Fintegration – collaboration of the FinTech sector with the traditional financial sector and regulators
Fotolia / ne2pi
Recently I had a pleasure to become a programme committee member of the FinTech Sector Congress which took place in Warsaw, Poland on 28 March 2017, and I also have moderated one of the panels during the congress, the one about a “Fintegration”.
Below I present my summary of the panel discussion – to find out more about the congress and the panelists please go here.
The panel’s theme was “fintegration”, understood as, on the one hand, cooperation of new players on the financial market (namely the FinTech sector) with the traditional players on this market (primarily the banks) and, on the other hand, an analysis of the approach of the Polish regulatory/supervisory authorities to financial innovation and the ability of these authorities to support innovation. The panel discussion revolved around the main arguments mentioned below.
Timeline for PSD2 Transposition in Poland – FinTech and Banks Save the Date!
- Mid-February 2017 – Internal Ministry of Finance’s works and public consultations of the working draft of legislation under the umbrella of Financial Market Development Council (RRRF) (including with market players and public authorities).
- March – April 2017 – External consultations.
- June – August 2017 – Works within the govenment.
- September 2017 – Forwarding the final draft to the Parliament.
- Mid-November 2017 – Parliamentary works and passing the amendment to the Payment Services Act.
- December 2017 – Signing of the new law by the president and publication,
- 13 January 2018 – Entry into force of the Polish transposition of PSD2.
Apart from the above timeline, during the meeting the so-called national options under PSD2, possibilities for “regulatory sandbox” under PSD2 and transitional provisions were also discussed.
This article was also published on my LinkedIn profile and can be found here.
FinTech and Banks – The Beginning of a Beautiful Friendship
If you are in the finance world you will have heard the word “FinTech” (unless you are having a gap year or are living under a rock), one of the most popular finance buzzwords in use today. Some argue that FinTech may be a bubble – and one that is set to burst shortly – but as a bank or other financial services provider you cannot really end the FinTech discussion with such a superficial assessment.There is no binding definition of “FinTech”, so let me stick with the definition I have used at several finance conferences this year: FinTech is an industry made up of companies (entities) that use innovative financial technology to provide or support financial services. People also use the term to describe those companies that create the technology to provide or support financial services, so it is very likely that you have already met firms claiming that they are FinTechs themselves.
The big question now is what kind of relationships between banks and FinTech newcomers shall be developed in the coming years?
Being the organizer and chair of #FinTechFriday @ Squire Patton Boggs Warsaw monthly meet-ups, I thought this might be good to ask this question to my colleagues at Alior Bank, one of the most innovative Polish banks, which has even created an in-house innovation lab (Alior Bank Innovation Lab or “AIL”) to make the most of the rise of FinTech (which, as I understand, is usually a goal of such labs). During our latest #FinTechFriday event on 18 November 2016, Mr. Igor Zacharjasz, Startups and Ecosystem Leader at AIL, was our guest speaker and provided his insight on the meeting’s theme: Bank Innovation Labs: FinTech’s Friends or Enemies?
During the meeting, Igor has shared with us some details of AIL (for example, a basic Bank-FinTech joint project assessment period is 100 days within AIL) and confirmed that in his (and his firm’s) view, banks and FinTechs, in most cases, are destined to co-operate, with such co-operation already taking place in many instances. As an example of a Bank-FinTech co-operation success story in Poland, he pointed out Alior Bank’s co-operation with VoicePIN, a Polish FinTech company providing advanced voice biometrics solutions to clients around the world. Alior Bank in co-operation with VoicePIN has launched a smart-collection project using the so-called virtual agent Dronn – an application for which the bank won one of BAI Global Banking Innovation Awards earlier this year.
I also took the opportunity to ask Igor which FinTech types he considered as the most interesting from the perspective of possible co-operation with banks. According to Igor, such cooperation in the coming months is most likely in the areas related to business models based on PSD2 (Payment Services Directive 2), blockchain, artificial intelligence and, last but not least, biometrics.
By the way, Igor’s predictions as to friendly scenario of future relationships between banks and FinTechs has also been confirmed by most of speakers during FinTech CEE Digital Congress which took place in Warsaw on 22-23 November 2016.
The bottom line is that, in my view, we are now in the so-called FinTech 2.0 phase. This means that banks and FinTechs should work together to find opportunity areas within the banking sector and work together to implement such improvements.
To borrow a quote from Casablanca: “Louis, I think this is the beginning of a beautiful friendship.”
This article was originally published on the O-I-CEE! Central and Eastern Europe Legal News and Views Blog.
FinTech w otoczeniu regulacyjnym (moderacja panelu)
Tej jesieni organizuję i będę uczestniczył w wielu wydarzeniach związanych z branżą FinTech. Na wszystkie z nich chciałbym Państwa serdecznie zaprosić w imieniu swoim i organizatorów.
W kilku krótkich artykułach przedstawię ich opis. W przypadku, gdyby chcieli Państwo wziąć udział w którymkolwiek z opisywanych wydarzeń – bardzo proszę o e-mail (jacek.wisniewski@squirepb.com) lub wiadomość przez LinkedIn, chętnie udzielę Państwu dalszych informacji.
Fintech w otoczeniu regulacyjnym – współpraca FinTech z pozostałymi uczestnikami rynku finansowego w kontekście regulacji – panel na Kongresie FinReg 2016
Data: 28 września 2016, godz. 13.40, (Dzień 1., Sesja III)
Miejsce: Warszawa, Polska
Agenda: Agenda FinReg 2016
Kongres FinReg 2016 (V Kongres Regulacji Rynków Finansowych) organizowany przez Instytut Allerhanda (http://kongresy.allerhand.pl/finansowy) to jedno z najważniejszych polskich wydarzeń poświęconych regulacjom rynków finansowych.
W tym roku tematem jednej z sesji panelowych, którą będę miał przyjemność moderować, przygotowanej we współpracy z Konferencją Przedsiębiorstw Finansowych, jest „Fintech w otoczeniu regulacyjnym – współpraca FinTech z pozostałymi uczestnikami rynku finansowego w kontekście regulacji”.
Z moimi rozmówcami, przedstawicielami branży FinTech, bankowcami i przedstawicielami instytucji płatniczych zastanowimy się:
· jakie najnowsze i nadchodzące zmiany prawne uważają za istotne dla rynku finansowego i swoich firm?
· jak rynek usług finansowych powinien przygotować się na możliwą zmianę modeli biznesowych w związku z coraz szerszym wykorzystywaniem nowych technologii i zmianami w prawie?
· czy nowi na rynku gracze z branży FinTech staną się konkurentami czy może parterami dla banków?
· Czy na horyzoncie widać już finansowego “Ubera”?
Nasza dyskusja będzie również zmierzała do sformułowania koncepcji zmian regulacyjnych, które zdaniem przedstawicieli podmiotów finansowych powinny być przedmiotem zainteresowania regulatorów.
W imieniu panelistów, organizatorów i swoim własnym serdecznie Państwa zapraszam!
My summary of the Vth KPF’s Cash Loan Sector Congress in Warsaw, 11 May 2016
The KPF’s 5th Cash Loan Sector Conference in Warsaw was a jubilee conference this year. Five years have passed since the first Congress, so the time has inevitably arrived for a summary. This Congress adopted such a formula.
On the one hand, this was a summary of achievements, the undeniable achievements of this sector, which, five years ago, was facing problems at practically every level, problems of financing, problems with reputation and now, after five years, it is a modern, buoyant market of modern financial institutions, which responsibly provide funding to consumers and this market is developing excellently. So a positive summary of this five-year period is justified.
On the other hand, of course, as at every Congress and this is probably the third or fourth Congress that I have attended, there was a great deal of discussion about legal regulations; here, lawyers always have ample opportunities for presentations. Although this market is not as regulated as the banking market, as the discussions have shown today, regulations are having an increasingly greater impact on the functioning of this sector.
A very interesting topic, which appeared for the first time at the Congress, is the financing of the sector. This was always a somewhat shameful topic, a sort of taboo. In fact, I have the impression that the players on the market did not want to share information on this with each other. Certain information was imparted at this Congress, hands were uncovered. It turns out that it is increasingly easier to obtain funding on the cash loans market. To the extent that, what was unthinkable just two years ago, namely to obtain a bank loan to finance lending activities, it turns out that such a transaction was conducted this year. One of the entities on the market obtained substantial financing from a bank. This is certainly a symbol of change and caused a great deal of excitement in the room. Clearly, entities from this market see bank loans as an opportunity to obtain financing, although they have also been using other forms for a long time, namely corporate bonds.
There was also talk about securitization of claims related to granting loans, although I have the impression that securitization it is still in its infancy. I have the impression that this is still being thought about rather than acted upon.
This article was also published on my LinkedIn profile and can be found here.
Important Changes in the Regulatory Landscape of the Consumer (Personal) Loans Market in Poland
This article comments on the important changes in the regulatory landscape of consumer (personal) loans in Poland granted by non-bank lenders, which are entering into force on 11 March 2016.
Regulatory Landscape for Non-bank Lenders
The most important regulatory reference for non-bank lenders (including payday lenders and on-line lenders) which are, or plan to be active in the consumer (personal) loans business in Poland is the Polish Act on Consumer Credit (ustawa o kredycie konsumenckim) (hereafter, the ACC). Generally, the ACC is the implementation of EU Directive 2008/48/EC on credit agreements for consumers and therefore Polish regulations and requirements regarding the lending process and the content of loan documentation are generally in line with EU standards in this respect. Other important pieces of legislation regarding the consumer loans market from the point of view of the lending process are also the Personal Data Protection Act, the Consumer Rights Act and the Electronic Services Act.
Under the ACC, a consumer loan is understood to be a loan of no more than PLN 255,550 (approximately EUR 60,000) or the equivalent of this amount in a currency other than the Polish zloty, which the lender grants (or which it promises to grant) to the consumer. Payday and on-line loans to be granted to consumers by a Polish non-bank lender are generally considered to be consumer loans under this definition.
The provision of loans (pożyczka), including payday and on-line loans, to consumers by non-bank lenders under a civil-law contract does not require a banking (or other) license in Poland (as opposed to credit (kredyt) provided by banks under Polish Banking Act, which requires a banking license).
Non-bank lenders can only operate as a limited liability company or a joint-stock company with a minimum share capital of PLN 200,000 (approximately EUR 46,000), in which the capital can only be paid up in cash and the members of the corporate bodies can only be people who have not been convicted for certain offences or crimes.
Given that financial services provided by non-bank lenders are provided in most cases to consumers, the main regulatory body that supervises the market and performs controls is the Polish Office of Competition and Consumer Protection (Urząd Ochrony Konkurencji i Konsumentów, UOKiK).
The Amendment
The Act on the Amendment to the Act on Financial Supervision, the Banking Act, and other Acts of 5 August 2015 (hereafter, the Amendment) introduces important changes to the regulatory landscape of the consumer loans business in Poland, which will have a significant impact on the payday and on-line loans sector.
The Amendment covers, among other things, the following aspects of the non-bank lending business in Poland, which enter into force as of 11 March 2016:
- it introduces the definition of “non-interest costs of credit” (pozaodsetkowe koszty kredytu) to the ACC – which are defined as “the total cost of credit excluding interest”;
- it sets a cap on the above non-interest costs of credit, which cannot be higher than25% of the total credit (loan) amount plus 30% of the total credit (loan) amount per annum, but in any case no more than the total credit (loan) amount over the total term of the credit (loan), and provides that certain loans (and their costs) which are deferred and/or rolled-over within a term of 120 days should be combined for the purposes of this calculation;
- tt sets out the maximum level of all payments related to late payment (e.g. “soft collection” costs) and interest for late payment, at the level of the maximum interest rate for the level of late payment.
The Impact
I believe the Amendment will have a significant impact on the non-bank lending business in Poland. The main trend to be expected is the extension of the product offering of payday lenders (which have offered mainly short term and relatively small loans to date) with longer term loans of a higher value, repaid in instalments. In my opinion, the reason for such a shift is that the limits of non-interest costs of credit and payments related to late payment that are being introduced undermine the main source of income to date of payday lenders, whereas these limits do not have such an adverse effect on longer term, higher value installment loans. In fact, such changes can already be observed as the market players have already adjusted their product offering to the new regulatory framework.
This article is my personal opinion and cannot be considered as legal advice.
The article was also published on my LinkedIn profile and can be found here.