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Is Romania set to become CEE's fintech hub?

At first glance no; but take a closer look

08 October 2019

It is almost two years since the deadline for national transposition of EU's Second Payment Services Directive expired. It has yet to be implemented in Romania, although rapid steps are currently being taken towards that end, with the implementing law in its final adoption stages in the Romanian Parliament. But Romania has always been a late bloomer in many respects: a closer look might reveal the right ingredients are present for the country to become a new European fintech hub.

Earlier this year UiPath, a robotic process automation company founded in 2005 in Bucharest, Romania, made headlines across the world with the closing of its latest investment round, at a post-money valuation of $7 billion. It was a big deal – in all meanings of word, but was  this deal an exception or the dawn of a fintech era?

Romania's IT History

A little known fact is that the first International Mathematical Olympiad was held in Romania in 1959. Romania has hosted the Olympiad four more times since then, more than any other country. Indeed, Romanian universities continue to produce large numbers of highly trained IT specialists, making Romania a favoured IT outsourcing destination for many years now, with multinational companies setting up outsourcing and IT support centres there. It is therefore no surprise that in the last decade, the IT industry's contribution to Romania's GDP rose from practically zero to 6% in record time; by some estimates that number could rise to 7% in 2019 and to 10% in the next five years.

Maximising Romania Fintech Potential

In its Decision 33/2018 the Chamber of Deputies of the Romanian Parliament stressed that "fintech services exercise a broad impact on economy and society, including the labour market and on technical evolution". It also  expressed its "concern with respect to the level of mobilisation of financial capital to finance startup and small and medium enterprises, considering their place between the practices of credit institutions that target large companies and those that target individual consumers". As a result itrecommended "a licensing and regulation framework as simple as possible, with a view to maximise FinTech's potential to fill this empty space in the Single Market".

Recently, with a view to supporting companies developing innovative solutions in the area of payment and financial services, the National Bank of Romania launched FinTech Innovation Hub, intended to ensure a direct interaction with the FinTech sector and provide an institutional framework for presenting innovative projects. Similarly, the Romanian capital markets regulator, the Financial Supervisory Authority launched its Fintech Hub with a view to create an institutional framework for dialogue with fintech firms developing new business models, applications, processes or products with impact on the provision of financial services.

The Romanian Fintech Map

So why is it then that Romanian companies are all but absent from most infographics outlining the European fintech ecosystem? Is it because there are no Romanian companies active in the fintech space or because there is no relevant data available? To answer that question, and with national transposition of the Second Payment Services Directive looming, a group of Romanian journalists, investors and consultants set out earlier this year under the coordination of Future Banking to create the first Romanian fintech map.

The final report was published on 1 October 2019 and reveals 46 startups and scaleups founded by Romanian entrepreneurs, 38 of which are headquartered in Romania (the majority in the cities of Bucharest and Cluj-Napoca); from a vertical perspective, the report includes 17 payments and wallets companies, 11 financial infrastructure, 7 personal and business finance, 5 investments and wealth management, 4 lending and crowdfunding, 2 insurtech companies and 12 tech companies developing solutions enabling financial services. From a stage perspective most companies are in seed stage (16), 14 companies are in pre-seed stage, 14 companies are in growth stage and there are 2 scale-ups.

To access the full report, please see the Future Banking website.