Things have finally changed in the Latvian financial sector, and the country is ready to make use of its potential in fintech. That is the current message from the government and from the Latvian financial supervisory authority, the Financial and Capital Market Commission (FCMC). These are welcome words from the market, which has, along with the whole country, gone through a challenging period of “financial sector renovation” and is more than ready to continue developing at full speed.

This hopeful trend can be seen from the public sector activities aimed specifically at fintech. First, the FCMC organised the Fintech Forum, which brought together both the public and private sector stakeholders and addressed diverse topics, from the need for enhanced education in IT up to the potential of crypto and blockchain. Second, the Latvian financial technologies’ strategy is finally in its last stages of adoption. This strategy highlights the country’s strengths (such as favourable regulation for start-ups, and options to consult with the regulator on the product and fintech company development process) as well as aspects still to be improved (developing crypto assets and the DeFi market via regulation, improving access to banking services for fintech companies, evaluating whether AML regulation fits the risk-based approach). Moreover, examples from practice show that the public sector’s readiness to accommodate market participants is not only expressed in words: for example, Latvia issued the first EU-wide crowdfunding licence and the licencing process took just three months.

What’s more, private sector participants seem to be mobilising with new inspiration. Importantly, there are more collective efforts, an excellent example of which is the Fintech Pulse magazine issued by Fintech Latvia Association (which Sorainen had the honour to participate in). It summarises the latest market statistics, technology trends, regulatory building blocks etc. and thus provides a valuable insight, especially for the prospective entrants into the Latvian market.

These inspiring new tendencies mark a significant shift for Latvian finance in general, not just for fintech. For several years, Latvian finance had less positive associations, beginning with issues with AML, which led to arguable over-scrutiny from the regulator and to de-risking in the market, especially in the banking sector. Some of the consequences from this can still be felt now, and must be tackled in order to ensure that Latvian fintech is indeed able to grow.

Overall, we are optimistic and believe that Latvia does in fact have several competitive advantages to enable it to become a fintech centre in Europe:

  1. Resilience and experience of both the market participants and the regulator due to the “financial capital renovation”
  2. Approachable, efficient and interested regulator
  3. Ever-growing infrastructure for developing fintech companies and products (e.g., regulatory sandbox and innovation hub)
  4. Active sector associations like the Fintech Latvia Association and Finance Latvia Association

We are curious to follow these trends in the fintech sector and ready to assist the fintech companies in their journey in Latvia.