Latvia’s FinTech sector development strategy has been drawn up. What are the next steps?
Latvia's vision as defined in the report: "Latvia as a financial technology centre of European Union significance where FinTech companies promote innovation and competition in the financial sector by developing significant, secure and internationally scalable business models".
Currently, Latvia has untapped potential in the financial technology area. Although regulation supporting the financial activity has been established in the country, it is still necessary to reduce barriers to the growth of the FinTech sector. The development of technologies and their integration into financial services should be stimulated to create financial services with high value added that will improve competitiveness. Funds should be invested in the development of artificial intelligence (AI), big data, cloud-based technologies and other technologies to ensure competitiveness in the European market. Currently, Latvia falls behind other European Union Member States in the area of technologies as suggested by, for instance, the Global Innovation Index, AI Readiness Index, Competitiveness Index and ICT Development Index. European countries such as Denmark, France, Germany, Italy, Poland, Spain and Sweden already use AI, big data and blockchains in the financial sector.
Nevertheless, Latvia has a chance of becoming an innovation and business centre together with other Baltic States, provided favourable conditions for the development of FinTech companies are ensured. Latvia's FinTech strategy identifies the responsible authorities and the work to be done in order to improve the environment for the growth of FinTech.
Prerequisites and recommendations for the implementation of strategy development directions
- To further improve the regulation of financial services so that it facilitates the development of financial technologies and a sustainable overall development of Latvia's financial system, follows the trends in the financial service market and technology development to ensure a quicker implementation of innovative ideas in Latvia.
- To create a financial market infrastructure conducive to innovation and available to all market participants based on the principle of technological neutrality.
- To strengthen the investment climate. To ensure the availability of capital and other financial support mechanisms, especially focusing on venture capital projects in their early stages as well as involving the representatives of the financial sector in the current support mechanisms to the extent possible.
- To promote the talent base growth so that the participants of the financial technology ecosystem would be equally capable of understanding, developing and introducing new technologies and services. To expand the knowledge of local experts (including by relevant study programmes or specialised training) and recruit foreign professionals, thus speeding up the entry of knowledge into the market.
- To build a strong and unified financial technology ecosystem in Latvia. It takes a dynamic and open cooperation between the main participants of the ecosystem: businesses, industry professionals, supervisors, public administration, investors, financial sector participants and other parties (for example, knowledgeable providers of professional services, educational establishments, etc.). A constant dialogue between the involved parties is also necessary. It should be coordinated and with a clear division of responsibilities.
- To continue the communication between supervisory authorities and market participants on licensing and other issues by explaining the requirements established in the regulation, whenever possible.
- When developing the financial technology area, it is important not to lower the compliance control standards and culture.
- Quality internal communication should be developed in Latvia so that both the current participants of the FinTech ecosystem and other interested parties become familiar with the opportunities of working in the financial technology area and with the resources available in the market. Meanwhile, communication outside Latvia should be developed by determining the target markets and facilitating the visibility of Latvia as a financial technology centre in these markets.
The Financial and Capital Market Commission, which is integrated into Latvijas Banka as of 1 January, the Ministry of Finance, the Fintech Latvia Association, market participants and other institutions took an active part in the creation of Latvia's FinTech strategy. The work has led to the adoption of the plan detailing the activities and tasks of involved institutions and foreseeing the creation of an environment supportive of FinTech, the strengthening of the FinTech ecosystem and the facilitation of the visibility of Latvia as a FinTech development centre outside the country.
In 2023, Latvijas Banka will focus on the following tasks:
- to reduce the administrative burden on financial innovation, while ensuring technological neutrality;
- to review the licensing process and make it more efficient;
- to improve the opportunities of FinTech companies (payment institutions, e-money institutions, etc.) to receive banking services by promoting a dialogue between banks and FinTech companies as well as the awareness of requirements in the area of anti-money laundering and combating terrorism and proliferation financing (AML/CTPF);
- to stimulate the development of RegTech companies (AML/CTPF, the elimination of fraud) by providing consultations on the compliance of solutions with the regulation; to identify the cooperation opportunities of the financial sector and FinTech companies;
- to facilitate the industry's awareness of the requirements for AML/CTPF; to prepare guidelines on the development of AML/CTPF procedures; to evaluate the compliance of AML/CTPF requirements and their application with ensuring the approach based on risk assessment, including in relation to supervision;
- to develop the capacity, availability and operation (speed, consultations on the cross-border activity) of Latvijas Banka's Innovation Hub.
The strategy and the tasks performed by the participants of the FinTech sector are available on the single portal for draft legal acts.
Meanwhile, for the news in the FinTech area, visit the website intended for the financial sector participants: fintechlatvia.eu. The website also offers advice by Latvijas Banka's experts, licensing guides and a possibility of applying for consultations at Latvijas Banka's Innovation Hub.
We invite FinTech companies and the authors of innovative ideas to apply for free consultations at the Innovation Hub. Consultations are possible both online and in person. To book a consultation, please fill in this form or write us to fintech@bank.lv.
We are looking forward to your applications and questions! Let us develop the FinTech sector together!
