initiation and account information services, which can be offered to customers across the EU. The PSD2 has also increased competition within the financial industry, as startups can now compete with traditional banks on a more level playing field.
One final advantage of PSD2 is that it has also reduced barriers to entry for startups, as they no longer need to obtain a banking license to offer financial services. This has made it easier for startups to enter the financial industry and has contributed to the growth of Lithuania's fintech ecosystem.
Lithuania is part of a wider innovation culture that is one of the most impressive in the world. From selling second-hand clothes to learning new skills, Baltic startups have made a pretty big name for themselves over the past decade. Here are a few examples.
TransferWise is a global money transfer company that allows users to send and receive money across borders at a low cost, using a peer-to-peer system. The company has disrupted the traditional banking industry and has become one of the most successful fintech startups in the world.
Vinted is an online marketplace for buying and selling second-hand clothing. Providing an eco-friendly alternative to traditional fast fashion, it has become one of the largest online marketplaces in Europe.
A knowledge-sharing platform, Qoorio allows users to connect with experts and learn from their experiences. The startup has disrupted the traditional education industry, providing an alternative way for people to learn and grow their knowledge and skills.
With these pioneering tech startups, the Baltic region has demonstrated that it’s a hub for tech innovation and it’s likely that it’ll produce more successful startups who take inspiration from the success of their predecessors.
The future of Baltic fintech
The future of fintech in Lithuania looks promising if expert reports are anything to go by. There are over 200 fintech companies currently operating in the country, many with bold new ideas that could mark them out as the next industry pacesetter to emerge from within Lithuanian borders.
The country's banking license regime is also seen as more accessible and affordable compared to other European countries, making it easier for new startups to enter the market. This could bring overseas talent, both in terms of leadership and talented workers, to add to the country’s fintech firepower.
The Lithuanian government has also been supportive of the fintech industry and has implemented various initiatives to promote its growth, such as the establishment of the Vilnius Tech Park and the FinTech Hub LT. Over time, these will provide the fertile breeding grounds for further development.
Looking ahead, advancements in technology could further Lithuania’s cause on the global Fintech scene, particularly in areas such as blockchain, artificial intelligence, and cybersecurity. With the country’s startups already among some of the world’s finest, they’ll be at the forefront of the increasing adoption of Web 3.0 digital payments and e-commerce, further strengthening its position among leading fintech economies.
In short, with its favorable regulatory environment, supportive government initiatives, and a thriving fintech ecosystem, Lithuania is well-positioned to continue to attract investment and innovation in the fintech sector over the next decade and beyond.