Innovators, especially from smaller countries, are overcoming the region’s odds.
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Central and Eastern European Innovators 2018 |
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Financial Innovator |
Raiffeisen Bank International |
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Corporate Innovator |
Avast Software |
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Individual Innovator |
Peter Halacsy |
Central and Eastern Europe are infinitely more diverse than areas farther west, encompassing European Union member states along with countries still classified by MSCI as frontier markets. The state of innovation in the various constituent economies is equally diverse, yet substantially lags the West. Only Slovenia ranks in the European Innovation Scoreboard as a Strong Innovator. Insufficiently developed financial systems, the lack of an entrepreneurial culture and the perhaps related legacy of communism are all cited as contributing factors. Whatever the causes, the results are unarguable—and unflattering.
Even Russia—with its huge population and addressable market, world-famous research institutions and long tradition of impressive breakthroughs in rocketry and elsewhere—has nowhere near the kind of innovation ecosystem found in Western continental economies. According to RG Partners and EY, Russia’s investment in venture innovation for 2016 year totaled just $900 million, compared to some $70 billion for the US and around $30 billion for China.
There seems to be something like an inverse relationship between size and innovation success. Tiny Estonia, with its population of around 1.3 million, has a well-deserved reputation as an innovation leader for CEE. The country declared access to the Internet a basic human right in 2000, and in 2005 became the world’s first nation to allow citizens to vote online. Estonia is well ahead of the EU average in relative venture investment and patent applications, and its success as a magnet for venture-capital investment is typified by the currency-transfer service TransferWise, valued at $1.1 billion in its latest funding round after gathering some $117 million in venture investment as of 2016.
As this suggests, some strikingly creative and successful innovators have arisen in the region, against the odds. Some of the most celebrated corporate success stories are Skype, with its Estonian engineers, and Evernote, founded by Azerbaijani Russian entrepreneur Stepan Pachikov. On the banking and financial-services side, there are players such as Poland’s Asseco, with its Asseco Omnichannel platform that unifies information from many banking channels; and Lithuania’s Siauliu Bankas, with its InnovFin guarantee system for extending finance to innovative small and medium-size enterprises (SMEs) in Lithuania.
A clear standout for Financial Innovator was Raiffeisen Bank International (RBI), the international arm of Raiffeisen Banking Group Austria and long a dominant force in banking in CEE. Its SEPA Instant Credit Transfer (SCT Inst) service, which facilitates currency flows across the region, is one of the innovations that elevated RBI to the honor.
Introduced by the European Payment Council, SCT Inst is a platform designed to support payments integration across the 34 member countries, both inside and outside the eurozone, that make up the Single Euro Payments Area (SEPA) “by enabling pan-European credit transfers with the funds made available on the account in less than 10 seconds,” according to the EPC. RBI got behind the SCT Inst project as part of its continued commitment to its function as a clearing bank. RBI’s payments and cash management services have long been two of its core businesses, and are a strategic priority in its development plan for the region.
In line with this commitment, RBI became one of the pilot banks for EBA Clearing’s RT1, the Euro Banking Association’s “infrastructure solution for the processing of instant SEPA credit transfers.” To deliver Instant Payments, RBI had to implement the service in its payment processing, core banking and customer front-end systems. The processing center had to be available 24/7/365, with continuous online communication with the
relevant systems, and offer compliance monitoring and fraud detection in all processes. Finally, RBI had to manage liquidity provision, with the supporting funds available on the RT1 account at any given time. All these challenges were overcome, and RBI went live with SEPA Instant Payments on Nov. 21, 2017—one of the first European banks to do so.
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Instant Payments are now available to all RBI clients, both retail and corporate. Retail customers can already use Instant Payments online through RBI’s Internet banking system, Mein ELBA, which serves some 1.8 million online-banking users. The same functionality will be implemented for corporate ebanking customers from mid-2018.
Hack Checkers
Banks would be nowhere without security software; and given the inventiveness of hackers and scam artists, it’s no surprise to see security innovations recognized. Avast Software, the Czech cybersecurity software company, takes the Global Finance honor for Corporate Innovator—CEE. The 30-year-old company is enjoying a spell in the limelight after its $3.25 billion listing in May 2018 on the London Stock Exchange—the UK’s largest-ever tech IPO. Avast claims to have over 435 million monthly active users, making it the world leader in the consumer-security field, preventing over 2 billion attacks per month. It has over 1,500 employees worldwide and retains former chess grandmaster Garry Kasparov as “Security Ambassador.”
It was founded in 1988 as a cooperative by Eduard Kuera and Pavel Baudiš, both then researchers at Czechoslovakia’s Research Institute for Mathematical Machines. The region was then under communist rule, and Czechoslovakia still a single country. Three years later, the cooperative became a joint partnership, with an antivirus product called Avast. The software won awards and gained international licensees (including McAfee); but competition from that rival and others drove the company to adopt a freemium model, which turbocharged adoption. After hiring an international CEO, Vince Steckler, in 2009, Avast rebranded in 2010 as a private company under the name of its key product line and held a $100 million VC round. In July 2016, Avast acquired Czech-originated rival AVG Technologies for $1.3 billion.
Avast is still closely entrenched in Czech society, especially through the Avast Foundation, a philanthropic platform created by its founders for hospitals and hospice care, medical education and other community-support causes.
