With slightly more than six million residents across Estonia, Latvia and Lithuania combined, the fintech profile among Baltic states is on the rise. Consider some of the leading fintech players that were formed in the Baltics, such as Latvia’s P2P leaders Mintos, Twino and VIAINVEST or blockchain innovator BitFury , Estonia’s Transferwise and Lithuania’s PaySera – a money-transfer companies worth more than $1 billion now, or Skype, which is the product of Swedish and Estonian innovation, proving fintech plays are quite active in the Baltic region of the European Union.
The trio – Estonia, Latvia and Lithuania — recently signed a memo of understanding for capital market development in the Baltics, for which fintech solutions, including distributed ledger technology, are key areas of focus. This MOU reflects the ongoing innovation across the Baltics in the area of fintech, whether it be blockchain, P2P lending or payments technology.
Lithuania and the Blockchain
Lithuanian aspires to become the fintech capital of the Baltic states, and it’s focusing on attracting blockchain startups to begin. Lithuania has strategically developed a Blockchain Centre in the capital city of Vilnius an attempt to lure UK-fintech startups to the region. It’s Europe’s maiden blockchain platform, which is designed for startups and entrepreneurs across public and private sectors, and it has the support of similar hubs in Melbourne and Shanghai.
The new hub gives blockchain companies the opportunity to research and apply their technologies in a regulated manner with a focus on advancing the blockchain for social good across sectors, particularly those where “security and credibility” are paramount, such as financial services and elections, for instance.
The timing of Lithuania’s blockchain center isn’t coincidental, with the country looking to poach top fintech talent, including some of its nationals currently employed in the UK region, ahead of Brexit.
On that note, Lithuania has already launched a Visa program to facilitate the hiring of top tech talent located outside of the EU region (Estonia launched a similar program about a year ago.) Lithuania has a great deal to offer, boasting some of the top speeds both for its internet network and the time it takes to establish a new business in the country notwithstanding its unrestricted EU market access.
Meanwhile, Lithuania’s central bank is developing a regulatory sandbox dubbed LBChain dedicated to the development of fintech and blockchain technologies for local and overseas startups.
Latvia, a country where Facebook and Draugiem battled for the No. 1 spot among social networking sites a few years ago, is an attractive domicile for foreign companies, with the country having recently passed a law with favorable tax benefits for startups that are projected to increase venture capital investments in the country twofold. Latvia’s presence in P2P lending is widely known already and continues to gain scale, but there’s another pocket of fintech that is also on rise in this former Soviet republic – ride sharing.
Uber may be banned in London, but Latvia has taken a different tack. Lawmakers decided to regulate the ride-sharing industry and in doing so have sparked innovation in this fintech segment. The Amendment to the Latvian Road Transport Law, which goes into effect in March, will regulate the ride-sharing market alongside taxi services and provide guidelines for startups such as Taxify and Uber.
Taxify is the leading ride-sharing app there today. But given that Latvia has rolled out the welcome mat to ride-sharing startups coupled with the regulatory clarity, Uber could be incentivized to expand its presence in the Baltic region. It already operates in Estonia.
Latvia, whose economy expanded at a rate of 6.2% in Q3 2017, is also host to a rising annual startup conference, TechChill, which is an offshoot of TechCrunch. The Riga, Latvia conference draws thousands of attendees and is an attempt to showcase Eastern Europe as a hotbed for innovation.
Estonia’s Digital Push
Estonia is not only making a name for itself in fintech in the Baltics, but it’s also taking a leadership position for fintech in the world. Estonia takes the lead in Eastern Europe for modern technology, evidenced by its mission to develop a “borderless digital nation.” In Estonia, citizens can vote in elections online and who they dub “e-residents” can domicile their businesses there even without a physical presence.
Reports surrounding Estonia’s own cryptocurrency, the Estocoin, are blurred, considering its commitment to the EU and hence the euro. Nonetheless, Estonia has captured the attention of no other than Vitalik Buterin, the co-founder of the Ethereum blockchain, who has been to Estonia and has plans to return.