Why Lithuania’s Fintech is Booming

Ekmel Cilingir, EMBank, Why Lithuania's Fintech is Booming

Lithuania is becoming increasingly established in the Fintech sector and is gaining more international recognition. The statistics do not lie – the country is attracting more investments and interests from foreign businesses every year. For example, in 2022, this sector attracted investments in the amount of EUR 67.9 million to Lithuania. During H1 2022, the country’s fintechs recorded an impressive EUR 375 million in revenue, marking an 80% increase compared to the same period in the previous year.

According to data from the Fintech Landscape in Lithuania overview, 263 Fintech companies were operating in Lithuania last year. Lithuania is the largest Fintech hub in the EU in terms of licensed companies. Also, this country is 8th globally among lowest ML/TF risk jurisdictions and 3rd in OECD for corporate tax competitiveness. The representatives of the Fintech sector in Lithuania are doing something right, and that the executive authorities are also creating good conditions for the development of the sector.

Knowledge is shared.

One of the greatest strengths of the Fintech sector in Lithuania is the unified ecosystem, with cooperation and mutual communication within the sector. The Fintech Hub LT association, as well as the public institution Invest in Lithuania, Bank of Lithuania, Ministry of Finance of the Republic of Lithuania, and other companies are working hand in hand to address the issues faced by the financial sector. After the Bank of Lithuania recognised Fintech as a strategic direction of its activity six years ago, the sector began to move at a faster pace, as the obstacles for market participants to enter larger markets began to decrease.
I must admit, I had never seen such close cooperation in other countries before. So far, these targeted efforts seem to be working.

For example, the Rockit Vilnius event and workspace provide entrepreneurs and innovators with opportunities to hold meetings and share their experiences and insights, as well as to hold training sessions. This creates many opportunities for establishing relationships and knowledge-sharing among representatives of the sector in the capital. Professionals have noted that companies, organisations, and public institutions are willingly sharing their experience with their colleagues in meetings, seminars, hackathons and discussions, thereby showing support for each other and their common goal of strengthening Fintech in Lithuania.

Reliable young professionals

Global challenge for the Fintech sector is recruitment, in terms of both attracting and retaining employees, as well as ensuring their preparation from the first year of their studies. Lithuania has also found a solution to this issue. With the rapid growth of the Fintech sector in the country, young people are noticing the success of the sector and the size of the investments it attracts and want to pursue a career in this particular field. In Lithuania, the number of young people choosing to study information and communication technologies in 2020-2021 increased by 17 %.
It has long been no secret that information technology professionals make a significant contribution to attracting foreign investors. In Lithuania, most professionals speak fluent English, so it is much easier for international companies to find employees and remove the barrier to mutual communication. Moreover, Lithuania ranks 4th in the European Union in terms of the number of young information and communication technology professionals working in this field.

Government interest in expanding Fintech

The Lithuanian government has also had a rather significant impact on the success of Fintech in Lithuania. Since a flat-rate corporate tax rate of 15% – still one of the lowest in Europe – is applied, foreign entrepreneurs are naturally turning this direction. I have noticed that the investors who compare the EU capitals to decide in which country it is worth setting up an office are surprised by the extremely low rents, the speed of the internet and the level of cybersecurity. With a well-developed and continuously improving digital infrastructure, an abundance of professionals and the availability of digital skills, there are no drawbacks for a tech business.
The post-pandemic wave of job and occupational changes, and the recognition of the opportunities created by technology, has led even more people to turn to the IT and financial sectors. The Lithuanian government quickly responded to this trend by offering support for those wishing to change their specialisations. According to data from “Invest Lithuania”, state-funded qualification programmes are contributing to the growth of the Lithuanian economy. Every year, about 2,500 professionals are retraining and improving their skills privately, and the Ministry of the Economy and Innovation of the Republic of Lithuania has announced its goal to retrain 19 thousand professionals by 2026, who will meet the growing demand for professionals in the market.
The Lithuanian authorities are also contributing to the development of Fintech through other forms of financial compensation. The Law on Employment, which was amended last year, makes it even easier to employ foreigners. For example, the arrival allowance to cover the costs of moving to another country for skilled employees amounts to EUR 3,000. In addition, the employer may receive a payment of up to EUR 5,256 from the state for each such employee. Foreigners coming to Lithuania to work are also able to obtain the necessary permits and pay their taxes in one place, without having to wander between several institutions.
Moreover, the government is supporting start-ups through investment funds, grants, and acceleration programmes. Furthermore, there are opportunities to participate in tenders, seek crowdfunding and apply for venture capital funds. All these decisions by the public authorities are providing huge relief to the Fintech community, which continues to look for local and international professionals while expanding its network of businesses.

Prospects and goals

Although the current position of Lithuanian Fintech is very good, the country’s government and the representatives of the sector are not stopping there and have developed a plan. This year, representatives of the Ministry of Finance, Bank of Lithuania, Invest Lithuania, GO Vilnius, Rockit, BCCS cluster, Fintech Hub LT and the Infobalt association signed the Memorandum on the Implementation of the Action Plan for the Development of the Financial Technology Sector in Lithuania for 2023-2028. The Memorandum provides that the public authorities and market participants will pursue the main goals set out in the guidelines through their joint efforts.
To promote the qualitative development of the sector, the Ministry of Finance will analyse the problems encountered by companies in attracting capital and, if necessary, propose possible solutions. It is also planned that cooperation with higher education institutions will be strengthened, a significant number of which have already initiated programmes or courses aimed at training Fintech professionals. This will allow a stable and sustainable growth of the sector in the future, by reducing the probability of a shortage of professional employees.

Ekmel Cilingir, Chairman of the Supervisory Board of European Merchant Bank

Ekmel Çilingir | Chairman of the Supervisory Board of European Merchant Bank UAB