How Fintech is Revolutionising Access to Credit in Eastern Europe with Expert Opinion from Taras Boyko

While the digital banking revolution struggles in the West, it’s time to look into the untapped potential of Eastern Europe’s fintech market. With a burgeoning economy and a young population hungry for credit, this region offers fertile ground for fintech innovation and growth. Taras Boyko, underscores the promising opportunities for investment and technological advancement in Eastern Europe’s financial sector and explains how fintech startups are reshaping the financial landscape in the region.

The Sofia Globe recently published an article exploring the dynamic world of Eastern Europe’s fintech market, where innovation thrives – unlike its Western counterpart where the staying power of digital banking leaves something to be desired. The big problem there is dwindling funding. Step forward the emerging economies in Eastern Europe offering fruitful ground for expansion. Young individuals with good credit have found it difficult to receive funds from traditional sources with excessive rates and barriers such as credit checks hindering their ability to obtain loans. But now, the fintech banks are filling that gap by providing the chance to broaden credit availability and so stimulate economic growth overall.

Struggles of Western Challenger Banks

At the heart of the West’s significant problems is a lack of investor confidence. What was once a promising newcomer to the financial landscape – a digital challenger bank revolution, no less – is encountering big problems. Despite initial excitement about the transformative potential of digital technology and challenger banks in general, the past three years have seen them running out of steam. For instance, in 2023, fintech funding in the UK, a hub for major fintech institutions, plummeted by 63%. 

You need to look no further than Metro Bank for a prime example of how things have gone so badly wrong. Last October it narrowly avoided collapse after sustained losses. Shares plunged by 30%. The bank was operating at the edges of its capital requirements – in other words, it couldn’t breathe. Other notable players in the sector, such as Kroo Bank, Monzo, and Atom Bank, have also reported substantial deficits. Amidst challenges like high operational costs, regulatory constraints, and entrenched competition from established giants, the viability of challenger banks in the West certainly appears uncertain.

On the flip side, the scenario in the rapidly developing Eastern European economies appears significantly advantageous for challenger banks. In this context, a combination of demand, expansion, and favorable conditions fosters an environment conducive to the success of digital challenger institutions.

The Promise of Eastern Europe

Eastern Europe’s banking industry has changed dramatically over the years, going from a market controlled by state-owned lenders to an environment of intense rivalry with a variety of financial institutions providing a broad range of banking services. The Vienna Institute for Economic Studies projects that in 2024, EU members will expand at an average rate of 2.5%, indicating that the region is enjoying faster growth. Although there are a lot of prospects for innovative financial services in this expanding region, there has been a lot of financial strain. The current success in the East hasn’t come overnight, either. According to McKinsey’s assessment, the adoption of digital solutions in banking has lagged behind Western counterparts. But all of that is changing.

The market dynamics today create an ideal environment for new fintech institutions to thrive. Challenger banks excel in places where banking friction is prevalent, and Eastern Europe’s demand for innovative financial solutions and underserved customer base creates a unique opportunity. By leveraging advanced digital technologies, fintech companies can offer alternative products and address the needs of those who have been sidestepped by conventional financial institutions. As a result, an increasing number of companies are venturing into this untapped market to bridge the existing gap and capture the potential for growth.

Taras Boyko – Embracing the Power of Fintech CEE

A significant portion of these advancements stems from foreign banks, which are introducing a wide array of innovative fintech products in the region. However, the true potential lies within small, agile, and innovative startups.

Despite a decline in fintech investment in the Western markets, Central and Eastern Europe continue to experience robust levels of investment. This trend presents a plethora of opportunities for entrepreneurs like Taras Boyko, the founder of BankBee, an investment company specializing in developing payment services for merchants.

He explains: “In the current market, Eastern Europe really is a land of opportunity. According to Statista, Eastern European digital fintech assets are expected to grow by 9.27% 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 in Eastern Europe brings much-needed innovation to the credit sector. With the adoption of the latest technologies and a small, agile business model, these startups are better positioned than traditional financial institutions to offer flexible credit options. Boyko sees the region as having the perfect combination of ingredients for growth. 

Taras Boyko adds: “Throughout my career, I’ve been passionate about finding exciting opportunities in emerging and untapped markets. 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 underserved 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 Innovators Line Up

Rising innovative startups throughout the region are securing funding and showing rapid growth, especially in payments and lending.

For instance, in 2022, Payhawk, a payment and expense solution, achieved a significant milestone by becoming Bulgaria’s inaugural unicorn, securing $100 million in Series B Funding. Similarly, Firms CreditFi is among the companies providing alternative financial solutions, including P2P crypto loans.

Wandoo, a fintech firm based in Latvia, has recently introduced Avinto, a novel credit line product that provides flexible credit services in Romania. Leveraging advanced machine learning technology, Avinto aims to provide quick and easy access to funds while maintaining responsible lending standards. It offers borrowers a more versatile and affordable borrowing option, where interest is applied solely to the amount utilized.

Another recent entrant into the arena is Romania’s Moldovan crowdfunding and investment platform Fagura, which employs advanced technology to invest in small businesses. Fagura has been actively backing initiatives in the green economy and specifically supporting businesses led by women, offering an appealing source of funding for promising startups that might face challenges in attracting investment from other sources.

The potential in Eastern Europe extends beyond the region itself. With fintech adoption now uneven between East and West, widespread emulation of industry leaders by all countries could invigorate the entire European fintech market.

Disclaimer: The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of the journal or its affiliated organizations. The journal does not endorse or guarantee the accuracy or completeness of the information presented in this article. Readers should use their own discretion and judgment when interpreting the contents of this article.