The fintech sector is booming all over the world, and in Europe in particular, where it’s one of the region’s largest investment categories, receiving around 20% of all VC investments. Last year, Europe minted 19 new fintech unicorns, and, in the first half of 2022, European fintech has already raised over 13.2 billion USD in funding. Better technologies, tighter regulations, and growing consumer familiarity with digital solutions are pushing up demand and adoption, creating a fertile environment for financial innovations thriving to the Baltic. The pandemic also served as a major catalyst for the adoption of digital technologies and services, including financial applications and mobile banking services, the use of which increased by 72% since early 2020.

Last year Latvia was named one of the most start-up-friendly countries in the world by Index Ventures due to its supportive legal environments. A focus was also placed on supporting the fintech sector specifically. At the same time, a workgroup has been established to develop the fintech strategy, to identify and reduce any barriers to the industry’s start-up growth. This stance is shared by the Financial and Capital Market Commission of Latvia, which has already established two support instruments for fintech. Latvian fintech strategy is under development by a workgroup made up of the Ministry of Finance, the Financial and Capital Market Commission of Latvia, fintech industry representatives, banks, the Investment and Development Agency of Latvia (LIAA), and various professional industry associations.

Fostering Latvia’s fintech scene is a core priority of the government and its efforts manifest through a variety of instruments for developing new ideas. Helping entrepreneurs is the Financial and Capital Market Commission (FCMC). Tarass Leočko, Senior Investment Advisor at the LIAA Investment Promotion Division, underlined: “Latvia is ready to excel as the innovation hub, where to test and scale up the latest fintech solutions. All local stakeholders are on a mission to improve the legal framework and develop the necessary infrastructure to accelerate the ongoing development”.

Latvian fintech is keeping pace with these global trends. It’s one of the fastest growing sectors in the country, with 118 of ~400 start-ups in 2021 being fintech, a 57% increase compared to 2019. Among the chief reasons why Latvia has such a healthy fintech scene are, according to the fintech themselves, its infrastructure and opportunities for innovation (43%), as well as the ease of doing business (36%). This is the product of targeted state support to enterprises and friendly regulations.

Fintech can also take advantage of broader start-up support mechanisms that aren’t necessarily industry specific. Latvia was named the most start-up-friendly country in the world by Index Ventures thanks to its attractive employee stock option policies, tax incentives, and accessibility. Latvia’s generous Start-up Law (including low social tax, no individual tax, and government co-financing for highly qualified specialists) is highly appealing. So are the available funding for international competitiveness promotion and the innovation vouchers offered by the LIAA. The combination of these various support mechanisms ensures that fintech gets every opportunity to put their ideas to the test, and the best solutions rise to the top.