In October 2022, the British company Revolut left the United Kingdom to settle in Lithuania, on the shores of the Baltic Sea. The fintech —a digital financial services company— was definitively moving to the territory of the European Union due to the increasing difficulty of serving the market of the old continent as a result of Brexit. “We always focus on our customers and understand that no one likes the unknown,” stated company spokesperson Ieva Elvyra Kazakevičiūtė shortly before departure. Along with it, there are already 263 companies that are part of the sector fintechwhich employs more than 7,000 professionals in a State of barely 2.8 million inhabitants.
“We are the first country in Europe to issue digital banking licenses,” highlights Diana Girdenyté, director of Investment Projects at the state agency Invest Lithuania. This milestone is possible, she adds, thanks to the fact that they have managed to build “the largest hub of companies fintech of the EU member countries and the tenth best country for these companies in the ranking prepared by the Global Fintech Index, with a client portfolio that exceeds 25 million users.”
The capital, Vilnius, ranks second among medium-sized cities in attracting foreign investment, according to the report fDi’s European Cities of the Future 2022. In addition to the British divorce, the massive relocation of Belarusian companies – citing, above all, security reasons – starting in 2020 and Lithuania’s strategy of positioning itself as the gateway to the European start-ups of American origin has given wings to the entire innovation sector. The country, which already had three companies valued at more than 1 billion dollars or unicorns —Vinted, Nord Security and Baltic Classifieds Group— since the beginning of this year, has put all its efforts into leading the innovation sector in Europe to become a true global benchmark in the digital banking sector.
A very flexible regulation, together with an increasingly avant-garde digital infrastructure – the cost of broadband access is one of the most competitive in the world – and prestige in terms of cybersecurity – they occupy sixth position in the Global Cyber Security Index – These are some of the elements that explain the growth of emerging companies in the financial sector in Lithuanian lands. In 2016, the country only had 82 companies, which have tripled in just six years. Of the current 263, about half are of national origin, and in 2022 they raised financing worth 67.9 million euros, multiplying by four the figures obtained in 2020. The rest of fintech They come mostly from the United Kingdom (33), the United States (16) and Estonia (8). 34% of all of them are mainly dedicated to the payments field.
The big question is whether a small country can really carry out such ambitious growth plans, in a continent like Europe with fierce competition – with colossi the size of Paris, Berlin or Stockholm – not only in the financial sector, but as hub of international innovation at all levels. The intentions, at least, point in this direction. Among the novelties that have been presented this year is Tech Zity, destined to become, in the words of its founder and director, Darius Žakaitis, the “largest hub from all over Europe.” What is still today an old abandoned textile factory from the Soviet era, will have the capacity to house nearly 5,000 workers from companies dedicated to innovation and technological development.
“The objective is, in addition to the transfer of part of the offices of already consolidated companies in our country, to attract start-ups from the rest of the country and, above all, international talent.” The planned investment exceeds 100 million euros, capital “of 100% private origin,” according to Žakaitis. The goal is that the first phase of the project will be completed by the end of 2024.
So far, the numbers are favorable to them: the main indicators show notable growth in recent years. In fact, during the last five years, and despite the outbreak of the pandemic, the country’s innovation fabric has experienced unprecedented growth. “The value of the technology sector has multiplied by 17 in just three years,” the Minister of Economy and Innovation, Aušrinė Armonaitė, a member of the socioliberal Freedom Party (Laisvės Partija), tells EL PAÍS. This small Baltic republic—which, along with Poland, is the only country in the world that has a border with both Russia and Belarus—already has 1,000 start-ups technological, and boasts of being the second ecosystem in Europe in terms of growth.
Biotechnology and health
In addition to the financial sector, the country is also focusing its strategy on biotechnology and health sciences, two sectors. Kilo Health is an example. According to Ilona Bernotaité, Director of Personnel, they are “the second digital well-being company with the highest growth rate in Europe.” Currently, they already exceed five million users, they have tripled their employees in less than four years to reach the current 800, and they have a turnover of more than 230 million euros in 2022.
But it is in the area of ICT where there have been more success stories. According to Eurostat data, Lithuania will reach 52,200 jobs related to the information and communication technologies sector in 2022. The Wix development unit (web page manager), the hub of engineering from the cloud services company Chronosphere, or the digital solutions platform for restoration Raydiant are some of the most recent success stories.
Lithuania wants to present itself to Europe as the alternative to Ireland as a digital platform. Its advantages are based on much more competitive prices, slight tax advantages and cheaper labor. The country already occupies eighth place in the tax competitiveness classification within the OECD, according to the International Tax Competitiveness Index 2022, and is taking over from Estonia, self-described as a “unicorn nation” and which until now had led the way for continue in terms of innovation in Eastern Europe. In addition to some obstacles such as the complexity of the language and its location in the eastern end of the continent, we will have to see how external factors such as the war in Ukraine end up affecting the country’s development, whose proximity and unpredictability predict a threat with increasingly difficult consequences. to forecast.
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