Fintech is playing a pivotal role in the economic growth of Armenia, Azerbaijan, and Georgia. With advancements in payment systems, blockchain exploration, and digital currencies, these nations are harnessing technology to transform their financial landscapes and drive future development.
Since gaining independence following the dissolution of the Soviet Union in 1991, Georgia, Azerbaijan and Armenia have leveraged their rich histories to fuel economic progress. Today, fintech and digital innovations are becoming key drivers in their continued growth, each nation adopting its own approach to integrate these technologies into their economic sectors.
Armenia
- Population: +2,967,000
- Capital, financial hub and largest city: Yerevan
- Gross domestic product (GDP) per capita: +$8,500
- Access to a formal financial account (adults): 52.3 per cent
- Central Bank of Armenia (CBA)
Armenia’s growth has been driven in part by its young, tech-savvy population. Through its regulatory sandbox, the Central Bank of Armenia (CBA) has attracted $90million in investments, propelling the country to 34th place in the Global Fintech Index 2023.
Key sectors such as payments, lending, insurtech wealth management and regtech have experienced significant development. The fintech sector in Armenia is growing at a compound annual growth rate (CAGR) of 25 per cent, with mobile banking becoming increasingly prevalent. Digital payments in the country surpassed $6.8billion last year, while fintech sector revenues exceeded $1.6billion.
Armenia is also exploring blockchain and cryptocurrency, with substantial investments in crypto mining and ongoing discussions about developing a central bank digital currency (CBDC).
Despite these advancements, challenges such as financial inclusion remain. For example, only 40 per cent of the adult population made a digital payment last year, reflecting the continued dominance of cash. Fewer than 20 per cent used the internet or mobile phones to pay bills, and debit card ownership is under 20 per cent, with just 9.2 per cent holding a credit card.
In the financial services sector, Armenia’s banking system remains the largest player, with 18 institutions and no single bank holding a dominant share. The growing fintech sector is helping to drive transformation across the financial sector.
Among the many fintech companies in Armenia is FinNow, which empowers users to manage their finances and make behaviourally informed financial decisions. This is just one of the more than 200 fintechs operating in the country.
Azerbaijan
- Population: +10,300,000
- Capital, financial hub and largest city: Baku
- Gross domestic product (GDP) per capita: +$7,640
- Access to a formal financial account (adults): 36 per cent
- Central Bank of the Republic of Azerbaijan
Azerbaijan’s financial sector is primarily dominated by banks, which account for approximately 95 per cent of the total financial sector assets. The non-banking financial sector, particularly the microfinance sector, remains underdeveloped, having been significantly impacted by the currency devaluations of 2015.
Financial inclusion in Azerbaijan faces several key challenges, including low levels of financial literacy and the high cost of traditional financial products and services. Additionally, insurance penetration remains minimal, with estimates indicating coverage of only 10 per cent of the population.
In response to these challenges, there have been concerted efforts to digitise the financial sector and support the growth of fintech. This includes the launch of the ‘Financial Sector Development Strategy 2024-2026’ by the central bank, which aims to strengthen key areas such as insurance, capital markets and payment systems, while enhancing the resilience of the banking sector.
The Baku Fintech Forum, organized by the Azerbaijan Fintech Association, has become a leading international fintech event in the country, providing a platform to foster the development of the fintech ecosystem.
Examples of fintechs include:
- M10 – Wallet-enabled money transfer and bill payment platform
- az – App-based wallet for money transfers and online payments
- Yelo Bank – Digital bank for individuals and businesses
As of late 2022, there were at least 22 fintechs operating in Azerbaijan, with this number now estimated to be as high as 55.
Georgia
- Population: +3,800,000
- Capital, financial hub and largest city: Tbilisi
- Gross domestic product (GDP) per capita: +$6,086
- Access to a formal financial account (adults): 61.2 per cent
- National Bank of Georgia (NBG)
TBC Bank and Bank of Georgia, the two largest financial institutions in Georgia, control 70 per cent of the country’s banking assets and are both listed on the London Stock Exchange..
According to the World Bank’s Global Findex 2021, transaction account ownership in Georgia has doubled over the past decade, reaching 70.5 per cent in 2021. Additionally, nearly 62 per cent of the adult population has engaged in digital payments. However, challenges such as low financial literacy and limited access to financial products, including savings accounts, persist, particularly among poorer households and micro businesses, especially in rural areas..
The fintech payments market in Georgia is on the rise, growing from just under $1billion in 2022 to $1.18billion in 2023. By 2027, analysts expect the figure to nearly double to $2.2billion. Key segments of the fintech payments market include MPOS, valued at $332.7million last year, and digital commerce, which stood at $825.4million. Analysts predict MPOS will nearly double to $636.6million by 2027.
Estimates range but there are around 50 fintechs operating in Georgia. Beyond fintech, Georgia, along with Armenia, has seen fast growth in its financial services infrastructure. Since 2004, the number of bank branches has increased significantly, with Armenia, Georgia, and Uzbekistan surpassing the global average of 20 branches per 100,000 adults by 2015.
In 2021, the National Bank of Georgia (NBG) was exploring the potential launch of a Central Bank Digital Currency (CBDC) as part of efforts to enhance the efficiency of the payment system and further promote financial inclusion.
Conclusion
Armenia, Georgia and Azerbaijan have the capability to utilise fintech to further boost its wider economic development in the Caucasus region and beyond.
