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Lithuania makes push to become Europe’s fintech hub

Brexit was a shock for the European Union but, for many member states, it was also an opportunity. Lithuania was among them: as Frankfurt, Paris and Amsterdam vied to lure financial businesses away from London, Vilnius made a play for the world’s fintechs.

Its strategy — based on streamlining regulation to entice fintechs to set up their “EU shop” in Lithuania — appears to be paying off. In 2014, there were just 55 fintechs based in Lithuania. Now, there are 265. Forty per cent of these have headquarters in other countries.

It has not all been plain sailing. The involvement of a local fintech — UAB Finolita Unio — in the Wirecard scandal rattled regulators, and investors acknowledge that it will take more than well-crafted rules for Lithuania to catch up with the UK.

Even so, venture capital investors poured a record €71mn into Lithuanian fintechs in 2021, almost four times the €18mn invested in 2020.

Payments software start-up Kevin is widely considered to be the country’s fintech poster child. It is also Lithuania’s most valuable fintech, thanks to a $65mn Series A fundraising in May that was led by US venture capital giant Accel.

“The Lithuanian fintech scene is still small in terms of the number of individuals, but it’s very fertile for entrepreneurial talent,” says Luca Bocchio, partner at Accel. “We’ve been travelling there quite a bit.”

Luca Bocchio, Accel © FT

Part of the country’s appeal for entrepreneurs is, as policymakers hoped, the regulatory regime, which is run by the Bank of Lithuania (BoL), the central bank. As well as overseeing a well-respected “sandbox” facility that allows fintechs to test their ideas under regulatory supervision, the BoL enjoys a reputation for efficiency and transparency in the licensing process.

A fintech can get up and running with an electronic banking licence in Lithuania in as little as three months — compared with a European average of 12 months — and can also apply remotely. Without a licence, companies cannot directly offer services such as mortgages, loans and overdrafts.

Just over half of the country’s fintechs, 147, have now been licensed as electronic money institutions, payment institutions, or specialised banks — a figure that Lithuania boasts is the highest in the EU, with second-placed France having 90.

This factor played a big role in British neobank Revolut’s decision to seek its European banking licence from Lithuania. It was granted a specialist banking licence in December 2018, which was upgraded three years later to a full European banking licence.

“We picked Lithuania because the central bank promised speed, which is what we wanted most,” says Nik Storonsky, Revolut’s chief executive, who has been waiting almost two years for a banking licence in the company’s home country, the UK.

“The strictness of regulation is the same everywhere but, in Lithuania, it doesn’t feel like a series of vague judgments,” he explains. “It’s just fast, clear and efficient.”

Understanding regulatory processes can be a big drain on resources for fledgling fintechs, but early-stage companies cite their positive experience of the Lithuanian regulator’s transparency.

“When you’re trying to register, they communicate quickly with what to expect — you know exactly what you need to provide and when you’ll get your licence,” says Ayelen Denovitzer, co-founder and chief executive of crypto investing app Solvo.

In other respects, too, Lithuania’s regulators appear to be doing a good job. The country is the eighth lowest-risk jurisdiction for money laundering in the world, according to the AML Basel Index, which ranks the UK 12th and the US 30th.

Last year, however, the FT revealed that UAB Finolita Unio — at the time, a licensed Lithuanian payments company — had been used to steal more than €100mn from Wirecard, the scandal-ridden German payments processor, prior to its collapse in June 2020.

Lithuania’s central bank revoked Finolita’s licence in June 2021 for a breach of anti-money laundering (AML) and counter-terrorist financing (CTF) rules. It said it had been investigating the business since autumn 2020.

While other companies and investors operating in Lithuania acknowledge the seriousness of Finolita’s breach, they insist it is not a sign that local regulators have been putting user-friendliness above rigour, as EU policymakers suggested at the time.

“I wouldn’t describe the process as ‘friendly’ at all, but very strict,” says Pavel Sokolovas, cofounder and chief operating officer of Kevin.

“And, yes, the Finolita breach involved a large sum of money but, if you look at the number of transactions Revolut is doing every month, it pales in comparison.”


So far this year, the BoL has imposed 24 fines — five more than the UK’s Financial Conduct Authority. Six of these were for AML failures, including €200,000 in penalties for Revolut in March.

Simonas Krėpšta, a board member at the BoL, admits that the Finolita incident was an “unpleasant wake-up call”.

“We have zero tolerance for large risks and, if we have clear misconduct cases, we solve them swiftly and with no compromises,” he says. “We now have an even clearer strategy.”

Krėpšta says this includes the development of new software that will collect data from the companies it supervises in “real time”, so the regulator will not have to rely on site visits or quarterly reporting and can react to breaches more quickly in future.

In May 2021, Lithuania launched a new “centre of excellence” dedicated to refining AML legislation and, in June 2022, the government amended its AML rules to tackle the risk of cryptocurrency fraud. Fresh fintech guidelines for the next five-year period are due to be published by the end of this year.

But no matter how “pro-fintech” its regulators may be, investors say it will take Lithuania a long time to match the breadth of London’s fintech scene.

Its tally of 265 fintechs is dwarfed by the UK’s 2,500, although only around 7 per cent of these — 178 — have been licensed by the UK financial regulator, which is a far lower proportion than in Lithuania.

Accel’s Bocchio says: “The advantage of London isn’t just the regulatory framework, but other variables that are largely skills-based. So, if you do a good job on regulation, over time you’re going to attract more foreign entrepreneurs — but that takes decades, not a couple of years.”

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