FinTech ecosystem effectiveness: Balancing competitiveness, profitability, innovation and resilience — The case of Latvia

Abstract

This paper examines Latvia’s FinTech ecosystem as a case of small-market adaptation to technology-driven change in the financial sector. It develops and applies an Ecosystem Effectiveness Model that connects enabling capacities (technological readiness, institutional collaboration, regulatory environment and market adoption) with outcome dimensions of competitiveness, profitability, innovation and resilience. The study draws on a bibliometric mapping of FinTech research and on micro-level evidence from the 2025 Bank of Latvia Innovation Survey, using principal component analysis, cluster analysis and logistic regression to profile ecosystem actors and their innovation behaviour. The results demonstrate that Latvia has achieved relatively high Application Programming Interface penetration, growing use of artificial intelligence (AI) in compliance and analytics, and structured FinTech– bank cooperation, supported by innovation-oriented regulation and access to payment infrastructure. At the same time, gaps in deep-tech scaling, venture capital availability, talent and international promotion could limit improvements in ecosystem performance. By situating Latvia’s experience within broader European FinTech dynamics, the paper demonstrates how small economies can design policy and governance arrangements to convert ‘secondgeneration disruptors’ (eg AI, tokenisation) into focused, resilient specialisation paths rather than scale-based competition. This article is also included in The Business & Management Collection which can be accessed at https://hstalks.com/business/.