How Lithuania became a fintech hub in Europe

Written by Dave Wallace
2nd February 2024

Sitting in London, it is easy to think that the city remains at the centre of the World of Fintech.

Lithuania’s fintech scene is thriving thanks to an environment that encourages innovation and investment

And while that may have been true a few years ago, the centre of gravity for fintech is on the move.

It is fascinating to see what is happening in places such as India and the Gulf Cooperation Council (GCC), where regulation, technology and investment are working to pull the various components of fintech into their orbit. They have the money, the ambition and, increasingly, the talent to do this, and are slowly encouraging an Eastward trajectory.

But it is not just these countries that have seen the opportunity that fintech offers. A number of other countries have also seen the future and are seizing the opportunity, with enterprises and governments endeavouring to work closely to ensure all the pieces are in place for innovation to flourish.

One such place is Lithuania.

I recently chatted with Vaida Cesnuleviciute, Lithuania’s vice minister of finance. Vaida oversees two main areas: the country’s “progress investment portfolio” and “financial markets policy”.

The progress investment portfolio includes investments to facilitate change instead of regular operational costs like salaries. Its focus is to drive innovation, development and significant improvements to the country’s ecosystem.

The financial markets policy covers the policies governing financial markets. It’s a standard component of finance ministries, given the critical role of financial markets in any country’s economy.

According to the vice minister, its distinctive approach to fintech and green finance sets the ministry apart from other countries. These two areas are given a separate and specific place on its agenda.

It was fascinating to hear from Vaida about how a country can see an opportunity and shape itself around it to ensure that regulation aligns with ambition and that policy works for business in the most productive way possible.

More about my conversation shortly, but first, a bit of background on Lithuania, one of the Baltic states sandwiched between Latvia, Belarus, Russia (Kaliningrad), Poland and the Baltic Sea.

Lithuania has a rich and complex history, first mentioned in 1009 and reaching its peak as Europe’s largest country in the Grand Duchy era.

It formed a significant dual state with Poland in 1596 but suffered partitions in the late 18th century.

The 19th century saw a national revival, leading to brief independence in 1918, disrupted by Soviet and Nazi occupations.

Modern Lithuania emerged in 1990, gaining independence from the Soviet Union, and has since joined NATO and the EU in 2004.

For some of these historical reasons, Lithuania has lower intergenerational wealth than other European countries, putting pressure on the younger generation to find ways to generate assets for themselves. This, among other reasons, has given rise to an entrepreneurial mentality that has led to a proliferation of start-ups, including unicorns such as Vinted.

According to the vice minister, in 2016, you could count on one hand the number of fintech companies in the country. The government assessed significant risks associated with the country’s financial structure as it concentrated on just a few banks that dominated the market. This led to a lack of innovation and credit.

So, it set about developing policies and an environment to foster a benign ecosystem for companies. Lithuania has since become one of the largest hubs for fintech in Europe. It has a population of 3 million but serves over 25 million people, or one in 10 people in Europe.

According to the vice minister, this extraordinary success resulted from “having a central bank that instituted a plan and programme that was open, welcoming and approachable, so it was easy to check Lithuania’s suitability as a base.

“It had the necessary IT infrastructure, including the payments infrastructure, enabling e-money and payment institutions to join the SEPA (Single European Payments Area) directly through the Bank of Lithuania. So they didn’t need to find an intermediary.”

Vaida also adds: “It is sad to say, but we also benefited from when the UK left the EU. I find it very upsetting, but those fintechs that had started (in the UK) before we even started thinking about it had to get licensed in the EU, and we made it easy for them.”

Revolut, for example, has a Lithuanian banking licence.

Meanwhile, the green agenda is a big focus. The Bank of Lithuania recently launched a green strategy through which it aims to ensure the financial stability and resilience of the Lithuanian financial sector to climate-related risks.

It also aims to ensure proper mandatory green disclosures by the financial sector and seeks to reduce the environmental impact of cash. The bank supports the introduction of rounding purchases made in cash, reducing the number of one and two cent coins in circulation.

The central bank already calculates its organisational carbon footprint and strives to minimise its environmental impact. For example, it has been using electricity from renewable sources since 1 July 2019.

It also plans to increase green investments in its financial portfolio.

An example of this is the country’s drive towards net zero. It had committed to move to renewables by 2050, but Russia’s invasion of Ukraine demonstrated their reliance on imported energy. The aim is to be 100% energy-independent by 2030 through renewables such as solar and wind.

The country is becoming a hub of innovation around these technologies. This means more investment from outside of the country, and you can see the virtuous circle that they have managed to achieve with fintech now growing around the green agenda:

Create a plan.
Execute the plan.
Provide a supportive regulatory environment which encourages innovation and investment.
Foster collaboration between industry and government.
Promote it.

Lithuania’s fintech scene is thriving. And I know many people there would be very happy to tell you why it’s such a great place to do business.

About the author

Dave Wallace is a user experience and marketing professional who has spent the last 30 years helping financial services companies design, launch and evolve digital customer experiences.