In the past several months (February- May) HFA members iTulip and Topicus/Akkuro have visited Adria Region, more specifically two capital cities, Sarajevo and Zagreb. There they held sessions with leading regional FinTech players. During the visits they had very constructive meetings with local offices of some major European banks (a.o. Raiffeisen Bank, UniCredit Bank, Banca Intesa Sanpaolo and Sparkasse Bank) and regional banks such as Addiko, NLB and ASA.

In addition to introductory meetings with the Dutch embassies, Topicus/Akkuro and iTulip attended two highly influential regional events: Adria FinTech (Sarajevo) and Money Motion (Zagreb). Here’s their take on the state of Fintech in the Adria Region.

 

The Nascent but Promising State of FinTech in Croatia and Bosnia and Herzegovina (BiH)

The FinTech landscapes in Croatia and Bosnia and Herzegovina, while still in relatively early stages compared to some European counterparts, show promising growth and innovation. Both countries are witnessing increasing adoption of digital financial services driven by technological advancements, evolving consumer expectations and a growing collaboration between established international banks (mainly from Austria, Germany, and Italy) and an impressive number of local FinTech companies.

Significant steps in this transition include existing and planned collaborations between private and public partnerships. Excellent examples are HUB387 and Intera Technology Park (Bosnia) and the “FinTech Hub” (co-created by Croatian Postal Bank, Startup Factory, and the Faculty of Economic Sciences).

These initiatives aim to foster innovation by supporting fintech startups, scale-ups and established businesses to align with EU regulations and global market trends. The European Investment Bank is providing policy guidance to both Bosnia and Croatia to deepen their capital markets and promote FinTech development.

Finally, renowned events like Money Motion (Zagreb) and Bloomberg Adria (Sarajevo) are developing into major FinTech events for the entire Adria region, aiding in the FinTech transition.

Bosnia: Untapped Potential in a Developing Market

The FinTech industry in BiH is at a nascent but promising stage, characterized by growing adoption of digital financial services. While less developed than some European counterparts, BiH holds significant untapped potential due to its high mobile and internet penetration rate and skilled IT workforce, presenting a favorable ground for the expansion of digital financial services. Despite a current reliance on cash transactions, the adoption of card and digital payments is growing.

The diverse startup ecosystem in Bosnia and Herzegovina includes a rising number of FinTech ventures, particularly in blockchain, software and data solutions. Key areas include:

•  Digital Banking & Payments: The digital banking and payments landscape is evolving, with traditional banks like Raiffeisen Bank, UniCredit Bank, Banca Intesa Sanpaolo and Sparkasse Bank increasingly offering digital services and participating in initiatives promoting digital transformation for SMEs. Emerging FinTech solutions in this space are still relatively limited but show potential for growth in areas like mobile payments and online transactions. Companies like FINCI offer multi-currency business accounts and payment solutions, indicating a move towards more sophisticated digital financial services.
• Crypto & Blockchain: This sector is gaining traction, with startups exploring blockchain applications and potentially cryptocurrency services, although the regulatory framework was only recently updated to include crypto assets. Companies like Evolt have been involved in developing crypto payment solutions.
• API Management & Software Solutions: This is a developing area with startups focusing on providing software and data solutions for better integration and efficiency within the financial sector. Several software development companies, such as Walter Code, Ministry of Programming, and Pontis Technology, offer services that could be leveraged by FinTech’s for building and managing API’s and developing custom software solutions.
• Lending & Financial Management: This segment is still largely dominated by international (traditional) banks (such as Raiffeisen and UniCredit), but there’s potential for FinTech’s to introduce innovative lending models and personal finance management tools.

Croatia: Building a FinTech Hub

Though currently encompassing a broad range of segments, including open banking, payments and the burgeoning crypto space, recent developments indicate a strong ambition to position Croatia as a regional FinTech hub.

While providing an exhaustive real-time overview of Croatia’s FinTech ecosystem is challenging due to its dynamic nature, here’s a look at notable companies and categories focusing on key areas: Digital Banking & Payments, Crypto & Blockchain, API Management & Software Solutions and Lending & Financial Management.

•  Digital Banking & Payments: Companies like Aircash (a leading digital payment platform) and traditional banks (HPB, Zagrebačka banka, PBZ) are increasingly involved in this segment.
• Crypto & Blockchain: Electro-coin is a key player in the Croatian crypto space. Revuto (also in payments), with its subscription management app and crypto integration, is an interesting player. Several startups in NFTs (Tribute Brand, DeFi, Nous) and tokenized crowdfunding (Genesis) are also active.
• API Management & Software Solutions: Treblle is a well-known API management platform and Minka offers a platform for modernizing banking infrastructure.
•  Lending & Financial Management: Croatia’s landscape features a mix of traditional institutions adapting to the digital age and emerging FinTech startups. While specific FinTech lending platforms might be fewer, there’s activity in loan comparison (Refinance) and traditional banks like Sparr Kasse (Austrian Erste), Zagrebačka banka (UniCredit) and PBZ (Intesa Sanpaolo) are increasingly offering digital lending solutions and partnering with FinTech’s. The broader startup ecosystem also includes companies with financial management aspects, such as those offering tools for salary negotiation (TABU) or subscription management (Revuto).

Regulatory Environment in Adria Region

Croatia’s regulatory environment (just as in Slovenia and Bosnia) is adapting to FinTech, notably through proactive early implementation of the EU’s MiCA regulation for crypto assets. This commitment to clarity and defined requirements for Crypto Asset Service Providers (CASPs), along with potential cost advantages and a skilled IT sector, aims to position Croatia as an attractive hub for crypto businesses.

Beyond crypto, traditional financial institutions in the region are increasingly digitizing and collaborating with FinTech’s. A growing focus on green finance aligns with EU regulations like the European Green Bond Regulation. However, navigating evolving EU rules such as DORA and the revised Consumer Credit Directive, alongside the risk of overregulation, presents ongoing challenges.

The adoption of a new Law on Anti-Money Laundering and Counter-Terrorism Financing in early 2024, now including crypto assets and e-money, represents a significant step forward in Bosnia. Just as is the case in Montenegro, this establishes a foundational regulatory framework to facilitate client onboarding for financial institutions and foster broader adoption and FinTech development. However, further specific regulations tailored to foster FinTech innovation are still needed.

Common Challenges and Future Outlook

Both Croatia and Bosnia and Herzegovina, as the whole Adria region, share some common challenges in fostering their FinTech sectors. These include:

• Access to Funding: Securing sufficient investment for FinTech startups remains a hurdle in both countries.
• Market Size and Fragmentation: The relatively small domestic markets can limit the growth potential for FinTech solutions.
• Talent Pool: While both countries possess a skilled IT workforce, retaining talent and ensuring a continuous pipeline of FinTech-specific expertise is crucial.
• Adoption Barriers: Overcoming the preference for traditional financial methods and building trust in digital solutions are ongoing tasks.

Looking ahead, the FinTech sectors in both Croatia and BiH are poised for further growth. Croatia’s strategic focus on becoming a hub, coupled with its proactive regulatory approach, particularly in the crypto space, positions it favorably for attracting FinTech innovation and investment. In Bosnia and Herzegovina, the increasing regulatory clarity and the growing startup ecosystem suggest a positive trajectory for FinTech adoption, provided that challenges are addressed.

Ultimately, the continued development of FinTech in the whole Adria region will depend on a collaborative effort involving governments, regulatory bodies, traditional financial institutions and the burgeoning FinTech community. By fostering innovation-friendly environments, addressing existing challenges, and leveraging their respective strengths, both Croatia and Bosnia and Herzegovina can unlock the transformative potential of FinTech to drive economic growth and enhance financial inclusion.