The state of fintech in Romania
I was having a beer with some friends the other night and we were talking about our first workdays. I started to work in IT 12 years ago while I still was a student. My employer paid me 1.75 USD an hour and because it didn’t want to pay taxes, I was receiving my paycheck each month in an envelope, while my payslip stated I was working part-time and was paid with minimum wage. It wasn’t something unusual, as tax evasion was the norm in Romania, and it still is in a lot of industries.
When they hired me, they were looking for someone to write a software application in this language nobody at their office worked with, C# (see sharp). I had zero experience with it, but it didn’t matter. After a few technical questions, they just left me in front of a computer and asked me to build them an app that was displaying some data from a database in a certain way. Being a true millennial, I just used Google to find out how to do it, and half an hour later I was hired.
For a full year, I’ve worked on this app that I’ve rebuilt from scratch 3 times, added complex algorithms that aggregated data from all sorts of suppliers, built tons of reports, while the only feedback I got was this or that button should be moved more to the left of to the right. Needless to say, my job wasn’t too rewarding, but being my first one, I didn’t know better.
Those were fun times to remember, and beer and stories go hand in hand, and after a few more beers one of my friends told us a story that blew our minds. He’s a bit older than the rest of us and he tells us a story from 1996, the year he started working for a Dutch-Romanian IT company.
Apparently, the didn’t have enough Windows licenses, so they used to work in shifts. And when they worked in the night shift, they used to come in 2 hours earlier, and sit behind some other guy that was working, just to make sure they got to work on a better computer when their shift started. Delivering the code to the final client meant that Mr Tibi (the company changed names and owners, but he still works there) would take the company car, an old Dacia, along with around 30 floppy disks and go to the Netherlands with them. If all went well, in 2 weeks’ time he was back home. And the most surprising thing, they were building software that was creating wedding invitations and restaurant menus. Not really a breakthrough in innovation.
Those were the old days, but what about today?
We’re doing now 1-click deployments to any corner of the world and it takes seconds, and we build complex architectures spanning across tens of servers, but I still think that 1996 was the age of heroes. Those guys working night shifts and creating wedding invitations were the pioneers that brought the IT industry in my city and made my life so easy right now.
And it got me thinking, who are the pioneers in today’s age? Are there any companies that go beyond the everyday normal and do something remarkable?
While most IT companies in my city are still only focused on services, there are a few interesting startups that strive for innovation. Neurolabs, a small 20-people company, uses AI and image recognition to automate mundane tasks like supermarket payments and it does this faster and cheaper than their competitors.
In entire Romania, there are not many big startups, except perhaps UI Path, building software for robotic process automation, that was recently valued at 7 billion USD, and also moved its headquarters out of Romania. UI Path is really taking off, and there are already a few new startups using their technology, like Roboself, that lets you automate repetitive tasks you do at work
But I’m mostly interested here in fintech. I’m invested in crowdfunding platforms across all Europe, I use on a daily basis my Revolut and Curve cards, and I keep an eye on every other interesting fintech startup, hoping that someday it’ll also come to Romania and I could use it.
So, I’ve built a list of all the fintech startups I could find in my country. Some of them don’t even have a working product yet, others were cannibalized by the competition, while a few others are quite interesting.
I’ve grouped them in 4 categories:
- Investments, wealth management, lending and crowdfunding
- Payments and wallets
- Personal and business finance
- Financial infrastructure
Investments, wealth management, lending and crowdfunding
These are the ones that I’m most interested in. Unfortunately, the Romanian ecosystem is really lacking in this chapter.
The first crowdfunding platforms launched were only donation-based and most of them mimic platforms already existing at the international level:
- potsieu.ro (I can do it too)
- wearehere.ro, focused on education, painting, music projects
- startarium.ro, rewards-based, similar to Kickstarter
- bursabinelui.ro (the goodwill exchange)
- sprijina.ro (support)
These have their role in the ecosystem and they definitely fill a gap in the market, but most of these will disappear in a few years. They can’t expand to other markets, because they didn’t bring anything innovative, while products from other markets will slowly take over Romania.
There are hundreds of crowdlending platforms available in Europe, yet none of them is based in Romania. The legislation is a bit more complicated than in other EU countries, although the lack of platforms mostly has to do with a lack of interest from investors.
To this date, there’s only one platform in the works, iFactor. It’s supposed to handle invoice factoring, similar to what Investly does in Estonia and the UK. I’m keeping an eye on it to see when they launch. Other platforms that handle invoice factoring are Instant Factoring and OmniCredit, although they don’t accept retail investors and they just act as short-term lenders to small and medium enterprises.
The only p2p lending platform I know that uses Romanian as its language is Fagura. It’s based in Moldova (but Moldavians speak the same language) and advertises around 8% returns on unsecured consumer loans. I’ve created an account with them, but never invested there. The returns are just too low and risk too high to make me interested.
The startup landscape is pretty arid in Romania. Also, there are no tax incentives, like in the UK, for people that invest their funds in risky ventures. Therefore, opportunities for investing in new companies are very few and few people feel incentivised to invest in new ventures.
One interesting point of view I heard about is that the startup ecosystem is usually small in mid-size markets like Romania. The market is big enough to sustain a startup, so companies tend to build products for the internal market. But the market is not big enough to play around and innovate, and then they fail to adapt their business model to international markets.
In a way, countries with 20-40 million people are at a disadvantage against smaller countries. Startups in smaller countries know they don’t have an internal market, so they build from start products and services intended for international markets because they know that’s their only chance of survival.
One interesting startup I look forward to seeing online is Optimus Fintech, a robo-advisor that’s still working on getting all authorizations from the state. It would be a good local option to ETFmatic or Nutmeg.
Another interesting startup is Stockberry. It’s not an investment platform, but it’s a stock tracker that offers technical analysis, sentiment indicators, risk assessment, relevant news and all sorts of other things that help you balance your stock portfolio. A similar risk analysis platform would be M7+, although it’s not live yet.
Payments and wallets
The most interesting p2p payment app in Romania is Volt. It has a mobile app that lets you attach all the cards you have and then transfer money to friends through the app.
It launched in 2017, but they seem to have lost steam since then. Apple Pay just launched in Romania this summer. Google Pay should be here soon as well. Revolut also came in 2017 in Romania with a lot more features than Volt can offer, at a lower price. And almost every bank in Romania created their own payment app that lets you make contactless payments and transfer money to friends. BT Pay from Banca Transilvania, George Pay from BCR, RaiPay from Raiffeisen Bank, ING Pay from ING, they all offer similar services.
I never heard of Volt until this year, and when I installed their app, I also noticed none of my contacts had it. While it looks like a cool app, they’ll die out soon unless they innovate.
I use Pago, a mobile app, to pay my bills. It only works for phone, internet, electricity and gas bills. Companies that have all the reasons in the world to set up recurring payments on your account, but for some reason, they don’t know they should.
While the business model for bill paying apps looks relatively simple, they don’t seem to have much success here. Pago is the only app still alive, while others like ArgentumApp, Younify, Pay24, just stopped working or are in “rebranding” mode.
Cool payment solutions
One cool payments solution is PayByFace, a software solution that lets you pay in stores using your biometric data. It promises to revolutionize the way we shop, although I give it slim chances to actually succeed.
Personal and business finance
I use Monefy to track my expenses, but I could hardly call this a fintech app. It doesn’t have cards or bank accounts integrations, no reports, no analysis or suggestions. It’s just a more convenient Excel sheet. While this is not a Romanian app, I could use some of the alternative apps developed here.
One of them is CashControlApp, with more advanced features like recurring payments, bank statement imports, reports and more. It still doesn’t have any integration with a real bank account, so I would still need to do things manually if I used it.
I was recently looking with my future wife for a way to collaborate on common expenses like food and bills. Since Romania doesn’t have the concept of a joint account, it’s a bit hard to do this in a seamless way.
One of the solutions we found that lets us do something close to what we need is DollarBird, a nice website that lets you collaborate on budgets and expenses. For now, it just looks to me like a very complicated way to track your expenses, but maybe I’ll get used to it.
Of course, Romania couldn’t escape the crypto hype, and even though the entire crypto industry is in the trough of disillusionment right now, there’s one interesting startup that caught my eye, Morfin. Morfin is supposed to be a crypt wallet, trading platform, e-payments wallet with personal IBAN account, some sort of bridge between crypto space and real banking. It’s not live yet, but it will be an interesting platform to use.
I’m not one to do much shopping, and months pass until I go online to buy something. However, the gifts season is coming and next time I buy something online I hope I’ll remember to use Beez and get some nice discounts on my purchases.
It’s available in Romania and the UK, and their business model is really simple. They just pay a part of their affiliate commissions back to the shoppers. The shoppers choose to use Beez because they do shop anyway, and why not get some money back if they can.
By far the coolest personal finance app is Franc, a Facebook financial assistant chatbot. It teaches you about finance, gives you tips on how to save money and cut your spending. It connects to your bank account and analyses your transactions, compares your spending habits with other peers, gives you tips on fees to avoid and so much more. At the moment, it’s only available in a demo version, but it will soon be live, and I’ll definitely sign up.
If I ever decide to open a company in Romania, I’ll use Keez to handle my accounting. I hate to do in-person things that could be done faster online and without unnecessary personal interaction. When it comes to accounting, most of this is still done by hand or with outdated software in Romania.
Keez is one of the few decent full accounting software a small company could use, without needing to actually see an accountant. Another cool accounting solution is SmartBill, although this is a software solution targetting accountants, not business owners.
Another cool startup is Ebriza, a cloud POS solution unfortunately limited to restaurants, coffee shops and supermarkets. The company is only 2 years old, so they still need more time to extend the app to other industries.
Confidas is similar to UK’s Companies House, except you need to pay a fee if you want more details about a specific Romanian company. Still, it’s a good site to easily find out info about other companies.
When it comes to enterprise software, things look a bit better in Romania. FintechOS, BankConnect, Finqware, Pluridio, Traderion, Symphopay, Canvi, Allevo, they all provide solutions to banks and other financial institutions to help bring them into the 21st century.
pAIdAnalytics helps businesses and financial institutions identify errors in payments and fraudulent transactions using artificial intelligence. Another AI-powered company is TypingDNA, which authenticates users based on the way they type. Druid builds virtual assistants for any type of enterprise using most of the chatbot technologies currently available
There are also a few initiatives related to blockchain and decentralized storage, like Modex, a blockchain database and Swazm, a decentralized cloud. Although I feel that they were launched at the top of the blockchain hype and now they struggle to find their place in the market.
When I started to write about fintech in Romania I didn’t put much hope into it. I thought it would be a really short article, with a few companies that just copy successful startups from other countries and would be swallowed anyway by the competition in a few years.
The real image is not that bleak, although it’s far from the one in other European countries. Recent changes in legislation and taxation, government and European Union grants certainly help, but it will still take a long time until Romania’s startup ecosystem will become competitive.
Nobody stops a Romanian startup to go to Berlin or London to look for investors, but very few choose to do so. In some ways, selling your idea to investors is harder than actually building a product.
For more details on Romanian fintech startups, you can also read this report from Future Banking, an annual event focused on banking and payments innovations.