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tal. This means they have the potential to follow “digital front-runners”, namely relatively small European countries with very high digitisation rates like Estonia, Ireland and the Scandinavian countries.
For comparison, the digital economies across the digital challengers accounted for 6.5% of their combined GDP in 2016, which put them almost level with the EU Big Five (6.9%), but behind the digital front-runners. On the other hand, the growth rates of the digital economies in the digital challenger countries in much faster than those of the EU Big Five at 6.2% per year between 2012 and 2016.
“Although most industries in digital- challenger countries lag behind their equivalents in digital-front-runner countries, some are almost level with EU Big Five benchmarks – for example, financial services and information and communication technology (ICT),” says the McKinsey report, which also lists positive factors such as good primary and secondary education with respect to maths and science literacy. Then there is the large talent pool in the science, technology, engineering, and mathematics (STEM) and ICT sectors, with no less than 230,000 graduates in these subjects in 2016, which is more than any of the EU Big Five markets and twice as many as the entire digital front-runner region. The CEE digital
challengers have also invested into high-quality digital infrastructure, and are less hidebound by older technol- ogy infrastructure than the Northern and Western European countries.
All this has helped the development of a vibrant emerging digital ecosystem, with a conducive environment for software development and game development, for example, and the emergence of a growing number of “unicorns” with valuations of more than $1bn, among them Czech antivirus software company Avast and Bucharest-born robotic pro- cess automation (RPA) company UiPath.
But digitisation isn’t just a task for
the private sector, McKinsey analysts believe, saying that the public sector also needs to get involved in using digital technology to improve the business environment and for governments to promote the adoption of new technolo- gies and create positive conditions for startups and high tech businesses.
The report also stresses that rapid action is needed. “We believe that to benefit fully from digital transformation, the time for CEE to act is now,” says McK- insey. The consultancy identifies three reasons for this. The first is specific to the region, where the CEE economies are booming, yet there are already signs already that the fast growth is slowing.
Then there are two global factors. McKinsey believes the world is “on
the cusp of a fourth Industrial Revolu- tion, in which new technology will fundamentally transform the economy and the labour market. This seismic change will drive growth and cre-
ate many new professions: big data scientists, machine-learning engi- neers, and new technology design- ers, to name just a few. But it will
also create serious challenges.”
The report points to the potential for automation in the region, saying that
to “to avoid potential spikes in unem- ployment, immediate action is needed, such as updating the education system to teach the skills that will be required in the future and creating a support system for lifelong learning.” Indeed, an earlier OECD report identified workers in Slovakia as the most likely among the 32 OECD members to lose their jobs as automation technologies are adopted.
And finally, “the rules of the digital game are crystallising and new ecosystems emerging”, says McKinsey’s report,
and many companies are now drawing up long-term digital strategies. “If the countries of CEE wish to compete and capture the €200bn digital opportunity, they urgently need to come together and devise a robust long-term digital strategy of their own,” the report concludes.
Lithuanian central bank issues banking licence to fast-growing fintech company Revolut
bne IntelliNews
London-based fintech company Revolut has obtained a European banking licence from the Bank of Lithuania that will allow it to operate across the European Union.
The company, which started out offer-
ing a prepaid card service for foreign currency payments, will now be able to offer banking services such as current accounts, loans and overdrafts.
A Revolut spokesperson said that the company chose Lithuania both because
of the “incredibly fintech friendly” regulatory environment – Vilnius has been seeking to position the country as a European fintech hub – and because it has 150,000 customers, around 7% of its total customers, in the small Baltic country.
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