Lithuania has a long and proud history as a center of learning and commerce in Eastern Europe. Vilnius was once one of the wealthiest, most tolerant and thriving trade cities on the continent, a melting pot of religion, culture, language and trade. Vilnius University has been leading intellectual progress in Northern Europe since the 16th century. Once known as the Jerusalem of the North, Vilnius is now trying to recapture its regional importance, and it’s doing a heck of a job.
Crossroads of Commerce
“We are small, so we must work hard — and together.” So said Narimantas Bloznelis, one of my guests at our Fintech CEO Roundtable. It should be noted that these roundtables are usually capped at 8-10 people, but in Vilnius we were bursting at the seams with nearly 20 in attendance. The enthusiasm, patriotism and attitude of working harder, together, was abundantly apparent in all of our meetings in Lithuania. I’ll be the first to note that it’s not just hard work that will put a city — no less a country — on the world’s financial map. So what has Lithuania been doing to get the attention of global financial superpowers? In brief, they have re-established themselves at the crossroads of commerce — only this time we are not speaking of the amber trade.
First, address the internal needs
Enter Marius Jurgilas. In an effort to bring about more competitive bank offerings for Lithuanian citizens, one very bright, ambitious and hard-working government official — surrounded, of course, by a handful of key assistants — began to invite competition within the Lithuanian banking system which was formerly dominated by a small handful of banks. They decided to take advantage of the CENTROlink payment system, and provided an open gateway for non-banks to access the central bank payment system.
Along with that, the Bank of Lithuania — which serves as the central bank and chief financial market regulator of Lithuania — produced a forward-thinking regulatory environment modeled after the UK’s Financial Conduct Authority. Note that the FCA is well accepted as one of the most innovative financial regulatory agencies in the world. Note also that the FCA has been on a campaign for several years to “export” their regulatory innovations through the Global Financial Innovation Network (GFIN), which was formally launched in January 2019 following the FCA’s early 2018 proposal to create a global sandbox. Lithuania is an example of a country that is benefiting greatly from the FCA’s willingness to collaborate.
Next, address the concerns of the entire EU
Now, it turns out that if you have a highly educated workforce, fintech-favorable regulations, and attractive processes for establishing and building startups, you can attract quite a number of new entrants to your city. But the key ingredient was the fact that an entity that establishes an e-money institution in Lithuania can do commerce as a regulated European bank across all of the European Union. It is for all these reasons that, in just a few short years, Lithuania has grown the number of payments and e-money institutions (PIs and EMIs) to almost 100, and birthed three new challenger banks – Revolut, EMIbank and Mano Bankas. While created in Lithuania, most of these entities are being built to serve the demands of consumers and businesses outside its borders.
Now, before you go casting stones that this is a bubble of EMIs and challenger banks, understand that the Bank of Lithuania is known to be a strict regulator, not afraid to shut down fintechs that are not measuring up to its reporting standards. After meeting with members of the bank’s enforcement division and fintech entrepreneurs, it is clear that the Bank of Lithuania understand what is at stake, and take their role seriously.
Lithuania becomes more important as Brexit becomes more of a reality.
It’s June, 2019 and Brexit is looming in the not-too-distant future. Everywhere I go, the banking & fintech communities are claiming some lift from the madness that will ensue in a post-Brexit world. One thing is for sure, major financial corporations are not waiting to see how it all plays out. While in Vilnius I caught whispers of which major financial corporation was next to move in. It seems there is a long line of guess who’s coming next announcements. We need only wait to hear more exciting news come from the revival of this mid-second millennium powerhouse.
Bo Brustkern is fascinated by the developments in Web3 and crypto, and how they will interact with the embedded systems of traditional finance. He is co-founder & CEO of Fintech Nexus, and operates mainly from his office in Denver, Colorado, USA.
