LPB Bank: Fintech industry in Latvia has great potential but requires decisive action
The fintech industry in Latvia has huge opportunities ahead – this was one of the insights at a recent forum held by the Financial and Capital Markets Commission (FCMC) and the Investment and Development Agency of Latvia (LIAA), with LPB Bank as one of the participants. Staņislavs Siņakovičs, head of the sales and regional development department at LPB Bank, makes his comments.
Staņislav’s Siņakovičs
“We are pleased that our regulator has teamed up with the LIAA to hold an event like this – it is a positive signal for the market and potential investors who are still considering entry and licensing in Latvia, and is particularly useful for businesses that lack information about the progress our country has made.Fintech development will continue to be a priority in the coming years, participants at the forum have mentioned their plans for next year to implement cryptocurrency licensing – a major topic of discussion worldwide.
Siņakovičs noted.
Many companies shared their experiences at the forum, and the discussions revolved around several burning questions in the field: what Latvia has achieved in FinTech so far and where it should focus its efforts next; the role of government, regulation and funding sources in the development of FinTech; innovative technology in the financial industry, and a number of other important topics. Many recognized the significant potential and advantages that Latvia has for FinTech development.
A collection of renowned European players and startups
The first FinTech forum brought together several industry leaders and newcomers. A number of them were companies with ties to Latvia and with headquarters throughout Europe (including the UK, Estonia and Lithuania) that have accumulated considerable experience in the field.
“We hope that this trend, combined with the active involvement of FCMC’s Financial Innovation Department, will encourage entrepreneurs to consider our country more closely,”
Siņakovičs added.
“The entrepreneurs gathered at the FinTech event expressed great interest in regulating Markets in Crypto-Assets (MiCA). Participants admitted that supervision and licensing of crypto market players is necessary, and a number of states already have these in place. Currently, Latvia does not , but bringing greater organization to the market is necessary to develop the FinTech industry – including cryptocurrency exchanges, exchanges and market participants. Now is a good time for Latvian FinTech regulators to consider experiences of other countries so far. As we do this, we should we should not miss the opportunity to promote a competitive market instead of introducing excessive restrictions. Everyone must understand clearly what participation in this market entails. Then each player can feel safe, and the attitude of the business to the industry will be different. Currently the risk level is still high, and precise knowledge is necessary for risk management and effective cooperation with crypto asset companies r. We hope and expect that Latvia will introduce regulations on crypto assets in the near future.”
commented Siņakovičs on future developments.
Investments in FinTech exceed USD 132 billion
“With FinTech on the rise globally, the amount of investment in the industry was over 132 billion US dollars in 2021, according to “CBS Insights,”
Siņakovičs emphasized that the analysis company has published data on the 250 most promising companies in the field.
“The 250 Best FinTech Startups and Well-Funded Unicorns [breakthrough successes] has attracted around $74 billion worldwide since 2016, across nearly 1,200 financing deals.”
“Latvian specialists have also gained experience, and LPB Bank has for a long time claimed that this is a high-priority field in the financial markets, and invests significant resources and technologies in the development of new services, as well as in the acquisition and dissemination of knowledge,”
Siņakovičs observed.
“For every event like this that takes place, both the country and the private sector will benefit – through information exchange as well as capital origination. We are open to participation and are happy to present our experiences at forums held by LIAA and FKTK, as well as other industry events. Internationally, Latvian FinTech capabilities are not widely known, although we feel the support of the state through holding such events. In the same way, competition is also increasing in Latvia. LPB Bank currently has a management position.
Informing the industry is one of our main goals. We recently attended Money20/20 in Amsterdam – the most prominent financial industry event in Europe – and attracted interest from public bodies for joint participation in the future.
Siņakovičs said.
Representatives of LPB Bank at this pan-European forum saw regulatory institutions taking similar approaches in Estonia and Lithuania with their respective industry players.
“This would be both engaging and very useful – supervisory bodies and the LIAA could inform European companies about the types of licenses and pathways to secure them, achievements in Latvia so far and plans for the foreseeable future,”
Siņakovičs added.
Many FinTech services in development and testing
“Speaking of trends, I’d like to point out that some of the services I’m talking about are in the development, testing and planning stages. Some of them are already available as part of our pilot projects,” Siņakovičs explained.
LPB Bank focuses on crowdfunding, Open Banking and virtual IBANs – a way for a financial institution to generate virtual IBANs for its customers as unique payment details for their incoming and outgoing transfers.
“A virtual IBAN is a sub-account in a current bank account. The difference is that a virtual IBAN points to another physical account. A vIBAN can be linked to a single account, which is useful for splitting cash flows. Virtual IBANs will be useful for companies that receive payments for various services and require additional details (e.g. agreement number, month, etc.) It is used with trading platforms, crowdfunding platforms and cryptocurrency traders with large customer bases, enabling them to quickly and easily to group different transfers, compared to having a single account with one account number for all incoming payments. We are currently testing this service and its attractiveness for different fields.”
Siņakovičs said about new developments in the bank.
LPB Bank researches industry needs and challenges
“With the rapid development in FinTech services, the bank needs to understand what is required of the participants in this sector; the bank must know their goals and challenges. Customers are looking for a so-called “support bank” that they can trust to protect their and their customers’ funds in secure, segregated accounts. The Open Banking payment initiation functionality with access to SEPA instant payments is very similar to the payment card purchasing service. Many merchants already support it as a payment method. Online stores in Latvia and abroad accept card and bank transfer payments and offer ready-made payment orders for customers’ banks, which allow confirmation via Smart-ID or another way of client authentication. We are currently reviewing this service.”
Siņakovičs says about current plans.
Despite a wide variety of offerings within the financial sector, a few financial institutions offer one-stop support in a Banking as a Service (BaaS) format. With LPB Bank, a FinTech company can connect to European payment systems for regular SEPA, SEPA Instant and TARGET transfers. Integration costs are significantly reduced for customers who choose LPB Bank, and infrastructure maintenance requires fewer human resources and capital expenditure.
On the other hand, companies that choose multiple service providers incur more significant financial and labor overhead for commercial solution review, coordination, testing, implementation and support. In most cases, technical integration takes more IT resources and time – both for the supplier and the customer.
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