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Fintech is booming in the CEE region, but investors want more than just clever code

October 28, 2024

6 min read

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October 28, 2024

By

6 min read

Emerging Europe is fast becoming one of the world’s most dynamic fintech hubs. With a combination of entrepreneurial spirit, strong technical talent, and growing investor interest, the region has positioned itself as a key player in the global financial technology sector.  

As countries in Central and Eastern Europe (CEE) continue to embrace digital transformation, fintech start-ups are flourishing, driving innovation in areas like digital banking, payment solutions, and financial inclusion. 

But what is it about this part of the world that has made it so attractive to investors? And, more importantly, what does the future hold for fintech in CEE?   

Emerging Europe offers a unique combination of factors that make it fertile ground for fintech growth.  

First, the region has a wealth of highly skilled tech talent. Countries like Poland, Estonia, and Romania have some of the best software developers in the world, many of whom are drawn to fintech startups for the opportunity to work on cutting-edge solutions.  

According to Stack Overflow, a question-and-answer website for computer programmers, Poland ranks as one of the top countries globally for software development, with strong expertise in financial technology. 

Secondly, CEE’s tech-friendly regulatory environment and government support have helped foster fintech innovation.  

Estonia, for instance, is renowned for its digital governance and e-residency programmes, which have created a fertile ground for tech-driven businesses, including fintech. Lithuania’s fintech sandbox meanwhile allows potential and existing financial market participants to test financial innovations in a live environment under the guidance and supervision of the Bank of Lithuania.  

Moreover, the rapid digital transformation accelerated by the Covid-19 pandemic has drastically altered how consumers in CEE use financial services.  

There is now a greater demand for digital banking and payment solutions, particularly among younger, tech-savvy populations who want financial services that are fast, efficient, and user-friendly. This rising consumer demand has created an environment ripe for disruption by fintech players. 

Who’s leading the charge? 

Several fintech companies in CEE have risen to prominence in recent years, drawing attention from both local and international investors.  

Although originally a UK-based company, Revolut has found a strong foothold in CEE, particularly in Lithuania, where it operates its European banking arm.  

With over 30 million global users, Revolut has made significant strides in digital banking, offering a wide range of services, including money transfers, cryptocurrency trading, and personal loans. Its popularity in the CEE region is driven by its ability to offer low-cost, easy-to-use financial solutions that appeal to a broad customer base. 

Also based in Lithuania, Paysera is another key player making waves in the fintech space. The company provides international money transfers, online payment gateways, and a host of banking services, focusing on affordability and accessibility.  

Paysera’s success is largely attributed to its ability to tap into underserved markets, providing financial services to individuals and businesses who may not have access to traditional banking infrastructure. 

Wise, the international money transfer service founded in Estonia, is one of the best-known fintech success stories to come out of the CEE region.  

By offering transparent and low-cost cross-border payment services, Wise has attracted millions of users worldwide. The company’s IPO in 2021 marked a significant moment for fintech in CEE, as it showed that companies from the region could compete with the biggest names in global finance. 

Two firms from Romania are also worth mentioning. Salt Edge is another fintech rising star, offering open banking and API solutions that enable banks and fintechs to securely access customer data. Last month it formed a partnership with Erste Group to bolster the multi-banking functionalities for Erste Group’s retail and corporate customers across Europe.

FintechOS meanwhile offers a low-code platform for developers of financial products and earlier this year raised 60 million US dollars in a Series B+ investment round led by BlackRock, Cipio Partners and Molten Ventures.  

Also raising money of late was Hungary’s PastPay, a provider of B2B payment solutions, which last month announced a 12 million euros Series A funding round led by Platina Capital in collaboration with several leading financial institutions and high-profile private investors.

“B2B commerce is becoming an increasingly digitised market, and the demand for flexible payment options is matching the need for innovative solutions,” says Benjamin Berényi, co-founder and CEO at PastPay.

“This funding shows that investors are keen to leverage this demand and lead in a market that is still in its early stages but with the promise of robust growth and profitability.”

Fintech’s role in financial inclusion 

One of the most significant impacts of fintech in CEE is its role in promoting financial inclusion. In countries where access to traditional banking services can be limited—particularly in rural areas or among underbanked populations—fintech companies are stepping in to bridge the gap. 

In markets like Romania and Bulgaria, where cash has historically been king, fintech solutions are offering consumers a way to access digital banking services without needing to visit a physical bank branch. This has not only improved convenience but has also opened up new opportunities for small businesses and entrepreneurs who were previously excluded from formal financial systems. 

Additionally, the rise of digital wallets and mobile payment solutions is helping to bring financial services to people who may not have a bank account.  

In countries like Ukraine, where the fintech sector has seen rapid growth despite the ongoing Russian invasion, companies like Monobank are leading the charge with app-based banking services that allow users to manage their finances entirely through their smartphones. 

What’s next for fintech in CEE? 

Looking ahead, several trends suggest that the fintech boom in CEE is far from over. Open banking is likely to play a significant role in shaping the future of the industry, with more fintech startups focusing on creating seamless, API-driven solutions that allow consumers to access a wider range of financial products. 

Additionally, the demand for embedded finance—where non-financial companies offer financial services through their platforms—is expected to grow.  

This trend could open new revenue streams for fintech companies and increase consumer engagement across various sectors, from e-commerce to healthcare. 

Finally, as fintech continues to mature in CEE, we can expect to see more consolidation in the market, with larger players acquiring smaller startups to expand their offerings and enter new markets.  

This, combined with sustained interest from international investors, will likely ensure that fintech remains one of the region’s most dynamic and rapidly evolving industries.  

With its abundance of tech talent, favourable regulatory environments, and growing demand for digital financial solutions, the region is well-positioned to become a global leader in financial technology.  

Investors are paying close attention, and the next few years are set to bring exciting developments as CEE fintech companies continue to innovate, disrupt, and redefine the future of finance. 

Marek Grzegorczyk

Marek Grzegorczyk

Marek Grzegorczyk is an analyst at Reinvantage.

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