The Baltic region – including Estonia, Latvia and Lithuania – is a burgeoning fintech hotspot at the forefront of digitalisation and developing technical infrastructure. In this week’s Spotlight, Lena Hackelöer, CEO and founder of Brite Payments explains why the region is important to the instant payments company.
Back in November, Brite Payments expanded its reach to offer full product coverage across the Baltic region, following the successful launch of its instant pay-ins solution in Estonia. The company now offers its instant pay-ins and pay-outs products in Estonia, Latvia and Lithuania.
The Fintech Times recently caught up Hackelöer to discuss the Baltics, the second-generation challenger’s 2023 plans and her thoughts on moving fintech forward in the next 12 months.
Lena, why has the Baltics been a focus for Brite Payments’ expansion?
Ever since Brite was launched in 2019, we’ve kept a close eye on the Baltics. Over that period, we’ve witnessed a significant growth in the adoption rates of digital payment solutions. We’ve also seen the area confirm its status as a true European tech and fintech hub, home to a number of unicorn businesses, including Skype who has created a legacy for itself in the ‘New Nordics’ tech scene.
The Baltic region is at the forefront of government-led digitisation and development of technical infrastructure. As a result, there’s already a high-level of comfort with digital channels and strong adoption of digital payments in the region. This makes the Baltics perfect for a company like Brite, as consumers are already familiar with adopting new digital technologies and primed to embrace convenient, account-to-account instant payments.
Additionally, there have traditionally been strong connections between Nordic and Baltic businesses – something that is essential as no single market in the region ranks as one of Europe’s largest. At Brite, we share the commonly held view that collaboration between businesses can help to drive scalability. That’s another reason why we’ve launched operations and products in the Baltics. It really did feel like the natural next step for us.
How is the adoption of digital payments in the Baltics, compared to some of the larger markets in Europe?
Convenience is the number one factor driving demand from consumers. Due to the high digital affinity of Baltic consumers, plus well-established digital national identification schemes, we can build highly convenient payment experiences that help drive adoption.
Whether you’re a merchant or a consumer, the benefits of instant payments – including the convenience factor – are clear to see. Primarily, these solutions mitigate delays between payment initiation, clearing and settlement, enabling funds to move more quickly from one point to another. It’s these benefits that seem to be driving consumer adoption. Now, with more online purchases being made, it’s good to know money can be processed instantly.
The adoption of these solutions in the Baltics is already quite high, and ahead of major Eurozone economies that still rely heavily on cash, most notably Germany. However, the region is behind neighboring Nordic countries, as well as the UK. In general though, Europe continues to be ‘leapfrogged’ by developing markets, such as Brazil and India, when it comes to the adoption of instant payments. This is largely on account of the entrenched nature of card payments across Europe.
Is there more that could be done to accelerate open banking-based payment innovation?
I’ve spoken in the past about how open banking, and more specifically open banking-based payments can be improved across Europe, and a lot of those points still stand today. We still see too many issues around API standardisation affecting the quality of open banking services. Similarly, it’s now time for the industry to move on from inequitable service-level agreements between those providing services, and legacy financial institutions.
These are areas that require action immediately. More broadly, I would like to see further efforts made to improve the reliability of access to the infrastructure required to complete payments. At the time of writing, outages and service downtimes are still too common and present a significant obstacle to further adoption of open banking-based services. Ultimately, this will need to be addressed as more people begin to rely on these systems.
Beyond the successful expansion in the Baltics, what have been some other highlights or milestones for Brite in 2022?
It’s been a really busy year at Brite, and we’re proud to say that we’ve reached many milestones over the past 12 months. Let’s start with the launch of our convenience-driven Single Sign product. You only need to look at the buzz this launch caused within our industry to get an idea of its impact. Single Sign enables customers to make payments from their bank accounts with only one authentication step.
We’re also proud of the quality of partnerships we’ve forged in 2022. A standout is our partnership with European payments goliath, SOFORT. In April, we joined forces with the company to launch a European Instant Payout partnership. The new partnership will see SOFORT’s comprehensive bank transfer product complemented by Brite Instant Payouts.
“We’ve entered challenging economic times, and unfortunately it looks like this will loom large over 2023. In the fintech sector, this will invariably slow down the speed of investment and it will get a lot harder to raise capital.”
Above all else though, we’re most excited about our growth this past year. In 2022, we’ve more than doubled our company headcount. Likewise, we’ve doubled the number of transactions that we process, and expect this growth to continue following our full Baltics launch. It’s been incredible to support this expansion by hiring numerous talented and influential people who bring a wealth of payments and fintech experience to the mix, which has been another big highlight this year.
What is coming up for Brite in 2023?
We’re looking to build on 2022 with another year of amazing growth, new products, and exciting partnerships. In addition to our continued regional expansion, we’re planning to further expand our product portfolio, with upcoming developments to be built on PSD2 APIs. At the same time, we’re continuing to build out some key functions within our business as the number of customers and users we serve keeps growing.
What are your fintech predictions for 2023?
We’ve entered challenging economic times, and unfortunately it looks like this will loom large over 2023. In the fintech sector, this will invariably slow down the speed of investment and it will get a lot harder to raise capital. Additionally, many investors will be more interested in companies that can demonstrate a clear path to profitability, which in some cases may come at the expense of innovation.
The economic downturn will have a broader impact on the payments sector. It’s highly likely that even those fintechs focused on payments that receive funding will have to reassess their growth plans.
If there is a general contraction of the economy, then merchants across many verticals will be scaling back and closely assessing their expenditure. On a more positive note for some fintechs, cost-effective payment solutions such as A2A payments fall squarely in this category, and can help alleviate merchant pain points whilst providing cost-savings at a crucial time.
How can we move fintech forward in 2023?
Fintechs, by definition, are subject to regulation, but this varies considerably depending on where they operate. As a result, there are competitive imbalances across Europe right now, with some markets subject to stricter regulation than others. This can impact how products are being built and their attractiveness across different markets. I’m not claiming that less regulation is needed – rather that levelling the playing field and having greater regulatory consistency would make market expansion easier. It would also allow European fintechs with strong offerings to scale.
Unification of regulation at the supranational level would help. Personally, I think it’s time for the European Union to start working to balance the playing field in this important area.
Additionally, PSD3 should start to take shape in 2023, and we will get an idea of how the revised directive may address some of the current issues. For example, will it mandate more uniformity between the APIs that banks use to support open banking solutions, which would ultimately improve customer experience. The recent EU proposal to mandate instant payments is also significant, and many fintechs – including Brite – will be watching closely how this develops.
Moving fintech forward in 2023 will also require a big drive to attract talented people into the sector. Fintech companies are competing for top talent and bringing in new people with fresh and exciting ideas is important to maintaining a thriving ecosystem. Fortunately, I believe that fintech is such a vibrant and fast-moving sector that we are well placed to attract talent into our ranks.
