With the usual suspects maintaining a strong grip on the world’s attention (we are talking about Hong Kong, Singapore, and New York), it's easy to overlook emerging markets offering outstanding opportunities to international tech and finance talent. One of those markets is Central and Eastern Europe (CEE) – a unique region that has been making unprecedented strides to bring innovation to every level of the government and business operations. Being an economic success story for the past two decades, CEE countries are continuously reinventing their economies to adapt to the changing world.
Europe remains one of the world’s top regions for executives, experts note in an attractiveness survey 2017 (Europe). Despite major geopolitical events, growth around the world facilitates demand for European products and services and gives business decision makers the confidence to expand and invest. Asked to rank the attractiveness of global regions, investors vote Western Europe first overall (53%), followed by US (39%) and CEE (37%).
Image: CEE key economic indicators; FinTech in CEE: Charting the course for innovation in financial services technology
In total, the CEE FinTech market is estimated to be worth over €2.2 billion, with the FinTech investment market in the region to grow at 55% annually until 2020. A recent comprehensive study on CEE FinTech reveals that innovations for the banking sector provide the greatest share of FinTech solutions in all CEE countries. Such solutions are highly developed in virtually all countries (internet and mobile banking, contactless cards, etc.).
Insurance and asset management sectors are considered to be far behind, with the focus in the insurance industry being on improving distribution channels (apps, gamification), and launching new services based on telematics. The asset management sector is deemed to be still conservative with most financial institutions using systems provided by traditional vendors, which, on the positive side, represents existing opportunities to break down the dominance of these players by offering exible and inexpensive solutions.
In an extensive CEE FinTech Survey 2017, professionals outline Estonia as CEE’s near-runaway tech-leader, with the government encouraging or even requiring the digitization of business processes and many aspects of daily interactions with the public sector, with knock-on effects for ICT businesses. In fact, Estonia became the first country to offer e-Residency, a government-issued digital ID available to anyone in the world. E-Residency offers the freedom to easily start and run a global business in a trusted EU environment. The e-Residency project was launched on December 1, 2014. As of March 15, 2017, over 18,300 people from 136 countries worldwide had applied for and over 17,300 have received the eID. By the same time, over 1,400 e-residents have established a company and there are over 2,700 companies connected to e-residents (owners, board members, etc.).
Another interesting contender among the CEE countries is Poland, which has been widely considered to be among the frontrunners as a hub of technological innovation. “We want the region to become the center of innovation. It is our responsibility to create an ecosystem in which you will be able to develop your talent,” Beata Szydlo, Poland’s prime minister, said to an audience of nearly 1,000 entrepreneurs and investors from local countries gathered in Warsaw. “We create, as a country, good conditions for entrepreneurs and we connect it with science. Then we hope and we know that it will have a positive impact on the economy she added. We want you to make your dreams come true here, in your countries, and through making them come true, help us all make our dream about the development and safety for our region come true.”
The philosophy underlines one of the most promising features of the Polish FinTech landscape – growing cooperation between the banks and tech companies; the latter are not developing their products in a vacuum, and the former are not shying away from embracing new technologies.
“Poland is widely considered as being in the vanguard of global financial digitization. We are a playground for Western partners to test and popularize the most advanced customer interfaces and payment methods. Already, as far as standards are concerned we are ahead vis-a-vis regional markets and even Western [European] neighbors,” StartUp Hub Poland’s CEO Maciek Sadowski explains. “As well as providing a large pool of potential customers for FinTech, this also allows developers and banks looking to offer the technology internationally fairly robust “proof of concept”, at a relatively lower price than in Western European countries.”
Mentioning other notable CEE FinTech markets, professionals emphasize Austria, Bulgaria, Croatia, Czech Republic, Hungary, Romania, Slovakia, and Slovenia. Each of these countries, while largely overlooked, offers unique opportunities for FinTech professionals.
Rarely mentioned, Russia is another emerging hotbed for FinTech. As well as having the largest domestic market in CEE, FinTech professionals admit it has a modern banking system and well-developed cybersecurity industry, and churns out programmers from its universities (in 2017, half of the top 10 best-performing universities in the global ACM-International Collegiate Programming Competition were Russian). Some of the FinTech professionals participated in a survey in 2017 believe that Russia, and probably to a greater extent Ukraine and Belarus, will increasingly provide the brainpower for FinTech centers around the CEE region.
Not to sugarcoat those opportunities – every one of the markets has its drawbacks and threats able to impair future prosperity. Even leading CEE markets have controversial processes in place, requiring careful assessment of the best choice should one decide to go on a CEE quest. High barriers for entry in certain countries, ageing society, corruption, significant rural population are among important downsides to local economies. Nonetheless, CEE is expected to emerge from local problems to a region with highly cooperative and supportive governments (which many already are), strong and open to collaboration banks, powered by an insignificant competition, up to the moment when the hype grinds down every aspect of CEE nations to shed light for the international community on their next place to be.