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Why Fintech Startups Are Skyrocketing in the Baltics

 5 min read / 

Lithuania, Latvia and Estonia are working desperately to support entrepreneurship, fintech startups and international talent. And they are proud of it. A little over six million inhabitants in a total of three Baltic states is a small market. Under such conditions, entrepreneurs need to be committed to international expansion and scaling up. These include Latvian company Transferwise, worth more than one billion dollars, who are in the business of international money transfers, and well-known Skype – a joint venture between Swedish and Estonian programmers.

There are also many other companies in this sector, such as Vivus or Creamfinance, which are known as the fastest-growing loan service in the world. Mintos is a Latvian P2P lender that is active in more than 50 countries, investing in business loans, consumer loans and even mortgages. Fortumo allows users to make payments in more than 90 countries, whereas Inzmo is the insurtech company offering car insurance, insurance of bicycles, household appliances as well as mobile solutions to traditional insurance companies (with a quick insurance claim processing system – users send a photo or movie to an insurer from a smartphone). The list goes on.

Skyrocketing Innovation

According to a report by the World Economic Forum (WEF), the Baltic states are some of the most innovative countries in Europe, taking into account the start-ups and creativity of workers in existing businesses (in and around the EEA). In the 28 European countries, the three Baltic states are in the top seven with Sweden, which is an important reference point for the Baltics.

Estonian state administration has been using the technology of distributed registries for many years, which is also part of the country’s immunisation against cyber attacks. The creation of the NATO Cooperative Cyber Defence Centre of Excellence was a clear expression of confidence in Estonia’s cyber security. The data of Estonian citizens are in the cloud, which is to guarantee their authenticity and immutability. Intelligent PKI cards allow digital citizens access not only to handle almost a thousand official cases, but also to vote from 2005 on the Internet, and from 2011 through SMS. The innovative e-resident program, in turn, allows you to obtain virtual citizenship and start a business, even without a visit to the country.

Estonia is also a country of digital payments – according to the World Bank, 99 percent of settlements are of such character. Furthermore, Estonia was one of the first countries to provide wi-fi in public places.

Clouds are Brewing

The problem is attracting talent. All the Baltic states have experienced a tremendous wave of emigration (some experiencing up to 20%). In Estonia, 24% of technological workers are foreigners. Institutional solutions are needed. In January, a special visa program for start-ups was launched, enabling non-EU citizens to work in Estonia or transferring existing companies to the Baltic.

Latvian Success

The Latvian ecosystem is also a magnet for large financial groups – SEB and DNB banks have operational centres, and the Nasdaq / OMX group has consolidated its Baltic operations in Latvia. Latvia boasts a third position in the OECD by providing access to their fiber-optic broadband internet (60% of users), a very high level of education for the working-age population (41%) and 70% of citizens under 40 speak English.

At the end of last year, the parliament passed a special start-up visa law that provides tax incentives for technology professionals – they can count on additional monthly bonus of £252, with doctoral students receiving social security and tax refunds.

Lithuania’s Struggles

Lithuania has joined the startup system and technology companies not so long ago, but acts at a very rapid pace, by establishing the first regulatory sandbox in the Baltic. Fintech firms with a capital of €1m can obtain a license for payment and electronic money in just three months. This comes with access (through the appropriate application of the Lithuanian Bank) to the Single Euro Payments (SEPA) system, and fintech customers can use IBAN numbers under this solution. The central bank also committed itself to providing a preliminary response to the licensing process. Applying for a license can take place without starting a business (the company has six months to do it), which means no need to freeze assets.

The intention of the Lithuanian authorities is to increase competition in the financial sector, where 90% of the market is controlled by the oligopoly of three Scandinavian institutions: SEB, Swedbank and DNB. New solutions are also expected to attract foreign fintech companies – a British neo-bank Revolut in the area of P2P payments and loans, and Israeli Moneta International, providing e-commerce payments.

Brexit and Fintech

Lithuania seems to be particularly concerned about Israeli entities as their homeland represents a large market for Lithuania’s technological solutions. Lithuania would also like to profit from companies leaving the UK after Brexit; a declaration boldly expressed at the Innovate Finance Global Summit in London in early April by the Finance Minister. Clearly, Lithuania isn’t hiding their aspirations to become a regional fintech hub. It’s worth noting that Barclay’s Bank is a key catalyst in the development of financial technology in Lithuania.

It’s also worth noting that accelerators attract businessmen and IT specialists from Russia, Belarus, and Ukraine, with the value of investment in the technology sector exceeding $1 bn last year. Looking at the dynamically developing Baltic area of financial technology, everyone is struck by the fact that Lithuania, Latvia, and Estonia are very competitive countries. However, there are no common initiatives – if there were, the results would have been much more spectacular.

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Brexit Deal Will Not Stop RBS Relocation Plans

 2 min read / 


The Story

Today’s Brexit deal has failed to change the company’s decision to relocate its trading hub to the EU, says RBS CEO Ross McEwan.

“Businesses like ours have to move forward as though we are not going to get any form of deal that would good for banking.”

Ross McEwan, Royal Bank of Scotland CEO

McEwan claims the company needs to “get in a position of having certain operations so that we can look after customers no matter what happens.” While he thought clarity over the Brexit transitional agreement might slow the bank’s relocation plans, this would have to come soon to have an impact on RBS’ decision.

Why It’s Important

McEwan has previously said the company would enact relocation plans by the end of March 2018, a year before Britain’s scheduled exit from the EU, if it was not clear whether the country would remain a part of the single market. While the deal struck today will allow negotiations to move onto the topic of trade, Britain’s access to the single market is still to be negotiated. RBS serves 250 corporations in continental Europe and has numerous British clients dependent on the lender’s ability to access markets across Europe.

Having a contingency plan for Britain not gaining access to the single market is wholly sensible from RBS’ perspective. However, McEwan’s comments are likely aimed to pressure the government into speeding up negotiations. RBS’ plan to relocate are not new, and the comments could be an attempt to emphasis their threat of leaving Britain. This will put May’s government under pressure to get the trade negotiations moving swiftly.

Keep reading |  2 min read


Brexit Deal Gives Trade Talks the Go-ahead

 2 min read / 

Brexit Deal

The Story

The UK has reached a deal on three contentious issues which have prevented negotiations moving on to trade. The deal ensures no “hard border” between Northern Ireland and the Republic of Ireland, that the rights of EU and UK citizens be protected irrespective of whether they live in the UK or EU post-Brexit and commits the UK to a divorce bill settlement estimated to cost between £35bn and £39bn. EU Commission President Jean-Claude Juncker called the deal “the breakthrough we needed.”

Why It’s Important

“Theresa May has achieved what she wanted – the green light to move on,” said the BBC’s Political Editor Laura Kuenssberg. Britain plans to leave the EU at the end of March 2019, yet trade has not been discussed. May will now be able to negotiate on trade and a transition deal, providing businesses with greater clarity over the regulation. However, the entire basis for UK-EU relations is still to be discussed.

“We all know that breaking up is hard but breaking up and building a new relation is much harder.”

European Council President Donald Tusk

The EU plan to offer Britain a Canada-style trade deal, which would impose new tariffs on trade, a document leaked last month revealed. Trade negotiations are expected to be tough and could take several years. The importance of reaching a clear transitionary framework will be vital for businesses, and a lack of clarity may deter businesses from investing in the UK.

Keep reading |  2 min read


Why Facebook Is Not Worried About Brexit

 2 min read / 

Facebook Brexit

The Story

Facebook will open a new London office in 2018, creating 800 jobs. The decision comes amid fears that Brexit will leave businesses uncertain about the future of UK-EU trade. Deutsche Bank warned earlier this year that as many as 4,000 UK jobs could be relocated to Frankfurt due to uncertainty for the financial industry. Goldman Sachs and Microsoft have expressed concerns about the lack of clarity post-Brexit. So why is the social media giant committing to London during a time of mass uncertainty?

Why It’s Important

Three months after the Brexit vote, Apple announced plans to build a £9bn “Apple campus” in London, while back in June, Google submitted plans for a new London HQ. Concerns about Brexit for businesses stem from the potential for trade tariffs and disruption to existing UK-EU supply chains. However, these problems are unlikely to significantly impact these tech companies, whose London operations are focused on design and marketing.

Leaving the European Single Market is unlikely to have a significant effect on the R&D side of their business but it could prevent these companies from hiring highly-skilled foreign workers. Despite these concerns, Apple plans to relocate 1,400 staff to its “Apple campus” when construction is completed in 2021. Amazon also plans to hire 5,000 new staff in London. Investments by these tech giants signal their commitment to the capital.

Keep reading |  2 min read