Fintech hubs are easy to market - hard to govern

Press release: Many countries position themselves as fintech hubs. Far fewer build the governance needed once fintech becomes economically significant and operationally complex.

As Europe enters a new regulatory phase shaped by MiCA, stricter AML expectations, and closer scrutiny of non-bank financial actors, fintech policy is increasingly judged on execution. Supervisory capacity, risk management, and system integration now determine credibility. Latvia offers a useful case study.

Fintech as an operating layer of the economy

Across Europe, fintech has moved from a niche innovation space to a structurally important part of the financial system. Since the mid-2010s — particularly after 2016 — more fintech startups have been launched in the EU than in the entire fifteen years before, signaling a sector that is scaling rapidly.

As fintech matures at the European level, the key question is no longer whether the sector is growing, but how that growth is measured, governed, and absorbed at the national level. According to Fintech Pulse 2025, Latvia’s annual fintech sector assessment published by the Fintech Latvia Association together with regulators and industry, the sector has now reached economic and institutional scale.

Latvia is home to 127 fintech companies employing more than 3,600 people, generating €369 million in annual turnover, and contributing over €91 million in taxes each year, according to data from the Fintech Observatory. More than 90 of these companies are of Latvian origin, highlighting a strong concentration of locally sourced talent and an ecosystem built with export and scaling in mind from day one. For a country of Latvia’s size, this represents a high fintech density per capita, positioning Latvia among the most concentrated fintech ecosystems in the region and underscoring the sector’s growing strategic importance to the national economy.

Fintech now operates directly within payment systems and cross-border financial flows. At this level, consistent supervision and regulatory quality are no longer optional - they are structural requirements.

Credibility under regulatory scrutiny

Fintech Pulse frames Latvia’s fintech strategy around one central concept: credibility. That positioning is reinforced by Latvia becoming the first jurisdiction assessed under the updated FATF/MONEYVAL evaluation methodology.

The revised framework shifts focus from formal compliance to supervisory effectiveness in practice - how risk-based supervision actually works, how innovative business models are assessed, and how licensing, financial intelligence, and ongoing oversight function as a single system.

Latvia is among the first fintech-active countries evaluated under these more demanding standards. As a result, it offers an early signal of what regulators across Europe are likely to expect next, particularly as fintech moves from experimentation into core financial infrastructure. Within the EU framework, this required deliberate and sometimes creative choices: leveraging a highly skilled workforce and advanced digitalisation to remain competitive, while deliberately avoiding regulatory grey zones - a balance that took years to build into Latvia’s supervisory system.

A structured approach to market entry

The Fintech Pulse outlines how Latvia’s regulator combines supervisory tools with hands-on engagement to support fintech companies entering the market in a structured way. These include early pre-licensing engagement across multiple license types - from payment and electronic money institutions to crypto-asset firms - supported by instruments such as the Innovation Centre, the Regulatory Sandbox, and direct access to core payment infrastructure via Latvijas Banka. A detailed overview of how these tools function together is set out in the Pulse.

In 2025, Latvia added eight newly licensed fintech companies, including three crowdfunding firms, three payment companies, and two entities licensed under MiCA (BlockBen and Nexdesk). According to Invest in Latvia, as of January 2026, five additional MiCA licence applications have been formally submitted, with 12 companies currently in pre-licensing and 100+ international companies exploring Latvia as their EU base.

These figures illustrate a pipeline-based approach to authorisation, where supervisory engagement begins well before formal licensing.

Governance that supports scale

Latvia supports fintech scale through visibility and execution capacity by creating tools such as shared factual baseline, the Fintech Observatory. The Fintech Observatory is a public, methodology-driven mapping of fintech companies active in Latvia - designed to make the sector transparent and inspectable for regulators, policymakers, and the industry itself. It provides a common data layer on who operates locally, under which regulatory perimeter, and with what economic footprint, enabling both more informed policy decisions and more targeted, risk-based supervision. This tool also allows the fintech sector to represent itself more coherently in dialogue with regulators and policymakers, reducing fragmentation and information asymmetry.

This governance layer is complemented by fintech-specific education and talent programmes developed jointly by universities, industry, and regulators, strengthening execution capacity on both sides of supervision - both within companies and within public institutions.

Additionally, Latvia’s Fintech Sector Development Strategy 2025–2027 sets out clear, measurable targets:

●      30% growth in the number of fintech companies,

●      15% growth in fintech-related investment, and

●      18% growth in sector employment.

Crucially, these ambitions are explicitly aligned with regulatory capacity and supervisory credibility, rather than pursued in isolation.

At the most recent Fintech Breakfast discussion (December, 2025), Mārtiņš Kazāks, Governor of the Bank of Latvia, noted that while the strategy provides a solid foundation, its targets may not yet be ambitious enough—a statement that sends a strong signal from the supervisory authority about confidence in the sector’s potential and institutional readiness to support faster growth.

From the industry side, Tīna Lūse, Managing Director of the Fintech Latvia Association, emphasized that sustaining a competitive fintech hub requires a deliberate mindset shift. The goal, she noted, is to position Latvia as a jurisdiction where innovation can be developed most efficiently and predictably, echoing approaches taken by innovation-focused regulators in the UK and Singapore. Importantly, recent progress indicates that Latvian regulators are actively working toward this mindset shift—moving beyond formal compliance to enabling responsible innovation at scale.

Together, these elements reinforce Latvia’s competitiveness as a fintech jurisdiction. Predictable licensing, early supervisory engagement, and consistent standards reduce execution risk, support responsible scaling, and protect market integrity as fintech becomes part of Europe’s core financial infrastructure.