International Comparative Legal Guides Fintech 2020

We invite you to read the latest International Comparative Legal Guides, where the Polish Fintech 2020 chapter was drawn up by Andrzej Foltyn, Partner, Maciej Zajda, Senior Associate, and Katarzyna Biarda, Associate - experts from our Capital Markets and Financial Institutions Practice.

1. The Fintech Landscape

1.1 Please describe the types of fintech businesses that are active in your jurisdiction and the state of the development of the market. Are there any notable fintech innovation trends of the past year within particular sub-sectors (e.g. payments, asset management, peer-to-peer lending or investment, insurance and blockchain applications)?

2019 was another year of dynamic growth for the fintech industry in Poland. A significant increase in the number of start-ups and an expanded customer and service base of existing entities resulted from a number of different factors.

First of all, the amount of funds engaged in the venture capital market was many times greater than in previous years and for the first time in the history of Poland, it significantly exceeded PLN 1 billion. Undoubtedly, one of the biggest beneficiaries of the growth in both the number of transactions and the average ticket were fintechs. The number of venture capital funds, funds available through public entities, and the involvement of the largest foreign players guarantee that the market will be fueled by an appropriate amount of cash.

The second element which, in our opinion, is of significance for the development of the fintech industry is the great interest in the subject on the part of financial institutions, including banks in particular.

The Polish banking sector has for years boasted an openness to new technologies and has been a pioneer of innovative products and services on a global scale. Currently, we are observing a very large opening of most of the largest banking entities not only to internal innovations but, above all, to independent fintechs and people and ideas related to fintechs. The banks have dynamically operating units responsible for market research, acquisition of innovations and offering banking resources to verify the most promising undertakings. 2019 was a breakthrough year, mainly due to the first direct investments (equity) in leading fintech companies in the market. Undoubtedly, it is the banks targeting (mainly but not exclusively) payment services and personal finance management solutions and companies that give the fintech industry in Poland the leading edge. Furthermore, the banking sector is one of the most innovative Polish sectors investing considerable resources in modern technologies in areas such as biometrics, AI including machine learning, Robotic Process Automation, cloud computing or de-centralised databases based on DLT/blockchain technology.

Another dynamically growing fintech area is all kinds of services related to raising capital – in 2019, a special focus was on share crowdfunding. Leading representatives in this sector – crowdfunding platforms – conducted a dialogue with the Polish Financial Supervision Authority (“PFSA”) concerning the legal basis and admissibility of this type of activity. It seems that the position they reached will allow for even more efficient implementation of business assumptions and continuation of successful activities. In this area, the intensive development of undertakings in the area of loans and borrowings, including crowdlending, should also be indicated.

As every year, significant undertakings could be observed in the areas of currency exchange, brokerage services and insurtech. This time, there were relatively few novelties in the areas that were leading the way in previous years, i.e. blockchain, cyber-security and cryptography, but this seems to be only a temporary phenomenon, and solutions based on cloud computing and Distributed Ledger Technology promise to be the main driving forces for 2020 in Poland.

Generally, after years abounding in very fundamental changes in the legal system governing the activity of fintech (including Payment Services Directive (“PSD2”), General Data Protection Regulation (“GDPR”), AML4 Directive, AML5 Directive and MiFID2 Directive), last year gave some respite to existing companies. It helped to better use the Polish potential, i.e. qualified staff, still relatively low salaries, a relatively large market and openness to innovations in financial services.

Unfortunately, the consequences of the COVID-19 pandemic, unknown today, make us believe that the year 2020, despite excellent prospects, may witness a very significant slowdown in the financial services sector. However, we should suspect that it will suffer less compared to other areas of the economy.

Full content of the article is available in attached PDF. Alternatively, you can access it by clicking the link: https://iclg.com/practice-areas/fintech-laws-and-regulations/poland

Source: International Comparative Legal Guides Fintech 2020, Fourth edition, June 2020