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Tuesday, April 23, 2024
HomeNordic MarketsLithuania Bet on Fintech and Won. Now It’s Doing It Again. 

Lithuania Bet on Fintech and Won. Now It’s Doing It Again. 

Lithuania went from a few fintechs to hundreds in the last 6 years. Its new 5-year strategy now aims to achieve 30% average revenue growth for fintechs by 2028. 

Lithuania’s “Before and After” fintech success story was initially driven by government and public institutions to bring innovation to the Baltic state. Today, the ecosystem they created is the one driving the success story forward. 

“Before Lithuania’s fintech revolution, we had a very concentrated financial market,” says Vaida Česnulevičiūtė-Markevičienė, Vice Minister of Finance for Lithuania. “It made for a stable market, but didn’t encourage innovation, resulting in few products in the market and forcing prices higher.” 

At that time, Lithuania launched a top-to-bottom fintech strategy, driven by the Lithuanian Ministry of Finance and Central Bank to bring much-needed innovation to the country. 

“Lithuania is fast to adopt regulatory changes, allowing companies to have an innovative business model.”

Vaida Česnulevičiūtė-Markevičienė, Vice Minister of Finance for Lithuania 

The strategy worked. Lithuania was one of the first eight countries to grant access to the new SEPA scheme, and the Lithuanian Central Bank’s CENTROLink Payment System was one of the first to implement SEPA Instant Credit Transfer (SCT Inst), more commonly known as Instant Payments. 

Fintechs flocked to the country

The country has now launched a fresh five-year fintech strategy with ambitious targets to grow its fintech sector even further.  

“The entire ecosystem has changed since then,” says the Vice Minister. “We see it in how this new strategy was created. The ecosystem itself drove the new strategy, and it was created bottom-to-top this time.” 

Why fintechs choose Lithuania 

When Brexit forced UK-based fintechs to look for new European headquarters, many of those companies moved to Lithuania. The combination of regulatory stability, a highly business-friendly environment, advantageous positioning between the Nordics and Europe, talent availability, and excellent internet speeds made Lithuania the obvious choice for companies like Curve, Yapily, and Revolut.  

Not only fintechs are moving to the Baltic state to set up headquarters or branch offices. The country now counts as part of its roster such major players as Danske Bank, Oracle, Telia, Wix, and many other major tech and financial companies.  

Recommended: Explore the Future of Finance at Nordic Fintech Week

“As a country, we’re fast to adopt regulatory changes, allowing companies to have an innovative business model,” says the Vice Minister. “For example, Lithuania was the first to introduce national crowdfunding regulations. By the time the European legislators came out with its own version, many of the Lithuanian companies were already largely compliant because the European regulations were so similar to ours.” 

The country believes in a spirit of dialogue between the public and private sector, encouraging a climate of cooperation for the mutual benefit of both. Regulators are accessible and willing to listen or provide legal clarity as needed.  

“Finance is a regulated sector and we have the necessary licensing services to support that, but fintech is about far more than just licences—the ‘fin’ part,” she says. “It’s also about the ‘tech’ part—supporting companies that help those fintechs with core business needs.” 

The ingredients for fintech growth 

“We understand that the ingredients that go into fintech growth are talent, regulation and funding,” says the Vice Minister.  

In the funding arena, Lithuania attracted nearly €300 million in tech investment in 2022, with €67 million of that going to fintechs.  

The Ministry of Finance also follows a “growth-friendly tax policy,” with multiple substantial tax incentives for qualifying companies. These incentives include: 

  • Triple-deduction of R&D costs. 
  • Shorter depreciation periods for assets used in R&D. 
  • “Innovation Box”—where taxable profit from inventions created through R&D activities is taxed at a reduced 5 percent tax rate. 
  • Direct funding. 
  • Potentially up to 100 percent reduction in corporate income tax for investment projects by offsetting any expenses related to acquiring new technologies. 

The purpose of the incentives is to bring innovative products to the market. The Government has recently proposed to the Parliament even further incentives to encourage business growth and investment. 

The country’s Green Finance Action Plan will bring private and public sector entities together in a joint program to create a green finance ecosystem, further attracting investment into the zone.  

Recommended: Explore the Future of Finance at Nordic Fintech Week

As for talent and people, one example of the country’s dedication to this was when it formed its AML Centre of Competence two years ago, a joint effort to share experiences in the ever-evolving subject of AML, and also to offer training to raise competencies.  

“We’re also implementing Knowledge Hub Programs to increase competencies and make Lithuania a Fintech Centre of Excellence,” says Vice Minister. “This is also being done as a cooperative effort between the public and private sectors.” 

With its new five-year strategy, Lithuania isn’t just betting on fintech—it’s doubling down on a proven formula for innovation, inviting the world to be part of its next chapter in financial technology leadership. 

R. Paulo Delgado
R. Paulo Delgadohttp://www.nordicfintehcmagazine.com
R. Paulo Delgado is a freelance writer and ghostwriter specialising in finance, investment, fintech, crypto, business, entrepreneurship, and technology. He was a computer programmer for 17 years, with particular focus on the finance industry, until he switched roles and followed his passion to become a full-time writer. Since then, his business articles have appeared in Entrepreneur, Moneyweb, Business Insider, and Forbes Councils. His clients have included representatives of CNN, the World Trade Center Gibraltar, and numerous tech startups across the globe.