Bulgaria – the well-hidden fintech gem of South-eastern Europe

The Paypers interviewed Georgi Penev, Director at The Bulgarian Fintech Association, to learn more about the trends that are shaping up the Bulgarian fintech ecosystem

A specific focus on fintech education, actively promoting and encouraging public discussions on the Digital Finance Strategy for the EU, passion and talent are just a few ingredients that make Bulgaria – the well-hidden fintech gem of South-eastern Europe. Today we continue our Fintech Series – ‘From helping European local communities to building supper apps’- and delve into the story behind the Bulgarian fintech landscape success.

Georgi, at the beginning of the summer you have attended Amsterdam Fintech Week. How did you perceive the European fintech landscape after listening to some of the presentations and how is the Bulgarian fintech sector positioned within this ecosystem?

Undoubtedly, the European fintech landscape could be considered underdeveloped compared to the US and Asia. However, it is important to note the good examples of fintech ecosystems all around the EU and, of course, the numerous opportunities and possibilities for growth. Personally, I am more than satisfied that not only the EU fintech private sector is thriving but also, we see as strong push coming from the European Commission who is now working towards the promotion and development of Digital Finance within the EU.

I am glad to say that as of 2021 Bulgaria is not only in the top of the nearshoring destinations for fintech in the EU but also the fastest growing fintech hub in the South-eastern Europe (SEE). We have many fintech companies and recognisable fintech solutions operating around the world who are getting traction in competing with the giants Revolut, N26, Wise, etc.

I believe that in the centre of this success is our educational system that contains of 57 universities and 30+ private software schools. At any given time, there are more than 10,000 students in Computer sciences and at least as many in Finance and Business and Administration.

Furthermore, I want to put a specific focus on fintech education in Bulgaria – this year, for a second time in a roll we launch a Fintech Master’s degree, together with the oldest university in Bulgaria – Sofia University. The programme incorporates highest level of teaching Finance, Investments in symbiosis with real-life examples of fintech success stories and business models. The programme is followed by a Fintech hackathon that attracts all interested fintech savvy students, giving them the chance to make their Fintech dreams a reality. In 2020 the ‘Fintech Master’s degree programme’ was the most popular programme at the Faculty of Business and Administration at Sofia University. In addition, ourselves, the Bulgarian Fintech Association (BFA) we pay visits on a regular basis to all Bulgarian universities that teach Finance and spread the world for fintech. Last year we managed to reach more than 250 students. BFA’s educational efforts were recently awarded and recognised, and we were pronounced an Affiliate member to the International Financial Education to the Organisation for Economic Co-operation and Development (OECD).

Comparatively fast we are getting traction and our efforts are getting recognised on a supranational level as well. For instance, in 2020, we organised the second most attended public discussion on the Digital Finance Strategy for the EU. In the end, we have sent a summary of the Bulgarian opinion to the European Commission who eventually incorporated all 5 points we have vouched for. Thus, one of the smallest EU countries managed to help setting the Digital Finance agenda in Europe.

What role does fintech play for your country’s economy? Is fintech included on your government’s agenda?

The fintech sector in Bulgaria is just a tiny part of our economy with 125 companies and just over 8,000 employed in the industry. However, in 2019 they generated more than 1 billion BGN (over EUR 500 million), which accounts to about 1% of the Bulgarian economy in 2019. Most importantly 84 of the fintech companies are Bulgarian-owned companies, 50% of whom are considered with exporting potential.

Undoubtedly, our country and business climate are very attractive to FDIs as well – there are about 40 fintech companies with offices here, among which Paysafe, Experian, Emerchantpay, Commerzbank, Bunq, Tide, Uber Finance, Crypto.com, Leno, and many others.

When it comes to regulation – all EU Fintech-related fintech laws are transposed in the Bulgarian legislation, including PSD-2, PCI-DSS, etc. Generally speaking, the Bulgarian Fintech sector is regulated mainly by the Bulgarian National Bank and the Financial Supervision Commission, respectively monitoring the banking and non-banking financial sector in the country. The latter has embraced fintech as part of their strategy and even created an Innovation hub to help further develop the non-banking sector. While the Ministry of Finance, announced recently that a regulatory sandbox is being created for the banking sector (most probably with the help of the Bulgarian National Bank). Furthermore, fintech is now an essential part from the Financial Literacy Strategy for Bulgaria meaning that digital finance will be studied across all ages around the country. 

All of the above shows that, slowly but confidently our government takes into account the developments in the Digital Finance sector and is ready to comply with the private sector to be at the forefront of the fintech (r)evolution.

When it comes to fintech/payments, what are the segments with the largest potential in your country and why?

This year we are releasing our 3rd Annual Fintech Report which will encompasses all 125 Fintech companies, fintech events and initiatives in the industry. According to the Bulgarian Fintech Mapping 2020 the most developed fintech segment is Payments/Billing, followed by Lending and Capital Markets. By a large extend we see insurance sector with huge potential to grow as well as personal finance and real estate Fintech solutions. In addition, we have Regtechs on a rise and wealth management solutions which are getting more and more traction. However, personally I believe in blockchain and its abilities to change the financial landscape. A great example for this is LogSentinel who are using blockchain technology for cybersecurity solutions designed to protect against data breaches and insider attacks, as well as ensure a higher level of compliance with legal standards and regulations.

How do you see the relationships of banks and fintech players in Bulgaria? Which are the biggest challenges standing in the way of bank innovation?

Banks in Bulgaria are quickly catching up. Whether it is because of COVID pandemic or just because of their clients’ preferences and the fintech competition, we now see almost all Bulgarian banks providing some sort of digital wallets. In the similar vein, the traditional financial institutions are showing an increased interest in newly created fintech solutions. Furthermore, there are a couple of banks with initiatives to help further develop the ecosystem via innovation hubs and accelerators. Such examples are Elevator lab by Raiffeisenbank Bulgaria, OTP Lab, etc. Overall, the relationships evolved over the years and both the banks and fintechs understand and accept each other’s vital role in the development of the Bulgarian financial sector.  

What are the top 5 fintechs to watch in Bulgaria? What do they have in common?

It’s hard to point out only 5 of them but if we have to, I would definitely keep a close eye on Payhawk who recently closed a USD 20-million Series A round of investment. Secondly, I would watch Cashwave, Phyre, Notolytix and LogSentinel who are proposing top-notch fintech solutions who are competing successfully with their EU peers. Last but not least, I would give some credits to Iris Solutions who are a PSD-2 licensed firm, with an amazing product that brings so much value and shows the real benefits of Open Banking. Of course, there are many more prominent companies with bright future such as Paynetics, iCard, ePay, Evrotrust, etc. who have bright future before them. I could only be very proud to be chosen to be a representative of their firms and this ecosystem. I sincerely hope that BFA could correspond their fast growth rates and keep its sustainable role of a facilitator in the fastest growing Fintech ecosystem in the SEE region.

Watch out for our next instalment to find out what is happening in the UK and Ireland. In our previous articles and interviews, we portrayed the fintech landscape in Romania and Europe in general.

About Georgi Penev

Georgi Penev holds a bachelor’s degree in Political Sciences from the UNWE-Sofia and a master’s degree in Public Policy and Management from the University of Glasgow. He has s a proven track in business consulting and IT development in the Fintech sector of Bulgaria. He believes in the benefits of digital transformation and is proud to take an active part in building the bright future of Fintech in Bulgaria and Europe.

About The Bulgarian Fintech Association

The Bulgarian Fintech Association is a non-governmental, for-impact organisation uniting all interest parties in the sector of digital finance innovation, working from the region of South-eastern Europe (SEE). The association was established in the end of 2018 and for a little over 2 years it has attracted 54 member organisations, among which Paynetics, Nuvei, Varengold Bank, Paysera, Paysafe, Klear Lending, Mastercard, Postbank, Sofia University and others. As of July 2021, we represent more than 7,300 employees in the Digital Finance sector in the region of Southeast Europe. Our ultimate goal is to establish Bulgaria as a leading Fintech Hub in the region of South-eastern Europe.