The financial landscape of Central and Eastern Europe (CEE) is undergoing a shift as fintech companies redefine how businesses manage international transactions, foreign exchange and financial risk. 

Going beyond simply rapid payments, fintechs in the region are increasingly offering SMEs and larger companies help in grappling with currency volatility and geopolitical uncertainty, said Johan Gabriels, regional director for Southeast Europe at fintech company iBanFirst, in an interview with bne IntelliNews. 

Gabriels was one of the pioneers of the fintech industry in the region. He arrived in Romania in 2009, serving as CEO of RBS Romania and later leading Banca Carpatica. He told bne IntelliNews that his experiences revealed the inefficiencies of traditional banking systems, particularly in international transactions.

“As a banker, I saw local international payments for companies took a long time, typically four to five days, during which people don’t really know where the money is sitting. Payments were costly, with no transparency at all. Most of the countries in the region have their own currency so there’s a conversion cost too … I started looking for alternatives,” Gabriels told bne IntelliNews. 

Gabriels transitioned to fintech in 2016, setting up Moneycorp’s operations in Romania and Bulgaria before joining iBanFirst. Today, iBanFirst has over 1,600 clients in the region and a growing presence in countries like Romania, Bulgaria and Hungary. 

“This region became my second home," he says. “While the fintech sector initially faced scepticism, particularly in the CEE, it’s now gaining momentum as businesses recognise its advantages.” 

Fintechs in the mainstream

The adoption of fintech services in CEE has accelerated, with onboarding rates nearly doubling over the past two years. Gabriels attributes this growth to fintech’s ability to offer faster, more transparent and cost-effective solutions than traditional banks. Platforms like iBanFirst provide access to over 30 currencies and enable nearly instantaneous payments.

"When I started in fintech, the sector was all about building trust, and educating,” Gabriels explains. "Now, with the likes of Wise and Revolut, the whole momentum is changing, fintech is getting more and more into the mainstream.”

Despite this progress, challenges remain. "There’s still a perception issue," Gabriels notes. "Convincing investors to explore countries like Bulgaria or Slovakia can be harder than pitching Spain, for example. So still is that perception, we’re gradually moving away, but it’s there, undeniably there.” He also points to issues such as the history of corruption and lack of predictability in the region. 

Hedging against volatility

Geopolitical tensions and currency fluctuations have made financial risk management a priority for CEE companies. Over the past year, demand for hedging services surged by 140% as import-export firms sought to protect their profit margins, according to iBanFirst. 

Analysis newly published by the fintech company indicated a transformation in how import-export businesses in Eastern Europe are addressing currency risk. Unlike their counterparts in Western Europe, who largely depend on traditional financial providers, companies in Bulgaria, Romania and Hungary are increasingly turning to fintech-powered solutions to manage currency fluctuations.

iBanFirst has seen rapid growth in these markets, with the total value of forward transactions by businesses in Bulgaria, Romania and Hungary surging by 66% in the first ten months of 2024 compared to the same period last year, reaching €341mn. In contrast, the group’s overall growth rate was 27%, with forward transactions amounting to €1.7bn across its entire operations.

The company points out that managing exposure to currency volatility remains a critical challenge for importers and exporters in the region. Fintech-driven hedging tools, particularly for non-euro payments, are enabling these companies to navigate diverse currency risks and maintain global competitiveness with the help of advanced digital solutions.

"Sometimes clients are not even aware they are running FX risks," Gabriels says. 

As well as the risks that arise, for example, for companies importing to CEE companies from China, Gabriels points to that CEE is “Quite a unique region – Hungary, Romania and Bulgaria all still have their own currencies and they are managed differently.” This ranges from the completely floating Hungarian forint, to Romania’s managed floating lei, to the Bulgarian leva’s peg to the euro.

The risks vary substantially from sector to sector and from company to company, one of the reasons why iBanFirst visits almost all its clients to understand their businesses and tailor its solutions. “For a pharma company, a 5% currency fluctuation might be manageable, but for a steel firm operating on tight margins, it’s a huge risk,” Gabriels said. 

A fragmented global economy

The fragmentation of global trade due to geopolitical tensions has also reshaped the way CEE businesses operate. Companies have reconfigured supply chains, sought alternative suppliers, and embraced financial tools to mitigate risks.

“There is so much uncertainty. We had covid, now it’s the war in Ukraine and the situation with Israel and Iran, that brings volatility. We don’t where this is going to end, but is there going to be volatility? Yes.”

The extent of the volatility depends on the currency, but, says Gabriels, “We live in a world where volatility is going to be more normal. It’s like climate change.” 

Global shifts in currency usage are also influencing CEE markets. The process of de-dollarisation, led by BRICS nations, has prompted businesses to explore alternatives like the Chinese yuan. While the US dollar remains dominant, accounting for 80% of global transactions, the yuan’s share is steadily growing.

“China is the second largest economy, and you see the Chinese yuan is growing in the percentage [of international transactions].”

As more companies transact in yuan, according to Gabriels, iBanFirst is helping clients by providing dual-currency invoices and negotiating with suppliers in local currencies. 

Future growth

Looking ahead, Gabriels is optimistic about the CEE region’s prospects. "CEE has consistently outperformed Western Europe in terms of growth, and I see no reason for this trend to change," he says. "We plan to expand our presence, adding three to four new markets next year. Ultimately, I want iBanFirst to be in every CEE market."

The rebuilding of Ukraine also presents opportunities. "Once the war ends, Ukraine will require significant investment, and we aim to be part of its reconstruction. This region is the most exciting place to be in Europe right now," Gabriels concludes.