Fintech in Lithuania: what makes it stick!

As of this year it’s official: Lithuania is the largest fintech hub within the European Union. The only country which has more licensed fintechs operating within its borders is the United Kingdom. On the European mainland, Lithuania however stands in a league of its own. If you’re looking for the definition of punching above one’s weight, this is about as good as it gets. Especially considering that Lithuania is one of the smallest member states of the European Union.

As of today, Lithuania has 282 licensed fintech companies which employ a joint 8,000 people and serve more than 30 million customers within the European Union. The secret to this success largely stems from crafty governmental policy to ease the licensing process for electronic money institutions (EMIs). With a license in one of the member states, licensed companies can operate throughout the European Union.

Lithuania has made a conscious decision to become the gateway to Europe by reducing red tape and creating a welcoming climate for fintechs. This has resulted in the challenger bank Revolut, the crypto exchanges Binance and Blockchain.com and the likes of Google Pay to operate within the EU under a license issued by the Bank of Lithuania.

Knowing this, many assume that the Lithuanian fintech landscape is merely a collection of mailbox companies seeking to license their activities throughout Europe. This is, however, a myth. The vast majority of fintechs have a significant workforce in the country and that is substantiated by the average headcount of 30 people per licensed fintech company. Almost 60% of the licensed fintechs have centralized both their software development and regulatory compliance in Lithuania.

If anything, the status of European fintech champion forms a testimony to the strong technological ecosystem that is present in Lithuania. Although licensed as a bank, Revolut is far from being one. Digital banks compare themselves as much to their incumbent counterparts as Uber compares itself to a taxi company. Fintechs essentially are tech companies that happen to operate within the financial industry. This is exemplified by the fact that among Revolut’s workforce of 1,500 there is not a single banker, but there are more than 1,200 software engineers. In many industries there is still being spoken about the digital transformation, but the true revolution is technology companies turning into (more accomplished) service providers.

Lithuania supports this development perfectly. With an ICT workforce which averagely grows 14% per annum, it has the fastest-growing workforce within the European Union. In summary, the ease of licensing is what attracts fintechs to Lithuania but the quality of the local workforce is what makes them stick.