FINTECH IN THE BALTICS - FinTech Discussion July 2021 - Aalto Capital
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FINTECH IN THE BALTICS
FinTech Discussion
July 2021
INTRODUCTION
GLOBAL INVESTMENT IN FINTECH
Global investment in financial FinTech companies exploited the
technology companies (FinTech) chaos to offer more efficient, innovative
rebounded in H2 2020 after a slow start to and instant financial services compared to
the year caused by the Covid-19 pandemic. traditional banks.
Since then, FinTech has gathered
increasing momentum. Q2 2021 was the
largest funding quarter on record ($30.8
billion of global investment), beating Q1
2021’s previous record by 30% (CB
Insights) driven by investments from
Venture Capital Funds (VC’s) and Private Figure 1: Telegraph operations room.
Equity Firms (PE). Source: Western Union
The History of FinTech Total Global Investments and Deal Count in FinTech Industry
FinTech found its roots in the mid- 120 108.3 1200
19th century when the transfer of money
by telegrams and morse code was 100 1000
invented. Western Union can be 80 800
considered one of the pioneers of FinTech;
in the 1870s they established a telegraph 60 50.6 600
network which allowed people to perform 40.3 41.6
40 33.5 30.5 400
electronic money transfers between New 24.8
21.8 19.9 19.7 21.3
York, Chicago, and Boston. 15.4 12.1 15 13.7
20 9.9 200
More recently, we saw the
democratisation of the financial services 0 0
industry following the Global Financial Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Crisis (GFC) of 2008. Retail consumers and 2017 2018 2019 2020
businesses that were impacted by the
crash of the global financial system lost Deal Value (in billions USD) Deal count
faith in traditional banks and turned to
alternative financial service providers. Figure 2: Global investment activity in FinTech industry. Source: KPMG. Pulse of FinTech H’2 2020.
1
FINTECH SEGMENTS
THE MAIN FINTECH SEGMENTS
Payments Lending Asset Management
The Payments segment includes firms that The Lending segment includes companies Asset Management encompasses trading
provide alternative payment methods, that provide lending/credit services, organisations, Robo-advice and personal
including blockchain and cryptocurrency- including crowdfunding and factoring. wealth management.
related transactions. Accessing financing for new Currently, with today’s low market
The segment is mostly driven by the businesses, particularly in emerging interest rates, consumers are looking for
simplicity of providing payment solutions markets, is a major challenge that FinTech alternative ways to make the most of their
compared to other segments which financing platforms are helping to solve; money. As a result, FinTech platforms
require more complex technological drastically improving the time and ease providing access to alternative investment
solutions. Currently, focus has shifted with which financing can be sourced. The solutions have been gaining popularity.
towards expanding product capabilities FinTech space has become the main arena The segment is shifting to providing
and offering more complex solutions to where lending companies are competing. opportunities for consumers to invest in
support B2B end-to-end transactions. Increased competition has, in turn, driven real asset classes, such as real estate,
efficiency within the industry and made it energy and infrastructure.
more attractive to businesses seeking
finance. Other FinTech Segments
Total Global Investments in FinTech by Segments (bn. USD) These include InsurTech, which provides
2 ultra-specialised services to customers
2.8 including social insurance and P2P
2020 0.3
14.5 insurance. PropTech companies provide
19.7
0.5 innovative crowdfunding solutions for
4.7 property ownership, data-driven financing
2019 0.4
14.3 and screening solutions. In addition,
105.9
0.4 FinTechs operating in Open Banking and
6.9
2018 0.7 Financial software areas have gained much
28.2 interest recently (especially in Europe,
52.4
0.1 since the PSD2 directive was issued in
5.2
2017 0.2 2018) but do not hold a large market share
11.2 yet. Most of these provide technological
17.7
solutions such as API tools that allow third
0 20 40 60 80 100 120
parties to access consumers’ financial data
Cybersecurity Blockchain/Cryptocurrency WealthTech RegTech InsurTech Payments
in order to provide more efficient financial
Figure 3: Global Investments in FinTech companies by segments. Source: KPMG. Pulse of FinTech
services than traditional financial
H’2 2020.
institutions can offer.
2
FINTECH IN THE BALTICS
GLOBAL FINTECH-RELEVANT RATINGS
The Baltic states of Estonia, Latvia and government support mechanisms report Europe’s Hidden Entrepreneurs,
Lithuania have become a hub of FinTech including favourable regulatory Estonia is Europe’s number one hotspot
activity, giving rise to, among others, stars frameworks, as well as a strong talent pool for technology entrepreneurs, with Latvia
like Wise (formerly TransferWise), of highly skilled IT and finance specialists, third and Lithuania seventh. Global
TransferGo and Monese. The key factors and the early adoption of digital FinTech-related ratings rank the Baltic
behind this success include a culture for technology into business infrastructures. countries among the top countries to start
startups and innovation fostered by According to the World Economic Forum’s a business in.
Another key reason why the Baltic region is
Global ratings Lithuania Latvia Estonia able to produce great FinTech companies is
2.71 million 1.88 million 1.33 million the small local market. FinTech companies
Population in the Baltics are able to test their early-
(68.2% urbanisation) (68.4% urbanisation) (69.3% urbanisation)
stage technologies and receive feedback to
Global urbanisation 56.2% of population rapidly improve their products or services.
3.82 million 1.79 million Therefore, the time from the idea to the
2.65 million
Mobile connections (141.2% of (135.3% of market is significantly shorter than in
(141% of population)
population) population) larger markets.
Mobile connections
109.4% of population
(globally) As demonstrated in Table 1, in the Baltic
2.22 million 1.67 million 1.21 million countries there are more devices
Internet users connected to the internet than there are
(82% of population) (88.9% of population) (91% of population)
people. By comparison, global smartphone
Internet users
4.66 billion (59.5 % of population) penetration is estimated to have reached
(globally)
WiFi speed rank 1 - 3
78% in 2020, according to data published
4 49 10 by Statista. People in the Baltics use
Vilnius – 6th among Riga – 34th among the Tallinn – 14th among
smartphones extensively and are more
Global FinTech index likely to use online FinTech services and
the best cities for best cities for FinTech best cities for FinTech
FinTech in Europe in Europe in Europe apps.
Rank of doing
11 19 18
business
Ease of starting the
34 26 14
business
Ease of paying taxes 18 16 12
Table 1: Statistics and Global rankings of Baltic states (2020). Sources: Datareportal; Findexable;
World Bank
3
FINTECH IN THE BALTICS
FINTECH IN THE BALTICS BY NUMBERS
There were more than 530 FinTech Number of FinTech companies by country
companies in the Baltics in 2020. Lithuania is a 230
250 215
leader in this field, with more than 43% of Baltic 210
FinTech companies headquartered there. In the 200 170
context of the EMEA area, Baltic FinTech 141
companies comprise circa 7% of overall FinTech 150
companies in the region (Statista). This share of 84 91
100 66 75
the market is high given the Baltic market has a
population of 5.9 million in 2020, approximately 50
0.02% of the population of the EMEA region.
0
The most popular FinTech segments in the 2018 2019 2020
Baltic states are Payments and Lending (in line Lithuania Latvia Estonia
with the global trends) accounting for 40% of
registered FinTech companies, mainly driven by a Figure 4: Number of FinTech companies by Baltic countries. Sources: Invest Lithuania;
transition from traditional banking services. Swedbank Latvia; Startup Estonia, Finance Estonia.
According to the Global Consumer Banking Study
by EY, approximately 40% of consumers have Baltic FinTechs by segment (number of companies, 2020)
decreased their dependence on traditional
94
banking services because of efficiency benefits 100
provided by FinTech companies. The Payments 69
80 64
segment is mostly driven by transaction speed,
lower fees and the flexibility to make 60 46 43
transactions at any time to any location. The 40 27 30 25 27 26
21 24 21
Lending segment’s growth is driven by the
20 9 10
number of new companies (mostly SMEs) which
seek financing and working capital but cannot 0
meet the requirements of traditional banks Payments Financial Lending Digital Banking
Other
(World Bank). As interest rates have been software (Blockchain &
floating around zero for several years, P2P and Crypto,
Lithuania Latvia Estonia cybersecurity,
other lending platforms have gained pace by
providing opportunities for individual lenders to investments)
earn attractive returns. Figure 5: Number of Baltic FinTechs by segment. Sources: Invest Lithuania; Swedbank.lv;
Startup Estonia, Finance Estonia.
4
FINTECH IN THE BALTICS
RECENT FINTECH DEALS
There has been an increase in companies are still relatively early stage, expanded and received international
investment and M&A activity in the Baltic most investment comes from local VCs recognition and financing. The latest deals
FinTech market as investors are drawn to and angel investors investing below €1m. are presented in Table 2 below.
the growth potential of Baltic FinTech Nevertheless, the Baltic region has
companies. As the majority of these generated several start-ups that have
Company Country Bidder/Investors/ Deal type Deal value/Funds Date Comment
name Financial advisor raised
4Finance Latvia Aalto Capital (Advisor) EURO bonds €150 million 2021/07 Refinancing of the bonds was made by
refinancing making use of the amend & extent
mechanism.
Wise Estonia D1 Capital Partners, Sale of secondary $319 million 2020/07 To existing and new investors at a $5bn
(Formerly Lone Pine Capital shares valuation; a 43% increase in value since
TransferWise) May 2019.
SME Finance Lithuania European Investment Investment (Debt €80 million 2020/11 First wave of funds received H1 2021. 70%
Bank financing) of proceeds will be allocated to SMEs, the
remaining 30% will be issued to midcaps.
BitFury Latvia/ Korelya Capital Financing round $80 million 2018/10 Second round of financing for this
Ukraine European, Asian Naver (Equity financing) cryptocurrency mining start-up. To invest
Group, Macquarie in new hardware and software for
Capital, Dentsu governmental structures.
Fortumo Estonia Boku Inc. Acquisition $41 million 2020/07 Acquired by Boku, a mobile payment and
Holdings, Inc identity solutions provider, merging two
major Direct Carrier Billing platforms.
Mogo Finance Latvia Signet Bank AS and Bond issuance €30 million 2021/03 Completed the largest ever bond issuance
Group Aalto Capital (Advisor) (Debt financing) by a private company on the Nasdaq Riga
Stock Exchange. 71.4% of issuance
allocated among existing bondholders.
TransferGo Lithuania Hard Yaka, Vostok Financing rounds $17.5 million 2018/12; To develop operations in 11 new countries
Emerging Finance, Revo (Equity financing) (2018); 2020/06 (Southeast Asia and Africa).
Capital, Practica Capital $10 million (2020)
Creamfinance Latvia Capitec Bank Series B financing €21 million 2017/03 Chosen by South African bank Capitec as a
round (Equity strategic partner for its “Smart Data”
financing) customer credit scoring solution.
Table 2: Biggest recent Baltic FinTech deals. Sources: TechCrunch; FinTech Baltic; Bank of Lithuania; Invest in Estonia; Business Wire; CrunchBase.
5FINTECH IN THE BALTICS
THE LARGEST FINTECH PLAYERS IN THE BALTICS
The Payments and Lending FinTech FinTech business that was established in revenue CAGR from 2016. Furthermore,
segments are the most mature segments Estonia in 2011 and is currently valued at Lithuanian FinTech Paysera, which serves
in the Baltics; the largest FinTech players in over $8bn. Latvia and Lithuania have not Baltic e-commerce companies, has
the region operate in these segments. yet produced any FinTech unicorns but recently announced its expansion into
Some of the biggest companies are have the potential to achieve this in the Spain which is due to significantly boost its
presented in Table 3. The region currently future. For example, Mogo Finance, a revenue and operations.
has one unicorn: Wise (formerly, Latvian lending FinTech in 2020, reported
TransferWise). Wise is a money transfer revenues of more than €100m, a 36%
Company name Country Segment Operations KPI Size/ Comment
of origin value
Mogo Finance Latvia Lending Issue secured car loans Loans issued €650 million Over 200,000 customers globally and over
Group and unsecured (since 1,400 employees. Acquired 3 consumer
consumer loans in 14 inception to lending companies in 2020 in Albania, North
markets worldwide. 2020). Macedonia, and Moldova.
Wise Estonia Payments Worldwide money Revenues £9 billion Revenues grew 70% 2019-2020. Wise
(TransferWise) transfer and (FY2020). continues to launch new products
remittance services. worldwide and in 2020 attracted 107,000
new business customers. The company
completed a direct listing in July 2021.
TransferGo Lithuania Payments Worldwide money Value of €677 million Customer base recently hit 2 million. Raised
transfers, currency payments more than €27m to date, most recently to
exchange. processed fund expansion into 11 new markets in
(2017). Southeast Asia and Africa.
Paysera Lithuania Payments E-commerce payments Value of €580 million Serves the majority of Baltic e-commerce
and money settlement payments sites (more than 12,000). In 2020, Paysera
services. processed helped many Baltic businesses to enter e-
(2020). commerce, fueling rapid growth in transfer
value and revenues.
Table 3: Largest Baltic FinTech players. Sources: Mogo Finance Group; TechCrunch; Paysera; Baltic News.
6FINTECH IN LITHUANIA
LITHUANIA
The majority of FinTech newcomers in Number of transactions and transaction value executed by Electronic
Lithuania are in the Payments and Lending Money Institutions (EMIs) and Payment Institutions (PIs)
segments. However, financial software products 81.4
and services are on the rise. In 2020, 16 of 39 new 140 81
FinTech companies registered in Lithuania were 120 71
primarily focused on financial software 100 115.8 61
innovations, such as application programming 51
interfaces (APIs) which increase the convenience 80
30 41
and efficiency of using financial services. Other 60
31
innovations included automatic credit scoring 40
8.5 44.7 21
solutions which provide access to financial services 3.3 6.6
20 1 11
to underbanked consumers. 2.8
13.4
0 1
The Lithuanian FinTech landscape is becoming 2016 2017 2018 2019 2020
more and more international, as the number of
companies with headquarters outside of Lithuania Value of transactions executed by EMIs and Pis, billion EUR
increases. Approximately 63% are still Number of transactions executed by EMIs and Pis, millions
headquartered in Lithuania, with 48% funded Figure 7: Transactions and transaction value by EMIs and PIs. Source: Bank of Lithuania.
locally and 15% funded with foreign capital.
Registered FinTechs in Lithuania by HQ location 2020 actual revenue growth vs 2021 revenue growth
expectations of Lihuanian FinTechs (% of companies responded)
13% 40%
35%
35%
30%
30% 26% 26%
24%
24% 25%
20% 17%
63% 14% 13%
15% 12%
10%
Lithuania 4%
5%
Outside of EU (UK, USA, IL, HK, etc.)
0%
Other EU countries
300% Nil/decline
Figure 6: Distribution of HQ of FinTech companies 2020 Revenue growth 2021 Revenue growth expectations
registered in Lithuania. Source: Invest Lithuania, Figure 8: Revenue growth and growth expectations for 2021. Source: Invest Lithuania
2021. 7FINTECH IN LITHUANIA
LITHUANIA (CONT.)
Lithuania’s growing number of another funding round in the next few (Invest Lithuania). Initial Coin Offerings
FinTechs are creating an increase in years, and 12% said they aimed to raise (ICOs) and Series C funding rounds or
demand for funding in the near future. over €5m. The most common funding type above are rare in the Lithuanian FinTech
42% of surveyed FinTech representatives in Lithuania is revenue funding, while Seed landscape.
in Lithuania said they were planning funding is the second most popular option
Lithuanian FinTechs to Watch:
Latest deal/investment/
Company Core business Comment
portfolio
Rent-to-own operator (customer lives First independent rent-to-own operator in Europe.
€10 million property portfolio
in a rented preferred dwelling until The portfolio is valued at €10m with expectations
(2021).
the down payment is collected). to grow it to €25m in the next few years.
€1.5 million raised from In 2021, the company plans to enter 15 new
API tool for direct payments. European business angels markets, and to serve 80% of electronic payments
(2020). users in the EEA by 2022.
The company was founded in 2020 and provides
P2P lending platform which provides €5 million loan portfolio loans to farmers. Developed a multi-million EUR
Heavy Finance
heavy machinery-backed loans. (2020). loan portfolio and expanded into Bulgaria in the
first year of operations.
Table 4: Lithuanian FinTechs to watch. Source: NUMAI; EU-startups; Bank of Lithuania
8FINTECH IN LATVIA
LATVIA
The number of Latvian FinTech transfer services provided by FinTechs companies operating in the FinTech
companies has been growing steadily in both to individuals and businesses. industry are small-scale; approximately
recent years. FinTech has now become the The Blockchain and Cryptocurrency 71% of registered FinTechs have teams of
most popular start-up industry in the area has slowed down recently and 10 or less employees (see Figure 10).
country. refocused its scope since the ICO boom. However, a survey by Swedbank showed
The largest FinTech segments in Latvia This segment is mostly represented in that most Latvian FinTech companies
are the Payments and Lending segments, Latvia by the leading player, BitFury, which (88%) are seeking to expand their teams in
in which approximately 50% of active is among the biggest crypto startups in the the next year.
Latvian FinTechs are involved. The Lending world. Approximately 85% of surveyed
segment has long been dominant in the The Latvian FinTech scene is Latvian FinTech executives expect to see
Latvian FinTech scene, whereas Payments dominated by companies involved in B2B fast revenue growth in 2021. Almost a
is a steadily growing segment in Latvia and or mixed B2B/B2C while the B2C business third of them believe that their companies
the wider Baltic region as a consequence model holds a minority share in the could increase revenues 1 to 3 times over
of more efficient and cheaper money Latvian FinTech market. Most of the the next year.
Latvian FinTechs by business model Revenue growth expectations by Latvian Latvian FinTech companies by team size
companies
3%
9% 9%
12%
12% 29%
9%
32% 20%
12%
21%
71%
29%
32%
B2B & B2C Pure B2B B2B2C 0 1-100% growth 50
P2P Pure B2C 100-300% growth 300-700% growth
>700% growth Na
Figure 9: Revenue growth expectations by Figure 10: Latvian FinTech companies by Figure 11: Latvian FinTech companies by
Latvian FinTech executives. Source: Swedbank business model. Source: Swedbank Latvia team size. Source: Swedbank Latvia
Latvia
9FINTECH IN LATVIA
LATVIA (CONT.)
According to the FinTech report published by Biggest Latvian FinTech growth opportunities
Swedbank Latvia, Latvian FinTech companies believe
the biggest opportunities for success are in the Open
Banking and Wealth Management areas; 50% of 20%
respondents selected these 2 segments. 38%
6%
However, in order to scale operations and achieve
high revenue growth, there are obstacles that Latvian 6%
FinTechs need to overcome. In particular, attracting 9%
qualified and suitable talent, building partnerships 9% 12%
with established players, and complying with
international regulations. Open Banking Wealth Management Instant Payments Insurance
Digital Currencies Personal Finance Other
Figure 12: Survey of Latvian FinTech executives: What are the biggest expansion
Latvian FinTechs to Watch: opportunities?. Source: Swedbank Latvia
Latest deal/investment/
Company Core business Comment
portfolio
Recently expanded its operations to Vietnam and
€ 92.5 million loan portfolio issued more than 3 million EUR worth of loans in
Consumer lending.
in 2019. the last year. Plans to enter the Philippines market
with new products under the VAMO brand in 2021.
Offers customers an all-in-one banking data API for
€ 2.1 million financing round
Banking data API. banking, lending and financing apps in over 31
(2021).
markets.
Offers loan-related services to the unbanked. It
€ 1 million financing round
Jeff Data-driven loan brokerage platform. plans to offer a free credit scoring service and
(2020).
expand to Southeast Asia in the next few years.
Table 5: Latvian FinTechs to watch. Source: FinTech news; Finextra; EU-startups
10FINTECH IN ESTONIA
ESTONIA Average net Income of Estonian FinTechs by segment (millions, EUR)
Estonia has attracted FinTech startups 1.6 1.4
from around the world due to its 1.4
pioneering E-residency program. It allows
1.2
anyone from around the world to apply for
e-residency in order to access Estonia's 1
transparent and digital business 0.8
environment. Applicants can establish a 0.6
company online and sign all the necessary 0.4 0.25
documents digitally in approximately 15 0.17
0.2 0.08 0.08 0.1
minutes. Once the business chooses to 0.02
establish or relocate their operations to 0
Estonia, they are eligible to apply for -0.2 -0.05
Startup Status. This allows the company to Lending Financial Digital Payments Insurance Digital WealthTech Others
hire talent from all over the world and software asset capital
receive residency permits for all exchange raising
Figure 13: Net Income of Estonian FinTech companies by operations segments. Source: Finance
employees with ease. Estonia (2021)
Estonian FinTechs to Watch:
Latest deal/investment/
Company Core business Comment
portfolio
The company facilitates payments and provides
flexible financing solutions for merchant’s
Payment solutions to merchant’s customers in the e-commerce market. Their
€ 19M Net loan portfolio
customer (buy now, pay later, instant revenues have grown 3.75x (to €7 million) during
(2020).
payments). the year 2020. Currently they operate in Estonia
and Lithuania and plan to launch a branch in Latvia
in Q3 2021.
The company provides loans for car purchases to
€ 2.2 million financing round underbanked customers in Africa. It is expected
Secured car loans.
(2020). that the company will have a 100,000-car portfolio
by 2024.
€ 1.7 million financing round The company offers credit solutions and financial
Consumer lending.
(2020). advice to underbanked clients in Latin America.
Table 6: Estonian FinTechs to watch. Sources: tech.eu; Techcrunch; Finance Estonia
11FINTECH IN ESTONIA
ESTONIA (CONT.)
The FinTech industry in Estonia is market is relatively small, an increasing executives feel some degree of
dominated by firms operating in the number of Estonian FinTech companies are uncertainty.
Lending segment (the unicorn, Wise, is focused on serving international markets. A
currently headquartered in London; thus, it survey by Finance Estonia (2021) showed
is excluded from the Estonian statistics). that more than 60% of FinTech Distribution of total FinTech income by FinTech
TalTech and Finance Estonia report that representatives are operating segments in Estonia (2019)
approximately 43% of total Estonian internationally. Currently, Estonian
FinTech sector income in 2019 was FinTechs mostly serve European countries,
generated by Estonian Lending FinTechs. but many businesses plan to expand into 17%
Furthermore, in Estonia, around 84% of North America, North Africa, Middle East
assets in the FinTech sector are held in the and East/Southeast Asia in the coming
Digital Banking and Lending segments. years. 43%
According to TalTech’s 2021 report, the 12%
FinTech representatives in Estonia
Lending segment outperformed other agree that the most common revenue
FinTech segments in 2019 in terms of source is the commission fee paid for their
average net income per company, which services. The biggest challenges that 12%
was around 4x higher than the second best- Estonian FinTechs face are and will be
performing segment (Financial Software). sourcing IT specialists and ensuring 16%
The Estonian FinTech sector is still in its compliance with a rapidly changing
early stage of development. Around 70% of regulatory landscape (Finance Estonia
Estonian FinTech companies are relatively survey, 2021). In 2019, Estonian authorities Lending Payments
small and, according to research from toughened regulations related to virtual Digital Banking Digital asset exchange
TalTech and Finance Estonia, only 30% of assets, mostly targeting cryptocurrencies.
Estonian FinTechs reported a positive net The new regulation resulted in increased Figure 14: Distribution of total FinTech income by
income in 2019, demonstrating that most fees for virtual currency activity licenses. FinTech segments in Estonia. Source: TalTech and
Estonian FinTech companies are still in the Also, it issued requirements that the board Finance Estonia (2021)
development phase. However, the of the company has to be located in (https://taltech.ee/en/news/FinTech-report-estonia-
Estonian FinTech sector has grown Estonia. Finally, if the international FinTech 2021)
substantially in recent years. TalTech’s firm would like to operate in Estonia, it
Finance Estonia 2021 report noted the total would have to open a branch with an
net profit generated by Estonian FinTechs address in Estonia (FinTech Baltic).
in 2019 had grown almost 800% from 2017 However, as the new government has
(€64m in 2019 and only €8.3m in 2017). recently come in, the regulations may
Due to the fact that the Estonian change. As a consequence, the FinTech
12IMPACT OF COVID-19
THE IMPACT OF COVID-19 ON THE FINTECH INDUSTRY
The FinTech segment has remained further. In addition, the pandemic saw an either be due to FinTech companies taking
resilient to the impact of the Covid-19 increasing number of corporate customers a more conservative approach to loan
pandemic relative to other industries. The drawn to FinTech companies over origination due to the economic risks
digital element of FinTech, as well as the traditional banking institutions. presented by the pandemic, or due to
fact that it provides an alternative and On the other hand, Covid-19 did consumers being forced to spend less and
direct route to financial services has proven negatively impact the global FinTech save more. Bloomberg recently estimated
popular among consumers. The pandemic industry in a number of ways. The number that consumers in the world’s largest
has helped to establish FinTech as a of late customer payments increased, as economies amassed $2.9 trillion in extra
sustainable industry. well as the number of defaults on loans. The savings during Covid-related lockdowns.
FinTech companies seized the pandemic also led to a reduction in the
opportunity and exploited the increase in number of new loans issued. This could
consumer demand for digital services along
with advancements in digital innovation. Global FinTech Market by Various KPIs during COVID-19 (yearly change)
Transaction volumes 11%
Despite the pandemic, the number of global
Number of transactions 13%
FinTech companies has skyrocketed over Number of fundraisers 10%
the past few years – in the end of the year Number of unique corporate customers 15%
2019 there were approximately 12,200 Number of "proofs of concept" 14%
companies, while in 2020 it reached 20,925, New customers/users 22%
and according to latest data available, the New borrowers/issuers 10%
Retention of existing customers/users 29%
number is still growing strong, as in Repeat borrowers/issuers 10%
February 2021 there were more than Investment by retail investor 6%
26,000 FinTech companies worldwide Investments by institutional investors 3% Positive impact
(Statista, 2021). Delayed payments -1%
Number of new loans issued -1% Negative impact
According to the survey made by CCAF, Number of claims 9%
World Bank and World Economic Forum Non-payments 9%
(see survey) the most positive impact Default on outstanding loans 9%
Arrears or late-repayment 14%
caused by Covid-19 is the retention of
Contractual disputes with clients or users 2%
existing customers/users, followed by the Time to value 11%
growing number of new customers
-5% 0% 5% 10% 15% 20% 25% 30% 35%
attracted to FinTech companies. These
factors have led to an increase in the Figure 15: COVID-19 impact on FinTech market. Source: CCAF, World Bank and World Economic
number of transactions handled by FinTech Forum (2020) (https://www.jbs.cam.ac.uk/faculty-research/centres/alternative-
companies, which is expected to grow finance/publications/2020-global-covid-19-FinTech-market-rapid-assessment-study#_ednref1)
13CONCLUSION
CONCLUSION
The global FinTech industry has shown early July 2021 on the London Stock Baltic states provide access to the
resilience during the Covid-19 pandemic, Exchange (LSE). It became the first Baltic- European market and have lower living
and global investments regained pace at originated FinTech company listed on the and operating costs than other EU nations.
the end of 2020 and into 2021. According LSE and achieved a $11 billion (£8 billion) This is why a number of UK FinTech
to KPMG analysis (2021), Payments and valuation, beating the $6-$7 billion market companies have chosen the Baltic region
Lending segments will maintain the expectations from earlier months of 2021 as their home after Brexit. The Bank of
dominant position, especially in the (Reuters, 2021). It is London’s biggest tech Lithuania reports that there are already 20
emerging markets. In the upcoming years, float to date with a current market UK-funded entities with electronic money
these segments should experience high capitalisation of £9 billion (20.07.21). licenses operating in Lithuania, including
M&A activity, as it is visible from the past The Baltic states are proving to be a established market players such as Revolut
several years that the market is maturing. global hub of FinTech innovation and and Yapily.
KPMG (2021) reports that the number of activity due to favourable conditions for The outlook for the Baltic FinTech
mature players and deal values has been hosting local and international FinTech market is very positive. In a survey
growing steadily (in 2020, the global companies. A supportive regulatory and conducted by Invest Lithuania and
median FinTech M&A value was approx. political environment in particular is Swedbank Latvia, FinTech executives said
$60M, while in 2019 and 2018 it was $55m attracting young and fast-growing FinTechs that international expansion will be a top
and $37m respectively). Moreover, in the to the region. This is evident from the business priority. Secondly, Baltic FinTech
next few years we should observe an growing investment activity into FinTechs companies are likely to focus on the Open
increasing number of FinTech IPOs, as the in the region, as well as the increasing Banking area in the next few years due to
number of FinTech unicorns continues to scale of operations of the Baltic FinTech the shift towards e-commerce which is
grow (in Q1 2021 alone there were 20 new landscape. It is expected that in the driving a growing number of online
FinTech unicorns, while in 2020 that upcoming years, the number of foreign- transactions, monthly subscriptions and
number was 19). Estonian FinTech Wise capital FinTech startups in the Baltics will new digital marketplaces.
(formerly TransferWise) went public in increase. This is due to the fact that the
14Aalto Capital
FinTech Discussion
July 2021
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