At first, saying so might feel a bit surprising, random even. Sure, there are some great success stories like Prezi, Ustream, LogMeIn coming from there, but calling the area the next big fintech market – maybe a bit too much. Except when you dig deeper you can see that it has many similarities with the current fintech leaders; in e.g. consumer mentality and environment, regulations, and so on. The potential is there.
We are doing an accelerator with one major bank there, OTP Bank, with 14,5 million customers and presence in 9 countries, including leading position in Hungary. Because of it, I have gotten the chance of digging deeper into the Central and East European market and especially Hungarian banking and fintech sector.
Here are some of the reasons that I am looking forward to doing the accelerator there and following the local fintech scene.
First of all the GDP of East European countries is growing fast. Better than fast when compared to other European countries who drag behind. In fact, most CEE economies grew much faster than Western European ones. If I was your average clickbait journalist I would already declare ”The glory days of Western Europe are over. Central & Eastern Europe are taking over!” and case closed. While it is too soon to know what the future holds, something interesting is definitely happening there.
But considering fintech and banking, what I find the most interesting is the conflict in how the consumers and even banks are calling for new innovations, but that at the same time there really isn’t that much of supply, innovators creating those innovations. Let’s dig deeper.
Consumers are calling for banking innovations
Like in China and India, in some parts the usage of banking services seems to be a bit behind also in CEE. For example, cash is still the leading payment method in many if not most countries of the region.
But at the same time, people in most countries of the region have high interest and even demand new technologies. And adoption of new payment methods like contactless and mobile payment are growing fast, in some cases even very fast. The consumers are increasingly aware of what kind of possibilities fintech could bring them. And they will not just passively wait for them, but may even start demanding them. That’s a much better setting for fintech than in many other markets.
Part of China and India’s success was being able to serve the previously under- and completely unbanked population. They jumped from not even having a bank account to using the latest fintech innovations. Something similar could also be possible in the CEE region. And that is a whole new kind of demand to be filled.
…but the current supply of innovations isn’t enough
But at the same time, there is a lack of innovators, the ones that actually create those innovations and bring them to the users. The demand and supply don’t match. Yet.
What usually happens when the demand is bigger than supply? It gets fixed, often fast. The interesting part is by whom. Will it be by international players expanding to the market like some say, or will the fastly growing local startup ecosystem fill the void? Either way, today there is an opportunity there in banking. Tomorrow? Maybe not anymore. Either way, startups and other innovators need to act fast or someone else will take their share.
How to get access to the opportunity?
An EY study found that one of the best models to drive mass adoption of fintech solutions is working with a partner who already has an existing customer base. Thus for a new entrant in banking, it makes sense to work with a trusted and established partner in the market. For example, in Hungary such a partner could be OTP Bank, a market leader and a company often mentioned as an example of innovative companies in the market. Their customers are already used to getting new innovations and even expect them. Having a partner like that could be a clear advantage for startups.
In regions with many countries and especially relatively small ones, it makes sense to have a partner that can give startups access to more than one market or even the whole region. Like OTP Bank who has a presence there in 9 countries. Much better than conquering each market one by one.
The easiest / best way to get such bank partners?
Doing a startup accelerator with them. Coming from someone who organizes startup accelerators for living that might just sound a bit too thick, pure sales talk, but that’s what I truly believe in. I’ve seen the results and what is possible. In an accelerator (at least the ones we do) the bank and startups truly work together, and the bank truly puts in what they can to help the startups succeed. It’s far from just a supplier partnership. It’s a collaboration where both can truly grow, in more than just one way.
And based on what I’ve seen while working with OTP Bank, they are doing all they can to prepare for working with the startups in the program. They are clearly excited and that makes me really happy for the startups.
The program is going to be awesome, and the relationships that start from it are going to be even more so!