We may not like buzzwords and often complain about their overwhelming presence, but they are helpful for embracing the change they put a name tag on. Almost 100 years ago one such buzzword was coined in CEE region – the word ‘robot’. Invented by Czech writer Karel Capek, it was a word that reshaped our way of thinking and marked many 20th century innovations. With the term 'FinTech' we can’t really track down its inventor, but one thing is clear: it does redefine the way we look at the financial sector across the globe and in Poland. And perhaps, decades from now, another buzzword will be associated with Poland and the CEE region – a FinTech Hub.
There are three major catalysts for the development of financial technology and the growth of the digital economy: clearly-defined state policy directions, a vibrant ecosystem of innovation and incentives for start-ups and corporations. Poland is advancing in all three quickly which makes it well positioned to become a FinTech hub for CEE.
Why is innovation so crucial to Poland?
After the 2015 general election, Poland re-evaluated its liberal economic policy and set out its Strategy of Responsible Development – an official economic policy guidebook emphasising the role of the state in ensuring economic growth. The new strategy stated that the country should build on its advantages, with a particular focus on high added-value jobs and innovation. In early 2017, the political leadership decided to put FinTech on the list of strategic sectors that have a chance to become future engines of the Polish economy.
The ability to listen to market needs, and the ability to seek solutions proactively within the current legal and organisational framework are key factors favouring financial innovations in Poland. In November 2017, the Financial Innovation Development Team, a group of business, academia and authority stakeholders, delivered a report presenting the barriers and recommendation for the development of the FinTech sector. It had its effect in reorientating the KNF, Poland's financial oversight commission. With amendments to the Act on financial supervision, the legislator extended the KNF's statutory goal to support the development of innovation in the financial market. Other recommendations are in the pipeline such as the small payment institution included in the PSD2 implementing draft bill and the creation of a FinTech-dedicated department at the KNF. One of the biggest unfulfilled demand remains a regulatory sandbox a solution that allows entrepreneurs to safely test new products without the need to comply with all regulatory requirements.
Poland learns from Global FinTech Hub champions
The unquestionable leader among FinTech hubs is London. The UK government is known as one of the most progressive advocates of innovation and has set up mechanisms to facilitate the development of FinTech's national ecosystem. The British were the first to create a regulatory sandbox, thanks to which selected entities of the financial market can test innovative solutions even before they formally meet all the requirements in the licensing process or do so to a limited extent. The example of London was followed by Singapore and other FinTech hubs in the world, including Australia and the United Arab Emirates.
The KNF is carefully looking to lessons learned by different authorities. In fact, in November 2017, the Monetary Authority of Singapore (MAS) and the KNF signed an agreement in the FinTech area, defining a framework for cooperation. A similar agreement has been concluded with Taiwan’s Financial Supervision Commission (FSC) in March 2018. Each of these examples (UK, Singapore and Taiwan) are carefully examined by Polish authorities and serves as benchmarks for regulatory changes proposals.
Ecosystem supporting development of Silicon Valley for FinTech
A positive feature of the Polish financial sector is considerable interest among large banks in various forms of cooperation with start-ups and vice versa. This cooperative strategy can be seen in banks launching acceleration programmes (PKO BP, ING and Alior have all done so). And these activities are complemented by financial instruments created by the PFR, the Polish development fund which offers to co-fund start-ups, business angels and venture capital funds.
But there's more than just 'smart money' available for FinTech. Ministries and public institutions are offering an array of networking opportunities to start-ups. One of the first hosts was President Andrzej Duda who invited start-ups to the presidential palace to showcase the latest technology application and brightest inventions. The most promising among them were granted the privilege to travel as part of the official delegation to other countries. Twenty other promising entrepreneurs were invited to present Polish business at the world’s biggest industry fair, Hannover Messe. It may not always be the case that public officials are supportive but a strong push comes directly from the government, and more specifically from premier Mateusz Morawiecki. The former deputy PM and minister of finance and economic development has said on many occasions that “We (Poland) want to be the Silicon Valley of Central and Eastern Europe”.
If this quest for economic growth based on innovation in financial sector brings any positive effects, we are about to learn. One thing is for sure: the role of the state in driving the economy has shifted from a laissez-faire mindset to an active role for the government in shaping conditions for strategic sectors. This means that in the foreseeable future, the FinTech sector will have to conduct a dialogue with decision-makers and regulators, making sure it creates the synergy that will make Poland a FinTech hub for CEE.