Brexit and the Fintech Revolution in Europe: Lessons from the Bulgarian Digital Finance Sector

Deyan Radev & Georgi Penev, Journal article in Competitiveness Review, 2026, (Scopus Q1, IF 4.610, Indexed in Web of Science)

Cite as: Radev, D. and G. Penev, 2026, „Brexit and the Fintech Revolution in Europe: Lessons from the Bulgarian Digital Finance Sector“, Competitiveness Review 32 (2): 403–418, https://doi.org/10.1108/CR-07-2022-0108.

Brexit is usually framed as a political and economic shock for the UK and the EU’s financial centers. This paper looks at it from a different angle: why did Bulgaria’s fintech sector accelerate after Brexit – despite limited venture capital and a comparatively small domestic market?

The central message is pragmatic: Bulgaria’s fintech growth after 2016 was not simply a “startup hype cycle.” It was strongly linked to firm fundamentals, strategic choices, and the broader ecosystem – and these factors can translate into real economic outcomes like job creation.

What the paper studies

The paper analyzes 128 Bulgarian fintech companies around the 2016 Brexit referendum and the following years of rapid sector development. Using company financial statements, the authors combine:

• Descriptive statistics (what the sector looks like and how it evolves), and
• Panel-data analysis (how firm characteristics predict performance over time).

The goal is to identify which business models and strategies are associated with stronger performance – particularly in a period when European markets were being reshaped and uncertainty was high.

The core finding: fundamentals matter more than hype

A key result is that larger and better-capitalized firms tend to generate higher operating income and profits. In plain terms: fintech companies that have more scale and stronger balance sheets are more resilient and more capable of converting market opportunities into sustainable revenues.

That point is particularly important in Bulgaria’s context, where venture funding has historically been more limited than in London, Berlin, or Amsterdam. The paper suggests that when abundant capital is not available, success depends more on:

• the ability to finance growth through stable revenues,
• disciplined cost structures, and
• credible execution.

The strategy insight: focus on what you do best (and outsource the rest)

The paper also highlights a concrete strategic lever: outsourcing non-core activities.

Many fintech firms face a classic trade-off. They need to move fast and comply with regulation, security requirements, and complex IT demands – but they don’t always have the resources to build everything in-house. The evidence in the paper indicates that firms perform better when they:

• concentrate on their competitive strengths (product, niche expertise, customer acquisition, proprietary tech), and
• outsource non-core functions that can be delivered more efficiently by specialized providers.

In other words, outsourcing – done strategically – is not a sign of weakness; it can be a scalability tool, especially in turbulent periods.

Real-economy relevance: growth can become jobs

A particularly policy-relevant finding is that better-performing fintech firms also hire more actively. This matters because it connects fintech to broader economic development:

• Fintech is not only about innovation and apps; it can generate high-productivity employment, especially in software, compliance, analytics, cybersecurity, and product roles.
• Strong fundamentals increase the likelihood that fintech growth translates into sustained hiring, rather than short-lived expansion.

Why “cluster factors” still matter

Even the best firm strategy plays out inside an ecosystem. The paper emphasizes that cluster-level conditions can amplify firm performance, including:

• access to talent (skills pipelines),
• a startup-friendly environment (administration, regulation, services),
• and links between firms, universities, and industry bodies.

This aligns with the broader view that fintech competitiveness is not only firm-level – it depends on the quality of the surrounding infrastructure.

Why it matters for Bulgaria / CEE

This paper has direct implications for how Bulgaria – and other CEE economies – should think about fintech growth in a post-Brexit Europe.

1) A realistic growth model for capital-constrained ecosystems

CEE ecosystems often lack the deep venture pools available in major hubs. The results suggest a workable model: build scale gradually, prioritize capitalization and financial discipline, and focus on sustainable operating performance rather than “funding-first” growth.

2) Strategy lessons for CEE fintech founders

For founders in Bulgaria/CEE, the paper offers a clear playbook:

• Strengthen capitalization where possible (retained earnings, strategic investors, partnerships).
• Build scale responsibly.
• Use outsourcing to avoid spreading scarce talent across too many functions.

These choices can be the difference between surviving turbulence and being forced to shrink when conditions change.

3) Jobs and competitiveness – not just innovation branding

If higher-performing fintech firms hire more, then fintech becomes a labor-market and competitiveness strategy, not just a tech narrative. Bulgaria/CEE can use fintech to expand:

• high-skilled employment,
• exportable services (B2B fintech, regtech, payments infrastructure), and
• ecosystem capabilities that spill over into other digital sectors.

4) Policy lever: unlock the constraints that hold firms back

The strongest message to policymakers is that growth will not be maximized by “startup slogans,” but by fixing bottlenecks:

• faster skills development (data, AI, cybersecurity, compliance),
• credible innovation support (sandboxes, digital public services),
• and predictable regulatory processes.

If those constraints loosen, firm-level fundamentals and good strategies have a bigger runway.