Before Easter, I had the honor to be invited to the “Irish Fintech Goes East,” a webinar organized by Enterprise Ireland, the Government agency in Ireland responsible for supporting Irish businesses, including hundreds of fintechs.
During the webinar, some of the panelists from CEE presented insights and reports about their local fintech landscapes, with key numbers and the advantages of doing fintech in the respective markets.
So I thought about Romania’s competitive advantage on the European fintech stage. Unfortunately, I couldn’t find enough resources to share with the Irish interested parties, besides our Fintech Map, where you could find quite a small number of fintechs.
Then I asked myself what other countries are doing better so the fintech vertical flourishes with hundreds of startups.
I think I had at least three answers, but I hope to challenge my findings and add more reasons to stress the need and raise the debate to higher levels.
The state and government agencies are absent or don’t know how to sell Romania as a place to incorporate a fintech
A telltale sign of the state’s engagement in the sector is the lack of promoting websites like “Invest in…” or “How to do Fintech in…”, which are part of the strategies through which other countries are seducing investors or founders to incorporate their startups.
Building a vibrant startup landscape by leveraging marketing and brand strategies is not a short-term effort. However, the results will be seen in the economy through foreign direct investments (FDI) and more revenues to the state’s budget from the financial services.
For example, the Baltics have an excellent and organized infrastructure to promote investments in their economies.
Lithuania has the Invest Lithuania website, an insight-rich platform that answers investors’ inquires; Poland has a 72-page report on “How to do fintech,” while Estonia also has an “Invest in Estonia” website and the e-Estonia platform.
Few bankers decide to leave the corporate world and start fintechs in Romania
Although a finance background is not a must-have in fintech, the total number of startups offering financial services might be influenced by the low number of bankers that decide to take the leap of faith and start a fintech.
After some success stories of the Romanian startup scene, like the 40 billion IPO of UiPath or the CEE rising star Fintech OS that aims to become a unicorn, the future looks promising. Apart from the stories in prime time, the UiPaths of Romania could help others take more risks and venture into the startup world.
Leaving the cozy corporate job can bring anxiety, but also a high reward if the fintech reaches hundred of millions in valuation.
Fintechs in Romania are scarce due to regulation too!
I thought about not being so harsh on this point, but in the last months, some of the fintech founders I’ve met told me that being authorized in Romania by the National Bank is a tedious process, and it takes up to 1 year and costs ten of thousands of euros.
I know at least five fintechs either in the process of getting their TPP (third party providers) license or thinking of applying for AISP or PISP status.
This process is complex and quite a burden for young fintechs who have to validate their use cases and first get some tractions to raise money from the investors.
Looking at 9-12 months of ping-pong with the NBR, a 1,000-page file, and maybe 50k EUR in advisory fees and other legal costs is undoubtedly discouraging for startup founders.
These high set-up costs and the barriers to entry in the payment industry will lead wannabe entrepreneurs to e-commerce or retail businesses rather than the fintech space.
By contrast, Lithuania introduced in 2017 a new bank license called the Specialized Bank License, the so-called “light banking license“ to offer perfect conditions to incorporate a European bank at low costs.
By the way, the powerful tagline on Invest in Lithuania website is “The EU entry-point for your fintech.”