While the Balkan fintech market may appear relatively small, the regional landscape presents a prime opportunity for digital transformation, evidenced by robust metrics in digitization and foundational banking services.
Romania, Hungary, Bulgaria, Croatia, and Serbia are at the forefront of fintech adoption in the Balkans, while Albania and Moldova lag behind. Since 2018, the region has attracted €1.7 billion in venture investments.
In the first half of 2022 alone, it pulled in a record €995 million, led by significant deals such as Viva Wallet’s €762 million from JP Morgan Chase and Payhawk’s €205 million, the latest Balkan FinTech market report by Pulsar VC shows.
A total of 172 deals happened in 2019-2023 with 4 more deals closed till May 2024 on the fintech market in the region.
The leaders are Romania (49 deals), Bulgaria (37 deals) and Hungary (36 deals). The world crisis has shrunk the venture market in the Balkans in 2023. However, recovery in the volume of deals is expected closer to the end of 2024.
Key drivers: Late-stage startups
Late-stage startups have been instrumental in driving the venture fintech industry. The period between 2021 and 2022 witnessed the highest average deal size, primarily due to the emergence of unicorns and late-stage startups.
Although there was a substantial decrease in the first half of 2023, reverting to 2020 levels, the market is now showing signs of recovery. The average deal size rebounded to €9.3 million in the first half of 2024. By the end of 2024, the market is expected to continue its recovery, potentially pushing the average check to the historical peak of €19 million.
Romania, Hungary, and Bulgaria account for 70% of the region’s fintech deals, equivalent to 71% in monetary terms, owing to their larger populations and favorable regulations. Greek and Croatian fintech startups have also consistently received investments, albeit smaller ones.
Market segments and growth
The Balkan region is home to over 950 fintech companies, with the largest market segments being Crypto, DeFi, Blockchain, and Web3 (23%), and Payments Processing & Networks (19%). Over 120 startups have been created in the last five years, fueling these market segments at an accelerated pace.
For further growth, the region must address regulatory challenges by implementing laws that ensure financial transaction transparency and safety. This includes Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) regulations, as well as laws governing financial markets. These measures are crucial for the operations of electronic wallet providers and cryptocurrency companies, the report outlines.
Balkan fintech regulation
Fintech regulation of countries in the region is directed to be aligned with the EU regulation practices and directives, since some of the countries already are members of the EU and some are looking forward to becoming part of the Union.
The EC and European Forum for Innovation Facilitators (EFIF) framework for launching cross-border testing was established to promote greater coordination and cooperation between innovation facilitators, supporting the scaling up of fintech across the single market.
The Digital Finance Strategy for the EU outlines four main objectives: reducing fragmentation in the Digital Single Market, adapting the EU regulatory framework to support digital innovation, promoting data-driven finance, and addressing the challenges and risks associated with digital transformation.
