Government and FinTech drive Baltic innovation push

The Baltic region is currently in the spotlight with the NATO summit in Vilnius, and it has long played an interesting and innovative role in terms of software and IT services adoption.

Estonia was the first country to hold legally binding elections via digital channels back in 2005. Since then, all three Baltic countries have emerged as hotbeds for emerging FinTech offerings and talent, benefiting from public policies that encourage local and foreign investment (primarily by simplifying administrative processes) and the fostering of vibrant supplier ecosystems. We will take a look at the different features of the region’s three markets and their current dynamics.

Estonia

Estonia ranked first in the DESI Index for digital public services and 6th among enterprises incorporating sophisticated or intermediate cloud services, and the country continues to launch cutting-edge projects. For example, the healthcare sector is exploring the use of AI in areas such as Andmevaatur (a data tool that gives doctors an overview of a patient’s health), a tool developed by TEHIK (Estonian Health and Welfare Information Systems Center) that is already used by 500+ healthcare providers. The country also aims to be a front-runner in blockchain and Web3 technologies. Estonia does have a history in this field: the country developed X-Road, a proprietary, decentralized, distributed system, in 2001, and the EestiPank ran an experiment in 2021 to explore the technological potential of a central bank digital currency based on blockchain.

Lithuania

Lithuania ranks 6th globally in the National Cybersecurity Index and 4th in the EU in the ITU Global Cybersecurity Index. Manufacturing is the largest sector of the economy, generating around 20% of Lithuanian GDP, and it is investing heavily in digital transformation projects to maintain its competitiveness. The Lithuanian Smart Specialization Strategy for Manufacturing for 2021-2026 has identified some of the technologies that will have the greatest impact over the next ten years, such as additive manufacturing, automation, robotics, mechatronics, smart sensors, photonics, automated warehouse management systems (WMS), cloud manufacturing (CMfg), cybersecurity, IoT business management systems (BMS), AI, and VR.

Latvia

Like the other Baltic countries, Latvia has a highly digitalized public sector. The country ranks 11th in the EU for digital public services, with 84% of the population regularly consuming e-government services, far above the EU average of 65%. As technology is embedded in all industries, big projects are expected to fuel the demand for software and IT services. Just last week, the European Commission announced the allocation of €305m to Latvian transportation infrastructure projects, including funds for the Rail Baltica project, the modernization of the Liepāja seaport, and the implementation of the European air traffic control project. Also, Latvia will receive €4.6bn worth of EU Cohesion Policy (2021-2027) funds to foster social justice, geographical cohesion, and economic integration; the funds will go into green and digital transition, boosting innovation in the economy, and healthcare and social services.

This brief overview of the Baltic market shows that it continues to punch above its weight in fostering the development of highly innovative technology use cases in Europe and is an important talent hub for SITS suppliers in the region.