Page 7 - FintechAtlas2019

Executive Summary
In the CEE Fintech Atlas 2019, articles by and interviews with key players in the areas of banking and financial innovation from 19 Central and Eastern European (CEE) countries
offer insights into the development of their respective fintech ecosystems. With its focus on Open Banking, this year’s CEE Fintech Atlas also provides an understanding of the local implementation of this approach.
Open Innovation and PSD2
PSD2 and the concept of Open APIs initially shook the traditional banking system. When the directive was issued, the concept of allowing client data to “escape” the secure premises of the bank was hard to accept. At that time, fintechs were seen purely as disruptors and potential threats to the financial services industry. Their solutions were often perceived by customers as cheaper and easier to use than those offered by traditional banks. There was a feeling that this new kind of competition would become even more aggressive towards banks by leveraging the advantages derived from PSD2. However, regulators have demonstrated great progress in developing official guidelines on sharing sensitive data and establishing a standardised and secure way of doing so via APIs. Due to the security ensured by
API standards, banks have shaken off their initial reluctance about sharing data.
Customer demand is driving the quick pace of change. Partnering with fast-developing, bold fintechs allows banks to leverage smarter and more flexible solutions that end customers can benefit from. Fintechs have changed their role from disruptors to facilitators and enablers of a revolutionary banking transformation. Furthermore, in CEE and even in countries not regulated by PSD2, the market offers many examples of corporations and traditional financial institutions seeking help and partnering with fintechs.
In addition to this, the topic of Open Banking changed the perspective of banks and paved the way for collaboration and the creation of financial ecosystems that nurture even more fertile ground for fintechs. Rather than competing with banks, fintechs offer their services based on a safe banking infrastructure and the transparent use of data via APIs. In all CEE countries, collaboration between banks and fintechs represents a promising climate for innovation and new
technological possibilities in a new financial ecosystem. The situation has positively changed in the following ways:
• Fintech associations have been founded and fintech incubation and mentoring programmes have been introduced by several banking institutions in Central and Eastern Europe
• Central and Eastern European countries, in which local markets are changing and pushing forward, have become hotspots for financial technologies and fintech communities
Facts & Figures
More than 65% of the population in the CEE market is expected to be using digital banking services by end of 2020 as a result of which digital markets will grow across the CEE region. Moreover, differences in digital penetration rates
in comparison with the leading Western European digital banking markets have decreased significantly in recent years (from about 25 to 30 percentage points to about 15 to 20 percentage points).
In addition to this, funding figures show that 2019 recorded
a new peak in the level of fintech investment in many CEE markets. Compared to 2018, the markets in Lithuania, Bulgaria, Hungary, Romania, Slovakia and Ukraine showed a strong growth in investment. Notable investments were made in companies including SME Finance in Lithuania (19.8 million euros), Software Group in Bulgaria (17.8 million euros),
Twisto in the Czech Republic (14 million euros), Minit in Slovakia (6.9 million euros), XOLO in Estonia (6 million euros), Hesqapkurdu in Turkey (4.1 million euros) and MyCredit in Ukraine (2.7 million euros). There is also a trend towards increased investment in fintech by local and regional VC funds, as exemplified by Speedinvest from Austria, Startup Wiseguys from the Baltics, Eleven Ventures from Bulgaria, ENERN from the Czech Republic, Hiventures from Hungary, Speedup Group from Poland, Gapminder from Romania and Revo Capital from Turkey.
In conclusion, research shows that, thanks to massive efforts in the field of digitalisation, Central and Eastern European markets are attractive for fintechs as well as for partnerships between fintechs and banks established in the region.
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