FinTech in Latvia : status quo, current developments, and challenges ahead

FinTech has been in the focus of discussion for quite some time. However, the market share of FinTech companies is still relatively small compared to that of more traditional financial services. The purpose of this paper is to analyse the status quo, current developments, and challenges ahead for the Latvian FinTech sector. We combine three analyses: a political and legal, economic, social, and technological environment (PEST) analysis; a survey among FinTech companies; and an analysis of the size and financial performance of FinTech companies during the last 10 years. We find that the current status of regulation is one of the main obstacles to FinTech development, because it does not sufficiently consider FinTech-specific aspects. Problems in attracting a skilled workforce and an environment that is not very supportive of new developments in finance are further challenges and might explain at least part of the growth and financial performance difficulties. A revision, modernization, and harmonization of regulation is essential to create a level playing field for all market participants: FinTech companies, traditional financial service providers, and those originally traditional players that are integrating FinTech solutions in their business model. Further efforts are also required to foster Latvia's attractiveness for a skilled workforce. We hope that this study helps increase the visibility of Latvian FinTech and contributes to the development of the new Latvian FinTech strategy.