The digital transformation of financial services: evolution and competitiveness of Bulgarias emerging fintech cluster

This chapter introduces a conceptual framework for presenting the digital finance cluster in Bulgaria and analyses its performance. We find that the fintech sector in Bulgaria traces its origins to the communist era, with the first applications of digital financial technologies aiming at improving the performance of the Bulgarian National Bank and the state-owned commercial banks. After the fall of communism, the sector has gone through major transformations during the transition of Bulgaria from a planned to a market economy. We identify the Global Financial Crisis and Brexit as the most important events that have increased the impetus in the sector, with 50% of the Bulgarian fintech start-ups being founded after 2016. Our analysis shows that the digital finance cluster performs well, but lags behind in certain areas, such as the slower growth of the qualified labour force, relative to the growth of the sector, and the slow pace of transformation of the public administration to answer to the needs of high-tech sectors in general and the fintech sector in particular. We outline a series of policy recommendations to address these challenges and emphasize the role of science in this transformation process.