Romania is a relatively cheap market to enter for Polish businesses, with promising growth prospects and low entry barriers, and Romanians are generally open towards Polish businesses and view the country in good light, a fact that hepls when trying to establish a business, Klaudiusz Sytek, President of Board at Aforti Holding, told Business Review.
- Why did Aforti enter Romania?
Romania was a first foreign market to which Aforti Group expanded. It is the country with one of the largest and most dynamically developing economies on the continent, thus it was a rather logical step for us. We first entered the market with our fintech, Aforti Exchange, which offers online currency exchange services, in October 2017 in order to “test” the market and see if it lives up to its potential. The results recorded by Aforti Exchange in Romania exceeded our forecasts – in 2018, the first full year of our operations, we reached turnover of EUR 67 million, three times more than what we initially expected.
Undoubtedly, Romania will remain the leader of the economic growth rate in Europe, hence – similarly as in the case of many Western European companies – we were actively working on entering this dynamically developing, although still very young market. Its advantage – as in the case of most emerging markets – are additionally lower entry barriers and the huge potential of Romanian entrepreneurs, who, following the development of the local economy, start their own business activities, looking for fast and attractive sources of financing. Nevertheless, access to capital can be hindered for local entrepreneurs. This is why we were determined to also introduce Aforti Finance brand in Romania, which is an IFN (non-banking financial institution), since its core business addresses directly young entrepreneurs. We consider that SME financing is a potent niche in Romania, and we have the ambition to differentiate ourselves from other players, by offering a wide spectrum of financial services, which altogether constitute a valuable package of services for the entire business and economic environment in Romania.
- What are the key benefits for Polish businesses to enter Romania?
Clearly, we are not the only company that see many opportunities for growth as the Romanian economy is still growing rapidly and the business environment is fairly robust. In terms of benefits, I would say that Romanian market is fairly similar to where the Polish market was a few years ago, in terms of size, economy growth as well as consumer behaviour. The economy is primarily fuelled by household consumption and here it needs to be underlined that Romania is second, after Poland, largest market in terms of population, offering a wide market for development. While the growth prospects are promising, the entry barrier remain relatively low thus it is a relatively cheap market to enter for Polish businesses. I think these similarities, paired with the fact that Romanians are generally open towards Polish businesses and view our country in good light, helps a lot when trying to establish a business.
- Why are there so many Polish companies in Romania, what attracts them to do business here?
Romania is growing very fast and the dynamics of the market stand out from the entire CEE region. For Polish companies, expansion to the Romanian market, which is very similar to Polish ones, gives them opportunity to grow business as the market in Poland is already mature and requires different strategies than a few years ago, when it was a market of rapid growth, as Romania is today.
In Romania, we see two major trends that are attractive for Polish businesses – on the retail side, the household consumption is very high, consistently growing quarter to quarter, sustained by the consistent wages increases. For the B2B services providers, like Aforti, we see on one hand the increase in the entrepreneurial mindset, with more and more Romanians starting their own businesses, while, on the other hand, still low competition on the local market among the services providers. Both these trends are further enhanced by the size of Romanian population, of 20 million, which ensures the appropriate market size to build meaningful businesses.
- What are the challenges, advantages and disadvantages of Romanian market compared with Polish?
I think the biggest challenge at this moment regarding the Romanian market is the question how sustainable the growth is and how long it can keep up growing at the current pace and what will happen when it will no longer be able to do so. The so-called country-risk has to be taken into consideration by all the foreign players who are already present or want to enter Romania.
In terms of advantages, especially for the companies operating in the financial sector, is the fact that is relatively easy to disrupt the market by bringing new services. For example, one of the key differentiators of Aforti Finance on the Romania market is the fact that we do not require a collateral from the entrepreneurs. Also, same as in case of Aforti Exchange, all our services are highly digitalized and decisions are made within hours, rather than days or even weeks as it is in case of traditional banking products. This differentiates us from the competition and allowed us to gain prominence on the local market relatively quickly.
When it comes to disadvantages, I would mention bureaucracy and the overall speed and length of the decision-making processes. It would help increase the competitiveness and also the innovativeness of the local and foreign businesses if they were not subjected to so many controls and lengthily licensing processes. At the same time, I do not see it as something that is unprecedented but rather representative for the whole region of Eastern Europe.
- Are you willing to introduce other brands form the portfolio in Romania (like the factoring company and a debt collecting company that exist in Poland)?
We have noticed that for any financial services, banks are the primary provider of services. This gives us a massive potential for development as a financial group, operating a number of key services that local SMEs need. Our main advantage is and will remain the fact that we work with SMEs, who many times are clients with revenues that are too small to be considered for local banks. Thus, indeed, we are analysing the opportunities of introducing either Aforti Collections, our debt recovery company, or Aforti Factor, providing factoring services, in Romania. Until that happens however, we want to increase our position on the local market with the two companies that are already present, Exchange and Finance. We do not rush; we want our expansion moves to be well-prepared and our solutions to be tailored-made to specific market needs.
- What are your targets in Romania? What do you want to accomplish?
Our goal is to offer wide spectrum of financial services, which altogether constitute a valuable package of services for the entire business and economic environment in Romania. Right now, for both Aforti Exchange and Aforti Finance, we keep investing in our people and the technologies used since we believe these two are the key vectors of our planned growth. We keep expanding our teams as our business model heavily depends on the tele-sales component which we use not only to generate new leads, but also to offer our current clients assistance in understanding all the features that our platforms put at their disposal. Our goal is to maintain the triple digit growth on the Romanian market for both of our businesses, Aforti Exchange and Aforti Finance. In parallel, we want to develop the recognition of Aforti Group on the Romanian market, which in future will ease the entrance of other brands from our portfolio on the market and will help us gain important position on respective market segments.
- What are Aforti Group’s development plans for the future, in Romania and abroad?
For the already existing brands – Aforti Exchange, Finance, Factor and Collections our goal is to continue consolidating our position on the Polish and Romanian markets. In terms of new markets, our 2018-2020 strategy envisages for the companies from Aforti Group to expand to markets of at least seven European countries, including the Czech Republic, Hungary, Albania and Macedonia.
Our biggest project at the current moment is, however, the EMI license for which we have applied in Lithuania with one of our companies, Aforti UAB. EMI stands for Electronic Money Institution, and it is a market participant, licensed by the Bank of Lithuania, which has the right to handling electronic money transactions, including transfers to third party accounts and handling cards and payment accounts. Once we obtain the license, we will be able to handle electronic money transactions in all EEA countries and one of our first goals will be to passport these kinds of operations in Romania, thus enlarging the scope of our services in Romania.
- What is the yearly turnover that the company expects in 2019 (Aforti Exchange & Aforti Finance)?
We want to maintain the growth rate that we have had so far this year. Between January and August 2019, Aforti Exchange, our fintech has exchanged over EUR 100 million in currency in Romania, an increase of 250% compared to the same period of last year. We continue increasing our client base month by month as well as gaining trust from our Clients, which translates into increasing volumes each month. For Aforti Finance, we have granted the first loan in Romania in June this year and so far, we have so far received 41 applications for financing, in the total amount of 7,5 million lei, a result which we consider a very promising for the first 3 months of activity.