- REUTERS/Sergio Perez
- Lithuania wants to become a fintech hub.
- MEP who set up Blockchain Centre says Brexit is “a big opportunity” to attract businesses.
- Thirty five companies applied to be licensed in Lithuania last year.
- UK-headquartered startups Revolut and TransferGo have already chosen to set up EU subsidiaries in the Eastern European country.
LONDON – Lithuania is betting that Brexit can help it become a global fintech hub, as the Eastern European country seeks to attract British companies setting up subsidiaries in the EU.
“I cannot deny that,” Marius Jurgilas, a member of the board of the Bank of Lithuania, told Business Insider when asked if Lithuania saw Brexit as an opportunity.
“We are not saying that we will be attracting top firms from the fintech hub of the world, which is and always will be London, to the new booming financial sector in Lithuanian, no,” Jurgilas said. “But there is a huge flow of firms – and we want to participate in that flow – who want to hedge the risk of Brexit.”
“This is the state of affairs that everyone has to deal with and we’re just part of the game,” Jurgilas said.
- Google Maps
Britain’s future relationship with the European Union remains up in the air and finance firms fear they could lose passporting rights, which allow them to sell services across the 27 member bloc. To hedge against this risk, many businesses are setting up licensed subsidiaries in other EU countries.
Lithuanian MEP Antanas Guoga told BI: “I think [Brexit] is a big opportunity because we’re cost-wise a very competitive country, people are very diligent and hard-working, and, because of Brexit, a lot of companies are in a position to move out of the United Kingdom to make sure they’re safe and secure.”
Guoga helped to set up a Blockchain Centre in the country’s capital Vilnius last year, dedicated to exploring applications of the new technology that banks are excited about. The centre launched in January with the support of PwC among others.
‘One of the most exciting fintech hubs in Europe right now’
Lithuania is an unlikely contender to become Europe’s next fintech hub.
Unlike Paris or Amsterdam, it does not have a strong history of financial services. Unlike Berlin, Vilnius does not have startup scene of any international renown. The entire country has a population of 2.8 million, around a third of London.
But its pitch appears to be working. Invest Lithuania announced in January that 117 fintech companies are now operating in Lithuania, employing 2,000 people. It may not sound like a huge amount but the growth is impressive – 35 new businesses were registered in 2017.
Hot London-based banking startup Revolut and fellow UK startup TransferGo are among the fintech businesses to choose Lithuania. Revolut praised the country as “one of the most exciting fintech hubs in Europe right now” in a statement last year announcing they were applying for a banking license there.
“They recognise the opportunity of Brexit,” TransferGo CEO Daumantas Dvilinskas told BI. Dvilinskas is originally from Lithuania but said he chose Vilnius for an EU office not just because of personal ties, but also because of its “innovative regulating body.”
The Bank of Lithuania has a “business-friendly attitude,” according to board member Jurgilas. The central bank has got the licensing process down to as little as three months, for example.
“We identified that the thing that is really tilting the scales in the decision-making process is time,” Jurgilas said. “It’s not about monetary cost or regulatory burden, it’s about how much time do I have to invest to get a decision? Firms want certainty and quick decisions.”
Other fintech-friendly initiatives include the central bank’s regulatory “sandbox”, where firms can try out innovative new business ideas with the regulators blessing, and a blockchain sandbox, dubbed LBChain, that will give companies a safe space to experiment with blockchain projects under the regulator’s supervision.
Can Vilnius compete with Paris, Berlin, and Amsterdam?
Lithuania is not alone in looking to attract fintech business off the back of Brexit. Many European capitals are trying to woo businesses, with Paris lobbying particularly hard. Why should firms choose Vilnius?
“Being in the eurozone gives us the same status of Frankfurt,” Guoga said. “We’ve got a lot of hard-working people with knowledge of fintech who are not costing as much as they would in other cities because of the living costs. The country is very clean. There’s a lot of different benefits and that’s why there’s only more and more people coming here.”
Established players are also choosing Lithuania for development facilities, which helps create an ecosystem Guoga argued.
“I’m just in the blockchain centre here and I can see the building next to me is all filled by Barclays,” he said. “Barclays has the biggest centre of development here in Vilnius. Further on I can see Nasdaq. A lot of the IT is all done from here.
“Having Barclays here, having Danske Bank, having Nasdaq here and having many many other startups and also big multinationals have cemented our place as a place for fintech development.”
“I think we’ll be on target to do a lot more [e-money licenses] this year. The momentum is definitely there. We should aim to issue 100 a year as soon as possible. The demand is very wide.”