Taras Boyko: Eastern Europe fintech’s market is full of promise

While the digital challenger bank revolution has somewhat faltered in the West, emerging economies in Eastern Europe provide a fertile ground for growth. With fast-growing economies and young credit-worthy people struggling to access credit from conventional sources, fintech banks have an outstanding opportunity to expand access to credit and kickstart growth.

The promise of challenger banks

The emergence of digital technology and challenger banks was hailed as a transformative moment in the West. However, after plenty of hype, the new wave finds itself somewhat in the much in the doldrums. In 2023 fintech funding in the UK, home to some of the world’s biggest fintech institutions fell 63 per cent.

Last year one of the leading challenger banks, Metro Bank, was rescued at the last moment after running losses for years. Others in this space, such as Kroo Bank, Monzo and Atom Bank have all reported heavy losses with only Starling Bank bucking the trend announcing a six-fold increase in profits in 2023.

However, while challenger banks face a combined challenge of high costs, stricter monetary policy, and embedded established giants, things look very different in the fast-emerging economies of Eastern Europe.

Here you have a heady concoction of demand, growth, and opportunity in which the digital challengers can thrive.

Eastern promise

The transformation of banking in Eastern Europe has been nothing short of remarkable. In a few decades, the region has gone from a market dominated by single state-owned lenders to a thriving, and competitive landscape marked by diverse financial institutions offering a range of banking services.

Growth is accelerating. According to the Vienna Institute for Economic Studies, EU members in the region are expected to grow at an average of 2.5 per cent in 2024.

That growth creates opportunities with customers looking for innovative financial services. However, this is also a region experiencing considerable financial friction, with many credit-worthy people finding it difficult to access credit. Costs of credit remain high, particularly for young people, while the high cost of credit checks adds to the barriers.

Penetration of digital technology in banking across the region is also lagging behind the West according to a survey from McKinsey.

All of which should be good news for new fintech financial institutions. Ultimately, challenger banks thrive in places experiencing banking friction. In an environment in which many people can’t access suitable credit products, fintech technologies have an important role to play. Advanced digital financial products can offer new, innovative, features that offer alternative products and serve customers who had hitherto been overlooked. The gap in the market is there, and a growing number of enterprises are looking to fill it.

Taras Boyko – ‘Eastern Europe – Land of opportunity’

Much of this comes from foreign banks who are offering an increasingly diverse range of innovative fintech products in the region. However, it is with small, agile and innovative startups where the real opportunity lies.

While fintech investment is faltering in the West, levels have remained strong in Central and Eastern Europe. For entrepreneurs such as Taras Boyko, this opens up a host of opportunities.

“In the current market, Eastern Europe really is a land of opportunity,” he explains. “According to Statista Eastern European digital fintech assets are expected to grow by 9.27 per cent up to 2028. As an investor you’re always looking for markets with space to grow and that’s certainly the case here.”

The growth of fintech is bringing much-needed innovation to the credit sector in the region. Using the latest technologies and with a small, agile business model, they are much better placed than conventional financial institutions to offer flexible credit options.

For Taras Boyko, the region has the perfect combination of ingredients for growth.

“Throughout my career, I’ve been passionate about finding exciting opportunities in emerging and untapped markets,” he adds. “At a time when fintech companies in developed markets are struggling to grow, Eastern Europe is full of promise. Growth combined with a tech-savvy, credit-worthy but under-served customer base means there is high demand for innovative financial solutions that offer affordable, responsible access to credit. The emergence of these firms will also be vital in further accelerating growth across the region.”

Fintech pioneers

Across the region innovative startups have been attracting finance and demonstrating rapid growth across a range of industries, especially in the payments and credit sectors.

For example, in 2022 payment and expense solution Payhawk became Bulgaria’s first-ever unicorn when it raised $100million in Series B Funding. Firms such as CreditFi, meanwhile, offer alternative finance options with P2P crypto loans.

Latvia-based fintech company Wandoo recently launched a new credit line product, Avinto, offering flexible credit services in Romania. Using advanced machine learning capabilities, it aims to deliver fast and simple access to money while still following responsible lending practices. It provides customers with a more flexible, yet affordable way to borrow money giving borrowers access to a pre-approved limit with interest only being charged on the amount drawn down. It’s a great feature for customers who want to control interests by not taking the full amount of a loan in one lump sum.

Another fintech company recently launched in Romania, is Moldovan crowdfunding and investment platform Fagura which uses cutting-edge technology to invest in small enterprises. It has been particularly active in supporting green economy projects and businesses led by women and provides an attractive source of financing for promising startups that might struggle to attract investment from elsewhere. Female-led enterprises, for example, have historically struggled to access venture capital and financing. By removing such barriers, such pioneers can play an important role in accelerating financial inclusion and economic growth.

Eastern Europe’s opportunity is also one for Europe as a whole. With financial technology adoption still divided between East and West, the prospect of all countries starting to emulate the performance of the market leaders, could give the European fintech market the shot in the arm it very much needs.

(Image: Monito – Money Transfer Comparison)