Establishing a business in Latvia with the support of FCMC
The history and development of Nordigen
Nordigen entered the FinTech start-up scene of Latvia in 2016 with the intent of bringing innovation to the world of finance. In 2020, having reflected on the state of the financial data industry and its reliance on impractical and unsecure methods for obtaining information, such as the use of screen scraping, we transitioned the firm into an open banking platform. Today, our company is steadily becoming one of the top players in open banking, doing our best to democratise the industry with free account information services, and premium insights and analytics. Our platform has grown tremendously and now enables connections with accounts across over 2200 banks within 30 EEA countries and the best coverage in Europe. Starting from a small team in Latvia, the company today employs more than 50 people and is one of the leading open banking platforms in Europe.
The role of the FCMC in Nordigen's development
A big push for the success of our firm in its initial stages came from the Financial and Capital Market Commission (FCMC). From the start, our vision for open banking aligned with FCMC’s goals to foster more competition on the market and they supported the ideas we proposed, granting us the licence to operate as a payment institution with the right to provide account information services. The collaboration worked on multiple levels, as both sides desired to level the playing field in the industry, and the FCMC was keen to facilitate innovation and improve consumer experiences within financial services.
The Latvian regulator and how forthcoming they are, is one of the many reasons why Latvia is one of the best places to establish a FinTech startup.
Having compared our experiences with colleagues outside of the country, it became clear that such a positive experience, along with a licence being granted in under three months, is not so common across Europe - Latvia has one of the smoothest processes for obtaining an Account Information Service Provider (AISP) licence. The Account Information Service Provider (AISP) licence is granted to financial institutions specifically to enable secure access to financial data of banking users in regard to accounts that are held with other financial institutions. The FCMC is the only national competent authority to grant these types of licences in the country. The AISP licence is crucial for financial institutions that wish to provide account information services, and they cannot operate without one.
Latvia is the best place to start a business
Apart from Nordigen, many other FinTechs are emerging and thriving within the country, such as successful peer-to-peer lending platforms Mintos and Twino, who have both also been licensed by the FCMC and are making waves globally.
The Latvian FinTech ecosystem is dynamic, and is continuously growing and developing.
This is largely due to an abundance of local talent, an understanding regulator, venture capital networks, connections with local bank infrastructure, low costs and an attractive tax regime.
Potential financial industry players can also benefit from the innovation hub and regulatory sandbox implemented by the FCMC, which allows growing FinTechs to test their inventions in a compliant manner. This environment enables FinTechs to experiment with and validate new financial products, financial services, or business models in line with a testing plan agreed upon in advance with the FCMC. The regulatory sandbox is open to new financial solutions that would positively contribute to the smooth operation and growth of the financial market, as well as increasing the alternatives for consumers and investors to utilise financial services.
Recruiting and retaining high quality talent is also made easier through Latvia’s Employee Share Option Plans (ESOP), with FinTechs giving away shares of stock to their employees as an additional financial incentive and bonus. While every country has their own set of rules in regard to ESOP, Latvia’s rules changed in January 2021 to become more generous to employees. The amendments include the possibility of providing workers with shares in private limited liability firms, not only stock in public limited corporations as it previously was the case. In order to utilise salary tax exemption when awarding options to workers, the vesting time has also been reduced from a minimum of 36 months to 12 months. Additionally, if all criteria are met at the time of sale, only a capital gains tax (currently 20%) is levied on the difference between the selling and exercise price.
Latvia is a fantastic technological hub and area to live and start new FinTech projects.
Along with business opportunities, residents benefit further from the vast amount of pristine and natural attractions, a calm lifestyle, low cost of living and one of the fastest internet speeds in Europe. Now is officially the best time to start a FinTech company in Latvia, take in all the benefits the environment has to offer, and take advantage of the fact that the country does not yet currently have a unicorn in its FinTech midst.
