Regional focus


He points out that Latvia was the first Eurozone country to introduce instant payments infrastructure. The region has also been ahead of the curve in terms of electronic signatures, automated authentication solutions and open banking. To cite just one example, Latvian fintech Nordigen is the first free open banking API in Europe.


“The biggest banks in our market are very open in terms of how we can share the data and how we can cooperate with other financial technology companies, other banks and other partners,” says Nogicevs. “Open banking is at quite a high level right now.” Lithuanian start-up smeFinance was founded in 2016 and launched a neobank for small business clients, smeBank, earlier this year. Its CEO, Mindaugas Mikalajunas, says the region is often described as the ‘new Nordics’, with more and more venture capital (VC) and debt funding pouring into the market. “With smeFinance fintech and smeBank neobank, we are making a unique ecosystem where we can scale our business and services across the whole of Europe,” Mikalajunas explains. “The Baltic region is our first step for expansion, and it’s here that we’re launching services, preparing tech solutions, attracting investors, raising capital, hiring talent and preparing group governance.”


Mikalajunas believes the challenges of the past few years have created a fertile environment for innovation, including the emergence of neobanks like smeBank.


“The top banks in the Baltics are focusing on large clients and projects with a low risk profile, so smaller businesses, with a higher risk, are out of their scope,” he says. “We see a major underdevelopment of small and medium companies financing, and especially newly established business, which is actually the most eager to receive financing.”


The company recently closed a €120m debt financing round, and is now ready for VC investment, with a view to speeding up expansion. Mikalajunas says the long-term goal is to become the fastest and most agile bank in the region – not to mention the “largest financial ecosystem in Europe”. “We already see that our business model works – we have more than 100 people in our ecosystem, our investors have trusted us with more than €200m of funds, we are doubling our revenues each year and we are still profitable,” he says. “We are happy to announce that our ecosystem has a notable portion of customers not only from Lithuania but also Latvia, Estonia and Germany.”


Accelerating innovation


It would be remiss, too, not to mention the ways the pandemic has sped up digital change in the region. Nogicevs remarks that while client video meetings were already a fixture at SEB Banka, Covid-19 made them far more relevant. During the first two months


Future Banking / www.nsbanking.com


of the pandemic, the bank moved almost all its services to remote channels.


“In 2017, we implemented the possibility of meeting the customer via video – we can authenticate the customer and conclude all agreements on the go,” he says. “Although in some cases customers like to meet us physically, we can do almost all our usual activities remotely. Before the pandemic, the ratio of video meetings to physical was about 20:80, whereas today more than 85% of our customer meetings are happening remotely.” SEB Banka has also been investing heavily in AI-based technologies, including a chatbot that can solve customer queries.


Above: Mindaugas Mikalajunas,


CEO, smeFinance.


Opposite: Ilja Nogicevs, head of digital banking Latvia, SEB Banka.


“With smeFinance fintech and smeBank neobank, we are making a unique ecosystem where we can scale our business and services across the whole of Europe.”


Mindaugas Mikalajunas, smeFinance


“We’re trying to understand the best way we can serve customers, rather than pushing certain things through specific channels,” says Nogicevs. “Our plan is to have everything digitally available, and then help educate customers in how they can take advantage of the possibilities we can provide to them in this area.” Although the money laundering scandal is still fresh in the minds of many, it seems clear that the Baltic banking system is well on the way to recovery. The region has taken responsibility for its mistakes and has redoubled its commitment to transparency. What’s more, these three tiny nations punch far above their weight in terms of entrepreneurialism and innovation. Could Estonia, Latvia or Lithuania be incubating the next big thing in banking? To anyone keeping an eye on the region’s burgeoning fintech scene, it wouldn’t be altogether surprising. ●


99%


Banking transactions in Estonia that are carried out online.


e-Estonia 13


smeFinance


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