Page 25 - FintechAtlas2019

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Fostering collaboration between banks and fintechs
An interview with Anikó Szombati - Chief Digital Officer at Magyar Nemzeti Bank (MNB), the central bank of Hungary - will provide a detailed view on the collaboration between banks and fintechs as well as the market situation in Hungary. Moreover, regulatory tools and programmes in Hungary will be discussed.
What is the current agenda of the MNB regarding the digitalisation process?
Szombati: Our goal is to increase the competitiveness of the financial services offered in Hungary, so that they will be accessible to a wide range of customers, in a personalised form and reasonably priced, while at the same time their digital form does not compromise their safety. To achieve this, we are promoting the rapid digital transformation of established banks, which will also support cost-effectiveness as well as the stability of the domestic financial system. The aim of encouraging innovative solutions and the widespread implementation of state-of-the-art, cutting edge technologies is to significantly reduce the operating costs of financial institutions, to manage risks more effectively, and to improve the quality of their services.
Regulatory support is also aimed at fostering partnerships between incumbent institutions and fintechs and developing the capability of the domestic financial system to attract technological talent. A strong and well-developed fintech sector could act as a catalyst for the development of the financial system that could become the engine of sustainable economic growth.
In addition to the proliferation of innovative services, the aim is to further increase consumers’ financial awareness and strengthen their control over these services, as well as to encourage ethical behaviour by financial service providers.
How could the MNB support relationships between banks and fintechs?
Szombati: The MNB is committed to supporting the safe
spread of fintech solutions: In order to provide effective ways
of supporting innovative ideas in the financial system, the MNB has been operating its Innovation Hub, one of the first in the region, since March 2018. Here we have so far been resolving issues arising at the borders of the regulatory perimeter for more than 50 applicants, incumbents and fintechs alike. The MNB Regulatory Sandbox was also launched at the end of 2018. The first regulatory sandbox in the region provides many benefits for applicants, whom, due to regulatory reasons,
we are expecting to reach for us in an incumbent-fintech partnership format. These participants can gain market- validated orientation on the potential demand for, return on and feasibility of their innovative ideas, which can ensure a faster and easier market entry for them.
And finally, in October 2019 we published our Fintech Strategy, which outlines a two year action plan consisting of 14 action points for us and 10 points for other stakeholders in Hungary on how to facilitate the digital transformation of incumbents and the proliferation of a dynamic and growing fintech ecosystem in Hungary so that all potential ways of cooperation among these two sectors can be exploited. Since then we have progressed in many fields, e.g. in setting up a Fintech Club, in partnerships with universities and by completing the most comprehensive ever digitalisation survey in Hungary.
How do you evaluate the current fintech ecosystem in Hungary? Is there any room for improvement?
Szombati: Despite the number of successful companies in Hungary, the fintech sector is still at the beginning of its growth trajectory. Domestic fintech solutions that are already on the market or being tested are related to a wide range of financial services, with mobile payment and payment solutions being the most common. The MNB estimates that approximately
120 fintechs are already active on the market in Hungary with one or more products and services, and numerous startups offering financial innovations are gaining regional recognition among foreign consumers and investors. According to market feedback, domestic startups implementing innovative solutions have many progressive ideas for the entire financial sector, but the domestic fintech sector is still in an early stage of development, as the domestic market structure or regulatory inflexibility often prevent the independent market entry and growth of these fintechs. In numerous cases we also see immature business models. These features may motivate innovative players to develop collaboration with incumbents.
What are the main current developments from the regulatory side and on the market?
Szombati: With the entry into force of PSD2 both incumbents and third-party payment service providers have been provided with new opportunities for the distribution of additional innovative services. On top of that we expect that the launch of the instant payments system in March, which covered the whole banking system in Hungary as participation is obligatory by law, provides further opportunities for enhancing the volume
of electronic payments in Hungary in many innovative forms. Hereby I would like to mention that payment transactions could be initiated not only by being aware of the bank account number of the counterparty but also of other secondary identifiers like their email address or phone number. Regarding market developments we see that online onboarding and account opening has already become available or will soon be launched in almost all banks. On this basis we expect that customers will be endowed with an increasing number of safe, simple and convenient financial products and services, while the possibility of comparison will also ensure competitive pricing.