EBRD launches $417 million programme to help Western Balkans 'go digital'
The programme, developed with the support of the European Union, will combine loans, grants and technical assistance for investments in digitalisation, automation and green technologies, officials said during a presentation in Bosnia and Herzegovina's capital, Sarajevo.
The bank says the digital modernisation of the private sector can play a vital role in improving socio-economic conditions in the region and strengthening ties with the European Union.
"With today's launch of the regional Go Digital in the Western Balkans initiative, the EU reaffirms its strong support for SMEs – the backbone of the region's economies," Adebayo Babajide, the deputy head of the EU Delegation to Bosnia, said.
The development bank will extend up to 350 million euros to partner financial institutions in Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia to lend to small and medium companies.
The European Union will also provide 27.6 million euros in grant incentives and technical assistance for the programme, secured through the Western Balkans Investment Framework.
Francis Malige, the EBRD's Managing Director of Financial Institutions, said the programme would address "substantial gaps in technology adoption".
It builds on the success of an ongoing 61.5 million-euro pilot programme in Bosnia that since 2023 has supported investments in nearly 200 local companies, and will enable around 750 businesses to receive support to innovate, digitalise and embrace green technologies, Babajide said.
"EU grants not only provide technical expertise and incentives, but also make financing more accessible and affordable for SMEs, with a special emphasis on women-led SMEs," he said in a statement.
Since 2009, the EU has channelled 628 million euros through the WBIF to support private sector growth through grants, guarantees and blended finance. The EBRD has invested more than 20 billion euros in the Western Balkans since the mid-1990s, supporting particularly the private sector and SMEs.
($1 = 0.9031 euros)
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Deep Dive: The Rise of Spend Management Fintechs in the EU and UK: By Sam Boboev
As a fintech product manager and enthusiast who writes a newsletter, I constantly monitor developments in fintech, payments, banking, and related markets. Recently, my attention has been drawn to the spend or expense management landscape, especially after witnessing significant funding rounds by companies such as Payhawk, Ageras, and Light. These European companies have grown substantially in recent years and show tremendous potential for further expansion. On a personal note, I always considered spend management a part of business banking until I realized it was a distinct field. This revelation occurred when I submitted a reimbursement form via a spreadsheet and emailed my receipt to the finance team. A brief conversation with them revealed that they were using basic tools like spreadsheets, company chats/emails, and accounting software. They mentioned they were exploring the market to find solutions for better expense management. This experience, combined with the recent funding news, inspired me to delve deeper into the expense management landscape. Let Technology Do the Job Spend management is not a new concept, similar to many other fintech innovations. Companies have always managed their expenses using various tools, including Excel spreadsheets, accounting software, and bill payment tools. Corporate cards have also helped companies manage employee expenses and payments, albeit with a stack consisting of multiple moving parts and interactions. As technology has progressed, so has the world of finance. The European and UK financial landscapes began to change significantly between 2013 and 2015 with the launch of digital banks like Monzo, Starling, and Revolut. These digital banks revolutionized customer experience by digitizing banking and payment processes, allowing customers to open bank accounts via mobile apps and order payment cards instantly. This shift marked a turning point in finance and banking, leading to exponential growth in features and solutions offered by single apps. Fintechs have since evolved into super apps, covering nearly all aspects of their customers' financial needs. This innovation quickly extended to business banking. For instance, Starling was among the first digital banks to launch a marketplace of tools for SMEs, enabling easy integration of various software to automate business processes. The integration of accounting software like Xero, Sage, and QuickBooks in such marketplaces set the stage for modern spend management tools. Game On for Spend Management The European spend management market is hot, with selected companies in this sector raising a combined $2.5 billion, according to my estimates. While my calculations exclude digital banks like Revolut, which also offer spend management solutions, the growth trajectory of these companies is worth exploring. Qonto, a leading spend management company in Europe, was launched in 2016. Initially offering payment accounts for sole traders and small businesses, Qonto has since expanded its product range to include virtual and physical cards, invoice management, bookkeeping tools, and various integrations. The company has raised $709.5 million and made three acquisitions. Payhawk is another major player, providing services globally with significant growth in the UK market. In Q1 2024, Payhawk reported an 86% global revenue growth YoY, with the UK contributing to a 127% increase. The company's ARR growth was also impressive, at 85% globally and 122% in the UK. Payhawk has raised a total of $239.1 million over six rounds and plans to increase its UK headcount by 44% following strong performance. Pleo, a Danish fintech, has a strong position in the European market. It raised €40 million in debt financing from HSBC Innovation Banking to offer higher credit limits and expand its overdraft facilities across Europe. Pleo's overdraft services are already in use in Sweden, Germany, and the UK, with plans to extend to the Netherlands. Moss, a Germany-based corporate card fintech, raised a €50 million debt facility from HSBC Innovation Banking UK to accelerate its European expansion. The company reported 100% growth in ARR and 120% net revenue retention over the past year. Moss plans to invest further in treasury and AI, including pre-accounting automation, using the additional capital raised. These examples highlight the significant growth and potential of European spend management fintechs. What about these companies? I learned that US-based spend management companies such as Brex, Ramp, and Mercury all started with venture-backed software companies in mind—well, it is Silicon Valley anyway. However, they did not stop there, expanding from mid-sized to enterprise companies. But what about European companies? How did they start their journey? The spend management market and companies are different in comparison to the US market. Often, European companies start with their core market and with smaller businesses in mind. For example, Qonto started in France with micro-businesses and self-employed individuals or freelancers as its target audiences. Therefore, it focuses on the process of registering the business, making payments, and managing invoices, which are very essential for individuals who are just starting their business. Qonto directly speaks to the owners of the businesses and simplifies not only expense management but the overall running of the business. On the other hand, Payhawk positions itself as a more comprehensive expense management tool. Payhawk focuses not so much on startups and small companies but on mid-sized companies. Payhawk's target audiences are CFOs and finance managers. The company enables its customers to manage their expenses in real-time through different tools, e.g., corporate cards, spend categorization, and spend policies. One of the virtues of fintech companies like Payhawk is that they can compile all expense data into one simple platform. Another interesting factor about Payhawk is that it is available in markets where competition is low, such as Central Europe, Spain, and Germany. They save time and money using an expense platform with cards. Unlike the previous two companies, the Swedish expense management company Pleo focuses on startups as well as large businesses and is similar to its counterparts in the UK. Pleo offers business cards, payment accounts, and comprehensive integrations with different accounts and other software. One of the main things that makes Pleo different from other players in the market is that the company tailors its software for certain industries such as technology, healthcare, retail, transport, etc. This approach helps the company offer unique experiences and solve problems specific to certain industries. As I mentioned above, European companies start with core markets where they are based and address the problems of those markets. However, once they achieve product-market fit in those markets, they rapidly expand into other European countries. Since they do not require additional licenses to expand, their market entry is quite smooth. Now, let's explore their product strategies. Product Stack Says It All Spend management is not just about tracking every euro spent; it's about analyzing company spending and extracting valuable insights. Companies of all sizes need to understand their spending patterns, optimize fund usage, and forecast future expenses. While small companies mainly need spending insights, larger entities require tools for quick and efficient fund access and utilization. Following the lead of digital banks, spend management fintechs have built their product strategies around integrations and marketplaces. Technologies like Banking as a Service (BaaS), Card as a Service (CaaS), Payment as a Service (PaaS), and Open Banking, all based on API technology, have enabled companies to launch comprehensive financial solutions. Most spend management fintechs began with basic products like payment accounts and cards, using smart data filtering and categorization to attract initial customers. In the modern world, most company expenses usually start with small card payments for different subscriptions and employee reimbursements. Based on my personal experience I can say that finance teams do not often understand department-specific tools and procedures which require departments to manage their own expense. In this type of scenario department specific cards and accounts play an important role in streamlining spend management and data collection for the finance teams. As these companies grew, they increased the sophistication of their payment flows, enabling companies to build various use cases for their employees. These include integrations of Google and Apple Pay Centralised subscription management and rule setting and others. These solutions help companies to manage their finance at scale in real time. The product strategy of spend management fintechs often revolves around integrations, ultimately leading them to become all-in-one solutions or multi-product strategies. After building core products, these fintechs progress to enabling their customers to get a full view of their expenses and finances by integrating accounting software like Sage, Xero, and QuickBooks. This type of integration has pushed some companies to focus on such solutions; for example, Codat enables fintechs and banks to quickly integrate accounting software. The next stage of the product strategy is to provide the ability for companies to manage their invoices or, in other words, accounts payable (AP) and accounts receivable (AR). Similar to integration with accounting software, this solution is either bought or built in-house, depending on the size of the company and its goals. My observations show that the range of product positions in spend management companies is quite wide. Most companies grow from simple to sophisticated product propositions, evolving from corporate cards to more integrated platforms. On the other hand, another trend I noticed is that companies initially focused on other verticals are also entering the spend management segment with the help of modern API technologies mentioned above. One such company is Ageras, an accountant or bookkeeper platform. However, after reviewing their platform, I noticed that the company offers most of the expense management services, e.g., bank accounts, cards, invoicing, lending, etc. Earlier in the spring of 2024, Ageras raised €82 million in fresh equity for new acquisitions and aims to complete 1-2 major acquisitions before a potential IPO in 2026. Generative AI is creating new avenues for the spend management stack. I believe these companies can get the best out of Gen AI, and the first place it can be implemented is in financial analysis and predictions. AI software is expected to be key in collecting and analyzing data from different integrations these fintechs have. For example, most companies have integration with major corporate communication tools such as Slack and Microsoft Teams. AI can already extract information directly from chats between finance and other departments and add it to the accounts or help finance teams quickly extract information from ledgers and share it with team members. Danish startup Light has recently exited stealth mode with $13 million in funding. The goal of the company is to modernize the CFO stack with the use of Gen AI. 'We use one model to help bookkeep all line items with correct taxes and accounts, and we use another model to help the C-suite to ask questions about revenue, costs, and profit — directly from Slack,' Jonathan Sanders told TechCrunch.
