FinTech-Friendly Lithuania Raises Alarms After Russia’s Invasion of Ukraine

The home country of FinTech companies such as Revolut or the account-to-account payment platform Kevin recently declared a state of emergency in response to Russia´s assault of Ukraine.

Lithuania has become a success story: a country that created an ecosystem to really attract FinTechs. With less than 3 million people, Lithuania has gone from the home of 55 FinTechs in 2014 to an impressive 230 in 2020. As a comparison, Germany had around 1,000 FinTech startups in 2021, according to data from Statista, in a country of 83 million people.

After the U.K. left the European Union, many of the FinTechs in the U.K. decided to move their operations to Lithuania because the country facilitated the provision of electronic money institution (EMI) licenses. This allowed companies to provide services across Europe. That is the reason why Revolut, which initially started in the U.K., applied for a banking license in Lithuania which could then be used to provide banking services in other EU countries.

Read more: As Brexit Looms, FinTech Firms Scramble For Lithuanian Licenses

Not only is getting the license relatively quick, about one year, in Lithuania, but the government and the central bank of Lithuania are known as FinTech-friendly. Marius Jurgilas, a board member of the Bank of Lithuania, is probably the best advocate of the FinTech-friendly regulatory environment, giving regular speeches in London and across Europe.

Companies are also pleased with the support received from an administrative point of view and in terms of expertise.

“Lithuania ended up in the right place at the right time. It will be hard for others to follow. Lithuania is ahead now in building a self-reinforcing ecosystem of attracting more FinTech — which attracts more talent, which attracts more FinTech investors. It will be hard, just by copying the model, to achieve the same results,” said Dimitri Gugunava of SumUp.

But this spectacular growth may be now tested if Russia’s ambitions don’t stop in Ukraine. The Wall Street Journal reported on Friday that the growing tech outsourcing sector in Ukraine could be at risk, given the internet outages. Kerry Hallard, chief executive of U.K.-based trade group the Global Sourcing Association, said that at one member business in Kharkiv, 80% of computers had no internet access.

Companies are helping their staff to relocate to other cities and neighboring countries, but the future is uncertain. Wix said it evacuated employees to Poland and Turkey last week, and Revolut said it has offered financial support to employees who wish to relocate.

However, the situation in Lithuania may be different than in Ukraine. While its position between Kaliningrad (Russia), Belarus and Russia positions the country in a risky enclave, the small Baltic country belongs to NATO and the European Union, and it would receive military support from all its members in case of a military invasion.

Additionally, unlike Ukraine, the FinTech sector has been booming from a corporate perspective, with many companies headquartered in the country or holding an EMI, but with most of the staff located in different countries across Europe and the U.K.

The three Baltic countries Lithuania, Estonia and Latvia are the only former Soviet Republics that joined NATO, which has been seen by Russia as a provocation.

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