If you have an effective management system, then the business can be done even in very exotic markets
Modestas Sudnius, CEO of Eleving Group for Forbes Latvia
To build and manage a global business from Latvia.
Eleving Group was founded in 2012 with significant international ambitions, but it was already clear that the company would be managed directly from Latvia. There have been several objective considerations for this. This business was started by local entrepreneurs; here are all the necessary conditions and resources, and the financial crisis’s consequences created many consumers who lost access to bank financing. The Fintech companies founded at that time, looking from today’s eyes, have laid a solid foundation for the industry’s growth and the entry of new business concepts into the market. We can now talk about the Fintech gene in Latvia and the market with consumers who are used to innovative financial solutions.
Regarding technology, Latvia is well ahead of many large and developed economies. There is a sound education system that produces capable professionals in the areas of IT, data science, risk management, and product development, which are integral components of Fintech. Also, a large part of society is multilingual – residents know more than two languages. This is very important for business because such an environment helps attract foreign specialists and create effective business contacts outside the country’s borders.
In today’s competition and market maturity, creating a new Fintech business will no longer be as easy as in the past. However, Latvia is still an excellent platform from which to run the business. It should also be understood that Latvia is a relatively small market, and we cannot enjoy the luxury of German or British companies, whose local market has tens of millions of potential customers, as opposed to our 1.8 million. Profit exists on a global scale.
For our company, Latvia is a business operations center with the shared service center principle. This is where product development takes place, strategic decisions are made, and various business management services are provided for our country representatives. Thus, a relatively small number of professionals can lead a team of more than 2,800 people daily, delivering results in 13 active markets on three continents.
A good business idea without a proper management system can turn out to be a lousy business idea.
When starting a business, many startups focus only on the product and its development, forgetting about the financial foundations and other homework related to effective business management. Admittedly, we also started without such a governance structure. It worked in Latvia because we knew this market, culture, sentiment, and product, but we quickly realized it would not be enough to turn a local business into a global one. We needed a precise system to effectively move and deliver functions to a completely different environment and maintain control over processes, people, and the outcome.
We found a solution in the approach of Hub structure or regional management teams. In real life, this means that we have grouped our markets according to specific parameters under several management teams, which centrally manage the countries allocated to them from Riga, while the operational activity takes place locally with the help of local human resources. It is not the cheapest approach, as it requires a very precise matching of resources, which is a time-consuming process. Also, increased attention should be paid to the creation of a strong team, as well as to the development of various IT systems that help to monitor business processes and their efficiency in real-time. However, this system has been one of the main reasons we have been able to successfully master foreign markets, issuing almost EUR 1.2 bln loans—and maintaining high profitability, despite what is happening in the world economy. If the system is right, it will work even in exotic markets.
The second thing such a management system provides is healthy vertical cooperation within the company. Eleving Group does not issue loans, our brand teams do, but we help them make sound and informed decisions by sharing our expertise, training them, and ensuring common standards and understanding of business fundamentals. We are like a multifunctional agency providing various services to our countries. However, local teams still have freedom of action in operational decisions, as they will always have a better understanding of the needs in the specific market and how to build relationships with local customers.
The Latvian Fintech industry does not yet realize what it can offer to the world.
Although entrepreneurs in Latvia have a good understanding of the creation of international financial companies, we cannot say that the potential offer of Latvian Fintech to the world has been fully mastered. Estonia and Lithuania are half a step ahead of us, as their Fintech ecosystem is increasingly filled with various payment platform solutions, cryptocurrency-related services, and other personalized financial tools.
In the case of Latvia, I hope local companies can create more and more mutually combined financial tools ahead of new trends. Open banking is one of today’s momentums worth following, as the resulting products open countless opportunities to improve the customer experience and create personalized financial tools. For companies, it is an opportunity to use data smartly and effectively, developing innovative products and services that make additional value for customers. I think that Latvia is capable of becoming a Fintech innovation center.
Another thing we recommend to industry representatives is to increase their ambitions and look beyond national borders. With the proper management structure and strategy, Latvian entrepreneurs can become successful exporters, promoting economic and social growth in developing countries through their products. We did not enter Kenya and Uganda simply with a financing service. We came with European standards, new technologies, and our expertise, which we pass on, contributing to the growth of their financial sector.