“Think global, act local” began as a grassroots call to action, but in the digital age, it has also become a mantra for startups around the world. While various cities and regions are claiming specific areas of expertise, the Baltics are moving to become the most important fintech region in Europe.
How do the small Baltic countries, sandwiched between Europe and Russia, find their competitive advantage? With educated, multilingual populations, innovation-friendly governments, a low cost of living and global mindset, Latvia, Lithuania, and Estonia are steadily showing what they are capable of in regards to technological development – especially when it comes to financial technologies or fintech.
If this is the first time you are hearing about the Baltics and fintech, here’s a quick update: Estonia has found its first fintech unicorn in Transferwise, Latvia has attracted several global alternative lending companies such as 4finance, Creamfinance, and Twino; and Lithuania just became one of the first EU countries to release official ICO guidelines. In the traditional banking sector, it would be impossible for any of the Baltic countries to become the new Switzerland, or overtake such financial centers as London or Berlin, but millennials are changing the way we view the finance industry. For the new generation of financial service consumers, customer experience and ease of transaction are valued more highly than the location of the company.
Choosing to launch our fintech startup in Latvia was a no-brainer, and not only because I’m originally from Latvia. There are at least 10 great reasons why the Baltic countries, and Latvia specifically, are the ideal place for startups, in particular, fintech startups:
Educated Talent. On average people in the Baltics speak three languages. Almost everyone in the tech industry is proficient in English, and a high percentage speak Russian, opening up an Eastern connection. Not only does Latvia boast great higher education institutions for business and IT such as the Stockholm School of Economics Riga, Riga Business School, and Riga Technical University; people are increasingly choosing to get a more diverse experience by studying abroad. This leads to a flexible and adaptable pool of talent with a global mindset.
Affordable Talent. Wages are rising in the Baltics, but they are still drastically lower than in western Europe, aided by low living expenses. The Baltics are full of experienced developers who are well educated and have been trained by big technology companies. This allows startups to hire a highly skilled workforce for a fraction of the price they would pay elsewhere. Latvia has around 10 thousand people working in the banking and finance sectors, which is a significant part of the active workforce for a population of just under 2 million.
Bang For Your Buck. Rent, communications and transportation prices in Riga, the capital of Latvia are extremely competitive when compared to such cities as London or Berlin.
Global Connections. Fintech businesses tend to be global and have cooperation partners all over the world. The Riga airport is located 15 minutes by car from the city center and well connected by public transport. Riga airport currently provides direct flights to 100 destinations in 30 countries and the national airline AirBaltic is expanding, with plans to purchase 60 new airplanes and open additional routes. Another fun fact – AirBaltic became the first airline in the world to accept payment in cryptocurrency.
Accessible Corporations. From accelerators to pilot programs and everything in between, many corporations are open to working with startups, and it is a lot easier to get to the top of organizations in the Baltics. If in the US it can take several years to sign a cooperation agreement with a corporation, in the Baltics it can take as little as a few months or even weeks.
Agile Government. Small economies are agile economies. They can more easily adapt to the needs of the fast-moving digital age and react to new innovation. In addition, the connection from the average person or entrepreneur to government representative is much shorter than in other larger countries. This, together with an active NGO sector, makes it much easier to see through changes in laws or implementation of new ones.
E-Government. Estonia is great at marketing its e-governance programmes, but the other Baltic countries are not far behind. While bureaucracy can be slow-moving, the startup ecosystem is being embraced by the Ministry of Economics in Latvia, and government institutions offer various e-services. It is very fast and easy to establish a business here.
Startup Law. Latvia is the first country to implement an innovative startup law aimed specifically at promoting the creation of startup businesses. The startup law includes special tax breaks, as well as eases visa restrictions making it easier to recruit a global workforce.
Space for Growth. Startup accelerators and sandboxes offer guidance and open new opportunities for developing startups. Lithuania has even opened the first proptech sandbox in the world. These spaces give startups the room to experiment and test out new technological solutions.
Great Lifestyle. Everyone who comes from abroad to work in Latvia always mentions the quality of life as one of the top reasons for staying. Riga has beautiful architecture, world-class arts, and cultural opportunities, while at the same time being located 15 minutes away from the seaside. Riga is surrounded by nature, forests, lakes, and fresh air and produce. Several indexes also place Latvia as one of the most peaceful countries in the world.
One in three millennials believes that in the future they won’t need a bank at all according to McKinsey’s 2017 annual global banking review. According to an Ernst and Young study, 45% of millennials find it easier to set up an account using a fintech mobile app rather than a checking account at a bank. Both trust and money are shifting from traditional financial institutions to new, transparent and technologically advanced fintech startups, and an increasing portion of that is flowing into the Baltics. A recent Tech.eu study shows that Estonia beats out Germany and France, and Latvia beats out Spain when calculating investment per capita in fintech. Startups, and especially in the fintech sector, are going to play increasingly important roles in the Latvian, Baltic and global economies, and I couldn’t imagine a better place than Riga to launch my fintech startup Mintos.
About The Author
Martins Sulte, CEO and Co-Founder at Mintos. Mintos is a global marketplace for loans providing retail investors with an easy and transparent way to invest in loans originated by a variety of alternative lending companies around the world.