London fintech heading to Lithuania post-Brexit

Lithuania has become the go-to destination for many British fintech businesses in search of greener post-Brexit pastures, according to the head of online banking service ConnectPay.

While London remains a leader in attracting fintech investment, Marius Galdikas, CEO of Connect-Pay, believes Lithuania is shaping up to be the next top destination for businesses due to its rapidly growing fintech sector.

Since the United Kingdom's departure from the European Union, prominent UK fintech companies, including Revolut and Yapily, have announced that they will be expanding operations to the Lithuanian capital, Vilnius.

"Brexit put a hard stop on the continuance of some UK-EU partnerships, and it's clear that companies would want to retain alliances they have worked very hard to establish, hence the trend in relocation," said Galdikas. "Relocating certain services offers assurances that were not, and still aren't, guaranteed, as implications for UK-resident financial service companies still haven't been widely discussed."

According to DSBC Financial Group, Lithuania's fintech ecosystem began a fast growth trend in 2016.

In 2019, the number of people employed there by companies in the sector rose 30 percent, to 3,400, making the nation the second-largest fintech hub in the world after the UK.

Russ Shaw, founder of Tech London Advocates and Global Tech Advocates, said the Baltic nation has been "smart" in attracting talent and businesses, as well as in marketing itself as a fintech-friendly ecosystem.

"The Lithuanian government is doing some positive things to attract startups, scale-ups and particularly fintech businesses, and obviously targeting UK fintech because they are in the EU and the UK isn't anymore," Shaw said. "They have put through some favorable regulations, such as better anti-money-laundering rules and regulations, (and) they've made it easier for companies to set up there very quickly, and they have created the right environment from a policy point of view."

Shaw added that relocating from the UK to Lithuania is much less costly than moving to France or Germany or elsewhere in the bloc. He said the nation also offers access to great talent and a low-cost workforce.

Galdikas also noted that Lithuania's regulatory authorities are one of the main reasons the country has become a catalyst for scaling fintech operations. Although compliance is strict to ensure sufficient risk management, regulators are eager to foster innovation in the financial services sector, which is reflected in introduced policies, he explained.

"The fact that regulators are not only willing but also keen on maintaining a dialogue between them and fintech market players creates grounds to exchange insights from both sides, leading to addressing regulatory issues with more in-depth knowledge of the market," said Galdikas.