Polish financial market (including banking, investment services and insurance) seems to be mature and developed in terms of innovative technology and digitization. Most of banks in Poland offer at least one „disruptive” technology (converted to a specific service or product) to customers and can be called “digital”. From a business perspective it might be difficult for new entrants to compete with incumbent institutions, however, we can find examples of successful competition (e.g. Blik to name one). In this article I will focus on a fintech legal ecosystem and its ‘attributes’ important for any fintech company that would like to penetrate the Polish financial market, irrespective to its business model and approach to services (e.g. license, freedom of services/establishment). While business initiatives (accelerators, incubators) are also important I will not elaborate on that part of the ecosystem as it is out of scope of legal framework. Let’s start!
In Poland we may distinguish the following areas belonging to fintech world: (i) banking; (ii) investment services; (iii) insurance; (iv) technology services and (v) RegTech. Why not distributed ledger technology (DLT) and crypto-assets? This technology may be used in each of the areas mentioned above and – in addition – legal framework for DLT is currently being drafted and information is rather scarce.
Who is who? Polish Financial Supervision Authority at the centre of the fintech ecosystem
We have many public institutions that may fall within the scope of fintech ecosystem. The most important (from the market’s perspective) authority is Polish Financial Supervision Authority (Komisja Nadzoru Finansowego – KNF) which is responsible for the supervision of: (i) banks and credit institutions; (ii) payment service providers; (iii) investment firms; (iv) insurers and (v) occupational pensions institutions. In addition, its role is to protect consumers. Institutions that are falling within the scope of the supervision are obliged to contribute (the amount is “floating”) to the KNF’s budget.
The KNF has various powers ranging from licensing to supervising and imposing sanctions (the catalogue is quite large) in case of breach. If you wish to provide financial services in Poland, you will have to adapt to its standards. The authority has its own legal personality and budget (from 2019 onwards) and competence to issue recommendations, communication and statements. Such documents are shaping the market standards and institutions are “obliged” to follow them in a proper manner. Most documents are in line with European Union supervisory bodies, e.g. EBA and ESMA guidelines. The KNF does not have a legislative initiative, nevertheless its staff is engaged in various projects led by the Ministry of Finance.
The composition of the Commission (the highest body of the KNF) is rather large and includes i.a. chairs of the most important public institutions (central bank, ministry of finance, deposit guarantee scheme and other). What is worth noting is the fact that the KNF has its own departments for cybersecurity and fintech that are focusing on various projects important for the financial sector (currently the KNF is working on important tools that will enable banks to use cloud computing more flexible).
KNF and fintech ecosystem
The current status of engagement of the KNF in the development of the fintech ecosystem is quite complicated and a bit unclear. Few months ago, the Chairman of the KNF informed that the current versions of regulatory sandbox for fintech together with the Innovation Hub will be “suspended” (available in Polish) as both projects require significant changes and for a few months there was silence.
Recently the Head of FinTech Department at the KNF informed that the regulatory sandbox will be created in cooperation with the European Bank for Reconstruction and Development and it will be regulated by a specific legal framework. The same comment appeared in relation to the Innovation Hub which is a space for ‘testing’ products and services from a legal perspective (the KNF may issue an individual legal interpretation, however, you need an extensive legal opinion prepared in advance and provide it to the KNF).
The KNF informed also that it would launch a ‘marketplace’ or space for various parties interested in cooperation, e.g. investment funds, advisors and market participants and educational website. In addition, the KNF published a website addressed to fintech environment (www.fintech.gov.pl), however, last article was published almost one year ago.
Ministry of Finance, National Bank of Poland (unofficial name) and Bank Guarantee Fund?
Not only the KNF has a real impact on the fintech business. Ministry of Finance, National Bank of Poland together with the KNF are forming the Financial Stability Board (responsible for assessing systemic risks and issuing recommendations).
Ministry of Finance has a legislative initiative and therefore plays important role in shaping the fintech ecosystem. The Ministry of Finance usually asks the market players to participate in drafting legislation that is relevant for specific market (sometimes it is difficult to find such information). The Minister is also a member of the KNF’s Commission and Financial Stability Board. The Minster of Finance has recently changed in person (due to European Parliament’s elections) and therefore it is difficult to predict in what direction the whole legislation will go. The fact is that currently no draft legislation for fintech ecosystem exists (or is publicly available)
The Central Bank (Narodowy Bank Polski – NBP) has important role in developing the payment system in Poland. It may undertake regulatory actions, participate in legislative procedures and conduct on-going supervision over payment systems. The NBP is a host for Council for Payment Systems which is a body that may issue good practices, like it did recently with reference to pre-paid cards. The NBP has its own Department for Financial Innovation. The NBP with its ‘statistical’ and analytical teams is creating a very useful reports on various aspects of fintech activity, including consumer’s trends.
Bank Guarantee Fund (Bankowy Fundusz Gwarancyjny – BFG) is a deposit guarantee scheme and protects deposits of customers. It does not have a direct impact on the fintech ecosystem, however, the president of the BFG is a member of the Financial Stability Board and may have advisory capacity with reference to risks for the whole financial system and economy that may be created by fintech market players (e.g. BigTech and its impact on traditional financial system).
Other bodies and institutions?
The number of institutions and bodies that may have an impact on entities that participate in the fintech ecosystem is, paradoxically, quite large (in comparison to its size). For example, we have Financial Ombudsman and Office of Competition and Consumer Protection both helping – mainly – retail clients with complaints. While it is true that they do not ‘create’ a real value for the fintech ecosystem, the fact is they are important players that keep an eye on fintech companies.
Anti-money laundering competences relevant for fintech are attributed to the General Inspector for Financial Information. This body is responsible for various cases related to the Act that is implementing AMLD. It plays a very important role for the payment services sector.
Beside these rather ‘formal’ bodies that are typical for every financial and non-financial services ecosystem, we have many business and investment institutions and bodies that may help fintech companies to unveil their true potential. To name one we have Industrial Development Agency that offers various programmes aimed at supporting start-ups with finance and expertise. The Agency also launched Foundation for Innovative Economic Growth that is currently working on creating a new fintech ecosystem.
In addition, we have the Ministry of Digital Affairs that is responsible for digitization in Poland. It works on various aspects of using blockchain technology and protection of personal data as well as e-Citizen programme. The Ministry is currently working on 5G and IoT and without a doubt these projects will have a significant impact on the fintech ecosystem as well.
As you can see from this short analysis several governmental bodies are involved in shaping our fintech ecosystem. While the KNF has a leading role as it is a supervising authority, other institutions are significantly contributing to its development. Some changes are hopefully coming in the upcoming months, however, detailed information has not yet been revealed.
In next articles I will take a look on the payment legal framework (including cross-border activities) with some potentially interesting business cases. See you next week!