Latvia

According to Merchant Machine, 81% of Latvians had access to the internet in 2021. Of all Latvian citizens using the internet, 83% use the internet for online banking, which is 12% above the EU average. Additionally, Latvia ranks 23rd in the integration of digital technologies and 11th for digital public services among EU countries. 

Latvia falls under the PSD2 legislation and has adopted Berlin Group’s NextGenPSD2 standard. PSD2 is a European Directive that regulates electronic payment services and was implemented in all EEA countries in 2016 and went live in September 2019.

In their European Open Banking league, Yapily ranked Latvia 17 out of 18. Although Open Banking is not a regulatory priority, Latvia does share banks with many baltic and nordic states. Regulators should develop a set of guidelines on what is expected from Third-Party Providers (TPPs). This would reduce uncertainty and provide an incentive for more firms to either enter the market or adopt Open Banking. With the majority of the population using digital banking, Latvia also indicates good levels of digital readiness for initiatives like Open Banking to take hold. For Open Banking to flourish in Latvia, the ecosystem will need to come together to tackle inconsistencies in the quality of bank integration and make the market more attractive for TPPs.

The EU Commission has announced its intention to adopt an Open Finance regulatory framework.

According to The Global Findex Database, 97% of Latvian adults had bank accounts in 2021.

Latvia is a highly digitised economy and encourages Fintech investment and innovation. Latvia was one of the first countries in Europe to launch and promote instant payments, which are increasingly comprising a share of non-cash payments. The adoption of digital payments in Latvia is driven by minimal cost, secure payments and a high level of user convenience. 

According to Yapily, regulators do not see Open Banking as priority in Latvia. Yapily suggest that regulators could develop a set of guidelines on what is expected from TPPs. This would reduce uncertainty and provide an incentive for more firms to either enter the market or adopt Open Banking.

In 2021, 118 Fintechs operated in Latvia. Latvia is a highly digitised economy and encourages Fintech investment and innovation. Index Venture ranked Latvia as the most “startup-friendly” country in Europe, along with Estonia and Lithuania. In 2021, 21% of Latvian Fintechs operated in payments and remittances, 15% in financial software, and 10% in online investments.

Latvia ranks 18th in human capital among EU countries in the Digital Economy and Society Index (DESI) 2021. The human capital measures digital skills, the proportion of employed people working as ICT specialists, female ICT specialists, and enterprises offering ICT training.

The Financial and Capital Market Commission (FCMC / Finanšu un kapitāla tirgus komisija) offers free expert advice by phone, via email or in-person to representatives of the Fintech field or those who have intended to start providing a new financial innovative service.

In addition, the FCMC has launched a regulatory sandbox, which provides for a process enabling the existing or potential financial market participants, whose activities require operating authorisation from the FCMC (licence or registration), to test or verify innovative financial products, financial services or business models in accordance with a specific testing plan agreed with the FCMC.

A regulatory sandbox is open to innovative financial solutions that would contribute positively to the sound functioning and development of the financial market, as well as improve and safely expand the options to use financial services for consumers and investors.

Latvia has adopted the Berlin Group’s NextGenPSD2 technical standard.