The North-East European country of Lithuania is home to just shy of 2.8m people, but what has emerged from this relatively small country is a burgeoning fintech sector that continues to provide a home for innovation. 

Speaking to Mantvydas Štareika, CEO of SME Bank – a banking service provider based in Lithuania – Payment Expert delved into how and why the country has been producing a thriving fintech space that has become one of the highest ranking sectors in the world. 

To highlight how impressive Lithuania’s fintech growth is, a Findexable Global Fintech Index Report last year listed the country 10th in the world and 6th in Europe for the prosperity and strength of its fintech sector.  

To put this into context, this ranking is higher than countries such as China (15th), Brazil (14th), and Canada (12th), countries that boast significantly higher populations and GDP’s. 

So how has Lithuania molded itself to become such a desirable destination for fintech firms to set-up shop? Štareika acknowledges that the country has become “one of the most attractive jurisdictions” in the fintech industry due to its regulation and location. 

He spoke at length regarding Lithuania’s “fintech-friendly regulation”, its ideal location and infrastructure, the seamless partnerships forged there, and the growing talent pool of employees that continues to grow from its capital of Vilnius

Štareika told Payment Expert:  “There are a few reasons why Lithuania is so attractive for the fintech industry: Clear regulatory system and clear, reachable regulation requirements and topics. The Bank of Lithuania offers one of the quickest and most flexible licensing regimes in Europe.

“Location and innovative infrastructure too. Actually, if you get a license from the Bank of Lithuania, you are actually getting a European license that lets you operate in the European Union. Infrastructure is another reason for Lithuania’s attractiveness, which counts as one of the fastest internet speeds globally. 

“Vilnius is a compact, convenient city where nothing is too far, and where quality of life can be pursued jointly with career. It has been singled out as one of the best cities in Europe for fintech companies to establish themselves by various rankings.”

According to Štareika, 265 fintech companies were operating within Lithuania in 2021, where firms are allowed to flourish through collaboration and create partnerships for the betterment of their strong fintech community. 

The SME Bank CEO cites the growing talent pool within the country as a factor to Lithuania’s success at building such fintech companies, who also possess knowledge and expertise in the AML field as well. 

“Lithuania has a highly educated labor force, with many talented specialists across the technology spectrum,” said Štareika. 

“In fact, Vilnius is becoming a hotspot for AML because of the talent that can be found here. The push to turn Lithuania into a major fintech hub has had a lot of positive effects.”

When speaking about Lithuania and how he envisions its fintech sector moving forward into the future, Štareika shared his thoughts on how the country can tap into open banking and how it can impact SMEs, something which SME Bank can utitlise to its strengths. 

“I believe that open banking will play an important role in SME lending, giving fintechs access to data that was previously not available,” Štareika continued. 

“It is now possible to better assess the customer’s creditworthiness, liquidity, cash flow management and other financial capabilities in real time. These unprecedented speeds and much lower prices will inevitably lead to a shift in which we’ll see more neobank users, and in the long run, increased trust in digital finance solutions.”

“Also in the future, it will be much simpler to share financial data such as credit rating, simply by using API integrations. Open finance is an important part of embedded finance, as it will allow combining as many products as possible into one user interface, and the users themselves will be able to access more financial products.”

With innovative payment solutions such as open banking and advanced API’s, there is still room to grow for Lithuania’s fintech sector to become even stronger. 

Lithuanian firms such as SME Bank have helped shape the sector to what it is today, as a country with not even 2.8m people, has become a world-renowned fintech hotspot.