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A Closer Look at Three Nordic and Baltic Fintech Environments 

The Nordic and Baltic regions continue to establish themselves as major hubs for fintech development, distinguished by an advanced digital ecosystem, high mobile penetration, and a profound trust in public institutions. These elements have catalyzed rapid advancements in financial services that have progressed at different speeds across the region but with a consistent upward trajectory. 

In this article we take a look at the Fintech scenes of three fast developming Nordic and Baltic ecosystems: Lithuania, Norway and Latvia.  

By Chris Crespo 

Investment and Sector Growth 

Despite a recent slowdown in sectoral growth and a contraction in investment pace, the fintech landscape in the region remains robust and dynamic. Fintech investment globaly decreased by a steep 48% in 2023 compared to the previous year. The trend was also reflected across the Nordic and Baltic region in 2023. The current investment climate, more selective yet strategic, prioritizes fintechs with proven growth and profitability potential.  We see this in ecosystemst like Lithuania,  which saw a stark decline in  the total amount of fintech funding, from €67.9 million in 2022 to only €5.5 million in 2023.  Despite this significant shift, the Lithuanian  fintech ecosystem remains vibrant with many companies still primarily funding their operations through revenue.  

Norway has seen a smilar trend in the decline of fintech investment. In 2023 it reported a decrease of 29% in the total number of deals compared to the previous year, while avilable funding has also suffered a significant loss estimated to be 78% lower than the year before. This shift shows a cooling down of investment previously seen across the region but also indicates the Nordic and Baltic markets are entering a new stage of maturity, honing in on sustainable and impactful financial solutions.  With evident discernment in capital allocation and a strong focus on sectors like blockchain, data analytics, artificial intelligence, climate fintech, payments and regtech, the region continues to justify its position of global influence in the Fintech arena. 

With over 2,500 fintech entities spread across the Nordic and Baltic markets, the region is a fertile ground for innovation, collaboration, and cross-border partnerships.  We continue to see great growth ambitions across the region. A great example can be seen in the Latvian Fintech ecosystem where the Fintech sector constitutes 25% of the 600 startups seen across industries, a significant portion of the startup ecosystem. Latvia has recently undertaken a significant reform of its financial sector, setting a precedent in Europe for the extent of its ambition. This transformation has enhanced the knowledge and expertise among industry stakeholders, regulators, and consultants beyond the European average. With the fintech sector rapidly advancing and diversifying in terms of business models and associated regulatory challenges, Latvia is now positioned to lead in demonstrating effective risk management practices and fostering the development of innovative financial solutions. The number of Fintechs in this market continues to increase annualy supported by government initiatives like visas, tax incentives and a friendly, open, and accessible regulator. 

Norway is another great example, having grown from less than 30 fintech startups in 2016 to over 180 by 2023,  the expansion of the Norwegian Fintech scene, indicates a robust development of the sector. The country has been actively working to increase the number of fintech companies within its borders through various initiatives including a Regulatory Sandbox that allows companies to test their financial innovations in a controlled environment under the suppervision of financial regulators, innovation clusters like NCE Finance Innovation in Bergen which bring together startups, established companies and academic institutions to collaborate on financial technology projects and investment in technology and infrastructure. 

Aside from fueling its home grown market, Lithuania has also gone to great lengths to attract foreing Fintechs by offering a supportive regulatory environment, a fast and efficient licensing process, and supportive government policies. Lithuania has successfully attracted notable fintech companies, including Revolut, Shift4 and Google Payment, leveraging its favorable regulatory environment and supportive government policies. These companies chose Lithuania for its efficient licensing process, proactive fintech promotion, and strategic location in the EU market, enhancing Lithuania’s reputation as a vibrant fintech hub. 

The Region’s got Talent 

These ecosystems are not only critical in the creation of jobs but are also magnets for international talent, essential for the ongoing development and diversification of fintech services. Several countries within the region report challenges in atracting the necessary talent to continue to fuel their sector growth, and this is not because of a shortage of technical talent emerging from their local higher education institutions, but because of a rapid surge in demand that surpasses locally available supply.  

Latvia, for example, is investing in specialized education programs and initiatives like the Baltic Centre of Excellence in Financial Services, aiming to bridge the knowledge gap and foster industry growth. Latvia is actively working to attract fintech talent through supportive government policies such as startup visas for foreign founders and friendly stock options policies. These measures, coupled with efforts to create a favorable regulatory environment, aim to boost the growth of the Fintech sector and make Latvia an appealing destination for international Fintech professionals and companies.  

Norway is also fostering its fintech workforce by capitalizing on its highly digitalized banking and public sector, and leveraging advancements in technologies like AI, machine learning, and blockchain. The country’s educational and training programs are evolving to meet the sector’s demands, ensuring a skilled pool of professionals ready to innovate in the fintech landscape. This strategic focus on workforce development helps maintain Norway’s competitive edge in the fast-growing fintech industry. 

Lithuania’s fintech sector is also known for its strong talent and employment growth. The countrys robust ecosystem with over 270 fintech companies, employs more than 7,400 people. The government’s proactive approach in facilitating a favorable environment for fintech startups has been crucial in attracting international talent and strengthening the local employment market in this field. The country has established itself as a fintech-friendly hub with initiatives like the “Startup Visa” program, which eases the immigration process for non-EU entrepreneurs, and a commitment to digital innovation. These measures, along with a collaborative ecosystem that encourages investment and development, make Lithuania an attractive location for fintech professionals and companies globally. 

Harvesting Local Innovation 

The rise in blockchain and cryptocurrency-focused companies signifies an innovative leap in transactions and financial solutions and the willingness from the sector to explore more foundational changes that challenge not only what services should be provided but also how. Data, too, has taken center stage, with companies leveraging it to gain actionable insights, developing solutions that ensure data privacy, and empowering user control.  

A trend, quite unique to the region is the rise of Regulatory technology (regtech) as a regional competitive advantage, driven by the EU’s rigorous regulatory landscape. The regulatory environment, particularly with frameworks like MICA, the AI Act, and the evolving PSD directives, has not only fueled innovation but has also built investor confidence and market stability.  

Latvia can be seen taking the lead in this trend as it continues to foster innovation while ensuring high compliance standards, particularly after its financial sector overhaul and focus on creating a business-friendly regulatory environment to attract new players and facilitate market entry. 

The Nordic and Baltic fintech sectors excel in crafting regtech solutions that align with legislative requirements, enhancing operational efficiencies associated with compliance that free up time and resources for companies to focus on core innovation. 

Across the board, climate fintech is gaining prominence, reflecting the region’s commitment to integrating environmental sustainability into financial services. This alignment with green finance principles not only addresses global climate challenges but also reinforces the regions’ leadership in sustainable financial innovation. 

The gradual shift from competition to cooperation among fintechs and financial institutions signifies a mature understanding of market dynamics, focusing on collective strength and customer-centric solutions.The success of collaborations between large financial institutions and agile fintechs are testament to the region’s forward-thinking approach. These partnerships not only speed up market entry but also infuse the sector with fresh, innovative capabilities. 

Cultivating strong Alliances  

Nordic and Baltic fintechs are enhancing their partnership capabilities to extend their global reach and enhance their market offerings. By collaborating with diverse stakeholders, these fintechs are not only expanding their operational footprint but also enriching their value propositions. This strategic approach leverages regional strengths in technology and innovation, positioning these entities as the keyholders to the gates to a thriving european fintech space led from the Northern parts of Europe.  

Examples include Norwegian fintech companies, like Vipps, Signicat, and others, that have significantly marked their presence internationally. For instance, Vipps has successfully merged with Denmark’s MobilePay, creating a major Nordic payment service provider with over 11 million users. This is a part of broader trends where Norwegian fintechs are not only thriving domestically but are also actively engaging in cross-border collaborations and expanding their market reach globally, benefiting from Norway’s digitally advanced ecosystem and supportive investment climate. 

Lithuanian fintechs continue to expand their footprint across Europe serving now over 27,000 million europeans  

It is exciting to witness first hand how the Nordic and Baltic fintech landscape rapid growth is influencing the broader European financial ecosystem. The region continues to solidify its status in the global fintech arena, driving strategic alliances, securing significant investments, and leveraging technology for financial inclusivity and environmental responsibility. 

Furthermore the unique public-private partnerships that continue to propel many of these ecosystems forward, provide valuable lessons in collaboration and innovation-driven development. The masterful orchestration between regulators, central banks and the fintech ecosystems of the Nordics and Baltcs, serve as exemplary models for global financial services evolution. Their ability to leverage regulatory frameworks for market advantage, coupled with a relentless pursuit of transformative solutions, positions these regions at the forefront of the financial industry’s revolution. 

Unity across the region makes for a strong case for combinatorial collaboration, where players are increasingly becoming adept at finding their sweet spot and augmenting their visions with the help of regional partners and collaborators. Of course each ecosystem remains independent from each other, maintaining their unique identity. But unlike other regions that compete for investment, talent and customers, the Nordics and Baltics have found common ground in their ambition, their values and their relentless pursuit for simplicity, elegance, functionality and quality.  Diverse in nature, cutlure and focus, Nordic and Baltic ecosystems thrive in the understanding that through collaboration, the size of the pie can increase for all. 

Chris Crespo
Chris Crespohttp://nordicfintechmagazine.com
Chris is a Founding Partner and Chief Editor at Nordic Fintech Magazine, where he simplifies complex financial ideas into easy-to-understand content. With nearly 20 years of experience in management consulting and financial services, including leadership roles with some of Europe's largest banks, he offers profound industry insights. Previously serving as the Chief Futurist at the largest bank in the Nordics, Chris has sharp views on the Future of Financial Services, Money, Disruption, and Ethical AI in Finance. He is also a guest lecturer at Stanford University, Singularity University and Copenhagen Business School, where he frequently discusses the future of Money, Finance, and Entrepreneurship in Financial Services. As a Behavioral Economist, Chris is passionate about studying how human behavior and decision-making relate to risk. He also delves into the connections between psychology, leadership, and technology within financial services.

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