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As Brexit hits London finance, Lithuania wants its fintech
[VILNIUS, Lithuania] Prajit Nanu was in a hurry to find a European base to expand his fintech startup from Singapore. He reckoned it would be a year or more to get an e-money license in the UK or Germany. Then he stumbled upon a brochure touting a country that wasn't on his radar. Lithuania, a nation of 2.8 million people with no real pedigree in the technology side of banking and finance, was offering to get him up and running in three months. Now he's preparing to start his European operations in February.
"It seemed impossible, to be honest," said Mr Nanu, chief executive officer of Vertex Ventures-backed InstaReM, which provides cross-border payments services in more than 40 countries. But after consulting his lawyer and contacting Lithuanian officials, he went ahead. "People like us don't want to wait a long time for a license. Time to market is very important."
The Baltic state, an unwilling part of the Soviet Union until 1990, is positioning itself as the amenable backdoor to the European Union and euro region for developers of everything from payment networks to foreign-currency services and gaming firms.
Lithuania has been in the shadow of neighbouring Estonia when it comes to embracing all things tech, while Latvia next door has been plagued by a string of money-laundering scandals in recent years.
But with Brexit weighing on London, Europe's traditional finance hub, and Bitcoin taking off, the country is targeting a global fintech market that's attracted more than US$125 billion of investment since 2010.
As well as Mr Nanu's firm, currency and international payments app Revolut and money-transfer business Contis Group are among the 38 companies that have received or have bid for Lithuanian fintech licenses this year.
The central banks reckons the UK's plan to leave the EU has thrown up an opportunity to help foster a more competitive financial services industry in Lithuania.
"Now everyone is looking to have some share of the pie," central bank board member Marius Jurgilas said in an interview in Vilnius, the capital. "Some of the people are scavengers doing it just because they want their share. We have an intricate reason why we're doing it."
The fintech mission began about a year ago, with the central bank holding roadshows from Tokyo to London. In the past month, it's met investors in Singapore, Japan and China.
It offers a specialised banking license with the eurozone's lowest initial capital requirement, one million euros (S$1.59 million). That includes access to the Single Euro Payments Area, permitting electronic payments across the euro region. The UK's departure from the EU meanwhile has cast uncertainty over the "passporting" rights that let offices in the British capital provide services across the bloc.
London-based Revolut, which has raised more than US$86 million in venture capital, applied for a European banking license in Lithuania last month. Its Baltic head, Andrius Biceika, said that unlike in other countries, it was easy to reach the decision makers at the central bank.
"We met the people we needed to meet right from the beginning," he said. "We want to mitigate risks from the potential consequences of Brexit."
Mr Nanu said that as well as fast license issuance, his company has unearthed talented programmers at a lower cost than elsewhere in Europe. "There are many benefits of applying for a license in Lithuania," he said.