Fintech is one of the most interesting topics, also for Germany. Old and dusted banking services and innovation fatigue in the banking sector, plus the news about new services in the or innitiated by people from the nordic states like Finland, Lithuania and Estonia, incl. Holvi Payment Services, Transferwise and others lead to the idea to get an insight from the perspective of an organization that actually produces new banking services and see what’s behind it.
We have interview Valdas Šimas, CEO of Alna Software, a specialized IT and business solution provider in Lithuania with more than 30 years experiences in the field.
1) Valdas, we have been talking on the phone about Fintech, which is also for our market in Germany a very interesting topic. Could you give us a short introduction to Fintech in Lithuania?
I am glad to say that in 2018, the Lithuanian government approved an action plan that aims at fostering the development of the FinTech sector. Among all major newly presented benefits, they will be further improving the legal environment, increasing demand in FinTech products and services, as well as it focuses in particular on managing risks. With the new regulations, AML/TF risks will now get more focus in order to increase consumer protection.
What’s more interesting and, perhaps, motivating is the new progressive regulation for financial institutions. Lithuania is currently offering the fastest pan-European Fintech licence in the EU. It only takes 3 months to get it, which, you will probably agree, is a tremendous leap forward for financial technology startups and even foreign direct investments. We now also be able to get a “lite” banking licence for the only €1M, which is 5 times lower than it would usually be as for traditional banking.
Lithuanian central bank is now happy to allow a sort of a Sandbox experience for newly formed startups by allowing them to test the innovation for one year. It means that this new company will be supervised by our regulators for one year to help them grow and facilitate their market penetration the right way. Virtually any newly licensed financial institution can now access SEPA through API provided by Bank of Lithuania, issue IBANs and perform other banking operations this way. To me, this is something never seen in any other jurisdiction before and is very promising indeed.
What is also appealing is that Lithuania will use this same approach to blockchain-based startups. I think it is worth mentioning since we observe the rapid global adoption of this technology.
These and a couple of other important statements of a supportive legal and regulatory environment in Lithuania caught the attention of such world-known companies as Google, Revolut, TransferGo and InstaReM.
According to the latest statistics, there are more than 200 FinTech companies operating in Lithuania. Over the year, the number of those working in this sector grew by 500%. Innovation, including the field of finance, is one of the drivers of the economy, creating the largest added value and balances the impact of legacy banking (mainly Nordic banks SEB, Swedbank, Danske).
2) So Lithuania seems to be a leading market in Fintech in Europe? Why, when the big financial centres are in London, Frankfurt and Switzerland?
As much as I’d like to think so, I would probably say that Lithuania is more of a leader in the overall growth of the FinTech industry rather than being a direct competitor to London or Zurich. All these favourable conditions for setting up a FinTech ecosystem in Lithuania are created by measures that are being implemented in close cooperation with public sector bodies responsible for the development of the financial sector. If we focus on delivering all these promises along with what’s already been done in the long run, I believe we have a good chance on serious success.
Not many countries are flexible enough to do what we do, this is a game-changing competitive advantage that I see for Lithuania. Let’s take another example: the opportunity for e-licensing will be offered this year and companies will be able to prepare all documents and procedures electronically. It means, even if I am in Germany, I can simply upload all the necessary documents in order to start an actual bank in Lithuania. If that doesn’t sound incredible, what does, right?
Great conditions are being created for FinTech companies developing innovative financial products in Lithuania and to test them. All their initiatives boost the attractiveness as a new Fintech destination and I truly believe that one day Lithuania will become a leading player within other destinations.
3) Lithuania is one of the emerging destinations for IT and business process services in Eastern Europe. Where do you think Lithuania fits in between markets like Poland, Romania, Hungary and Bulgaria?
Like I said before, Lithuania – a country of just 3 million, is quick to adapt, focusing its business environment to meet the needs of specific industries that aim to create huge added value to the whole regional economy. Our highly educated pool of talents streamlined its regulatory framework to become a leading destination for international FinTechs already. Our short business establishment time and low corporate taxes are just a few of the benefits that characterize this business-friendly environment.
As we know, BREXIT is about to happen and we can feel it. And we feel not the way the British government might do, but as for highly increased interest in pulling financial business out of UK and re-establishing them here in Lithuania. And I’m not only speaking about our expats but general, highly sophisticated businesses from “The City”.
To be a small country that can punch above its weight, focusing in on one industry you are especially strong at, is essential. In Lithuania, that industry is FinTech – a rapidly developing field on the intersection of traditional finance and cutting-edge information technology. If we compare it to other global FinTech hubs, Lithuania possesses one highly distinctive feature: a shared strategic outlook found at every level of the ecosystem. From a regulator often named the most progressive in the EU, to a government that understands the value of adapting fast, through to industry associations building a close-knit community, there is a shared commitment to making FinTech work. Our country found its way and in no time will be leading the region.
4) From your experiences working with the banking sector, which are the biggest hurdles traditional banks have to take when digitizing their business?
First of all, digital banking has been around for years. At the matter of fact, many experts call it the cure for the shattered banking industry to which I must agree.
As we all know, traditional banks are not known for being fast movers. Customers are still waiting for this new banking experience, touted as a revolutionary transformation that will bring many new features, including anytime and anywhere banking, ultra-fast response times, and omnipresent advisors. Newly establishing application based mobile banking solutions highly facilitate the transformation and is something of a new banking era as such.
However, one of the main hurdles we notice are related to decision-making and execution. Heavy governance structures around IT-related decisions and shift of the traditional banking model, is slowing the digital journey. Even decisions are being made, the execution stuck due to inefficient internal capabilities, lack of talents and missing agile practices and this dark period will only get darker in the upcoming future. All highly ambitious talents will strive to get into the fast-moving, the competitive and rewarding digital banking industry.
5) With years of experience with CSC, DXC Technologies in different roles and now working with Alna, you have a lot of success stories in onboarding clients. Could you give us a few tips on what to pay special attention to in order to start successfully into new cooperation?
From my personal point of view, companies that want to succeed in today’s highly competitive marketplace require an increasing level of sophistication, a thorough familiarity with state-of-the-art technology, and a spirit of innovation to deliver creative solutions right when the industry needs it.
When clients enter into information technology (IT) outsourcing engagement with Alna, we deliver creative solutions that keep them one step ahead in the competition. It is important to help them to realize several important benefits to switching on that motivation and eagerness to go along with us.
Like I mentioned before, it is essential for any country and the company to maintain the critical level of talented people in operations. They are key to innovation and long-term success. Talents will not only innovate in terms of inventing new services or products, but they will also cut the operation costs the way no one thought of before. They will also create new pricing, see opportunities in additional segments that were not penetrated before.
This is how we work, this is how I like to work. There is no time to waste, all projects need to get started as soon as possible to keep the enthusiasm up for everyone. This sort of approach people teams and increase productivity in all team members.
The company I manage is highly experienced in providing IT outsourcing services. It has all started more than 15 years ago from scratch. Currently, Alna is a midsize Lithuania based IT company with a number of global clients that we lead through their IT outsourcing journey. Having an experienced, flexible, result-orientated team onboard, we have managed to successfully complete more than 20 major outsourcing projects (capability and services relocation to Lithuania). Our methodology has been developed over the years and includes main areas, which have to be covered during the near-shoring journey. This is the baseline for it:
Applications – creation of knowledge base of services (if exists; otherwise subject to be developed), systems, architecture and decisions remain within client responsibility.
Team formation – team composition design, team building and onboarding, retention and skill updating.
Process – capturing as-is and to-be processes where we do support the client with process definition, improvements (if needed), metric reporting, process-governance collaboration.
Near-shoreability – near-shoreability parameters design, decisions on “what” and “when” to nearshore, nearshore operations, people management.
Project Management – addressing risk mitigation, issues management, communication, planning, coordination with business and functional leaders, stakeholder management and de-risking.
My personal experience with German business partners allows pursuing for more ventures and projects to be accomplished alongside with focus on Lithuanian benefits, talents and your desire for measurable innovation.