Lithuanian fintechs use their know-how to aid economy hindered by Covid-19

Source: Lithuani Fintech

Lithuania was one of the first countries in Europe to declare a State of Emergency back in February, before the first case was even reported.

Although it wasn’t struck as heavily by the COVID-19 pandemic as other European nations, the Baltic country has had a huge part of its economy paralized. Since March 16, Lithuania has been under lockdown, with most non-essential businesses either switching to remote operations or temporarily shutting down. In these testing times, the country’s Fintech sector is going out of their way to help mitigate the crisis.

Coders hack the crisis, help small businesses go digital

According to a report by Google, quarantine measures have led to a 72% drop in visits to retail and recreation locations, more than in other Baltic countries. When it comes to SMEs, many are trying to expand their digital presence, with most physical storefronts closed during the quarantine. A government-backed initiative There is No Quarantine on the Internet has already united more than 700 SMEs on a single online marketplace. Interestingly, for 70% of the participating businesses, this is their first foray into e-commerce. The initiative itself was among many developed during the Hack the Crisis hackathon in mid-March. The event gathered some 1300 participants tackling challenges like infection tracking, remote education and business digitalization.

“This hackathon was so much different from other events of such type, as the challenges the teams were dealing with are so pressing. It is great to see that some of the ideas passed the test and are already online. These include School at Home, a platform implemented by Inventi that lets people donate unused computers to kids in need. So far, more than 1,000 laptops and other devices were collected,” says Paulius Tarbūnas, head of Fintech Lithuania, an organization uniting Ondato, Inventi, Etronika, Metasite and other Fintechs that took part in Hack the Crisis.

After the results were announced, Metasite, a company that has been engineering platforms for the financial industry since 1997, took several prizes for its Sherlock @home pilot. The idea is to unify communication between medical staff in the National Public Health Center (NVSC) and registered high-risk people under quarantine.

Software developer NFQ, another member of Fintech Lithuania, launched a platform for all Lithuanians stuck abroad and wanting to get back home during the lockdown. Horion Digital, a software developer with a focus on Fintech, presented an app for people to assess their likelihood of contact with COVID-19 carriers.

Ondato, a Lithuanian developer of remote KYC tools, also took place in the hackathon. The company used their latest Live Video Identity Identification solution to build an MVP version of a service that enables patients to register for a visit or place an urgent call with their doctor.

A different kind of fundraiser
As in other parts of the world, it is the healthcare workers that are the most exposed to COVID-19 risks in Lithuania. Solidarity with medical professionals inspired local tech entrepreneurs to use their fundraising skills for a different cause - buying supplies. A group of IT and Fintech - founders, including those of Tesonet, CoinGate, Inventi and others raised €300,000 in a single day. Another fundraiser led by Laisvės TV, the country’s first Internet TV station, has collected north of €2 million to this day. The allocation of funds is closely monitored, with the vast majority being spent on the much-needed and hard-to-get medical equipment. The first batch of 300 thousand medical masks reached Vilnius by train from China on April 4. Vilnius-based Seven Seas Finance, a cross-border payments provider, helped with facilitating payments to suppliers in China.

“A crisis like this shows the true nature of Lithuanian entrepreneurs. The way they are utilizing the know-how accumulated in more peaceful times for the benefit of the medical staff and trouble-struck businesses is really astonishing. And having an agile public sector - one that is quick to incorporate digital solutions, at times in 24 hours, Lithuania makes sure initiatives don’t go to waste,” says Jekaterina Rojaka, Vice-Minister of the Economy and Innovation of the Republic of Lithuania.

Governmental support for local SME businesses
The government has thrown a lifeline to local businesses with €1 billion in financial support. The money allocated via the state-run Invega fund will be used to provide loan holidays, loan guarantees and additional interest-free loans.

Back in 2018, Invega launched Avietė, a P2P platform where private investors and the government can jointly finance business loans. Lendees of Avietė have the opportunity to reclaim up to 95% of paid interest. Due to COVID-19, Avietė raised the limit for state-issued loans from €10,000 to €25,000. And if under normal conditions the state-provided part of a loan could not exceed 40%, now Avietė funds can finance up to 100%. Currently, users of Finbee - the country’s pioneering P2P lending platform - can take part in the Avietė programme, with other companies likely to join.

Next-gen solutions for difficult times
Moving money around during a crisis might be difficult, but a number of Lithuanian Fintechs are offering pro bono solutions. NEO Finance has waived service fees of its Neopay online payment collection platform to new clients, in order to “facilitate swift conversion towards online payments”. The company also pledged to provide free services to charities, NGOs and media companies in the Baltics until the end of 2020. Another company enabling cross-border B2B payments - ArcaPay - offers free international transactions for the medical sector and business affected by the quarantine measures.

Multiple other companies working in Fintech and other tech segments were quick to offer their solutions to the Lithuanian public and private sectors. InformDebtor - a platform facilitating debt collection across borders - is providing debt auctions and access to some of their services - for free to all Lithuanian businesses in financial difficulty. Dokobit - the largest e-signature provider in the Baltics - announced providing their services free of charge until April 30.

“In the last couple of years, the Lithuanian Fintech scene has evolved into a true community, with frequent events, gatherings and joint projects. This crisis shows the strength and potential this community has. I do not doubt that, by helping others, many of these companies will come out of the quarantine even stronger,” says Šarūnė Smalakytė, Head of Rockit, a Vilnius-based Fintech hub.

According to a study by Invest Lithuania and Rockit Vilnius, the number of companies operating in the sector grew by 24% in 2019, with a total of 210 enterprises. And in terms of the number of licensed Fintech companies (i.e. those operating under an Electronic Money, Payment Institution, Specialised Banking or P2P Lending license), Lithuania comes first in the EU. According to the EUCLID Register of the European Banking Authority, Lithuania has 35 licensed Payment Institutions and 62 Electronic Money Institutions. Lithuania has also issued 5 Specialised Banking licenses that allow neobanks to provide basic banking services like issuing credits and taking deposits.

Comments: (1)

Mark Boyd
Mark Boyd - Platformable - Barcelona 15 April, 2020, 16:49Be the first to give this comment the thumbs up 0 likes

It's not surprising that Lithuania is leading in Europe. While PSD2 has aimed to open the doors to banking services and make it possible for new fintech players to enter the market, in reality there are no mandated European API standards so fintech end up having to build integrations for individual banks or groups of banks. (There are some standards emerging but no requirement for any one bank to use them so fintechs can't essily scale in this environment.) The Bank of Lithuania has avoided this fragmentation. They specifically sought to extend PSD2 when regulating it in their country, using it as an opportunity to set goals to become a fintech hub for Europe. They set up a Payments Council working group to bring together banks, fintech and consumers to encourage collaboration and take advantage of the open banking opportunities. Already that is paying off and has helped their fintech contribute to COVID-19 responses. Great to see.