EXPERT'S VIEW What are the challenges of the FinTech industry?

The fintech industry in Poland today consists of over 200 projects offering primarily online payment and financial management services. However, this market is very diverse and it is also made up of technology providers, online exchange offices, AI, paperless and blockchain projects, and a number of others. The sector is currently growing dynamically, and modern solutions are also introduced by traditional financial institutions.

In 2020, Autenti – creator of a secure electronic signature system, solution which was jointly implemented by PKO, BNP Paribas and Alior Bank to develop their own services using, of course, the Autenti solution itself to sign the contract – enjoyed special triumphs. The pandemic has shown that tools that have similar functions are today not only an opportunity, but a market necessity. The progressive development of the fintech sector and the increasing presence of the financial world online brings with it problems related to both security and the proper legal regulation of new solutions. We asked Aleksandra Kopeć, lawyer and the founder of FinLegalTech portal which explains the legal side of the implementation of modern financial technologies by business, to tell what challenges the fintech industry is facing today.

Aleksandra Kopeć: New technologies allow fintechs to fill the gaps in the poor offer available on the financial market. Thanks to modern, innovative solutions, entities from the FinTech industry can offer their clients unconventional and personalized services or products, adapted to the changing reality. Thanks to new technologies, fintechs can also offer traditional and proven solutions in a new form – digitized and available anywhere, at any time.But increasing the comfort of customers and ensuring greater availability of certain products or services are by no means the only advantages that new technologies bring. Thanks to their development, the activities of fintechs simply become safer and more effective.

The FinTech industry is one of the few that does not seem to feel the negative effects of the coronavirus pandemic. The temporary lull in the “real world” has acted as a catalyst for the development of new technologies, and has often led to the complete transfer of traditional solutions to the digital space. The last year has clearly shown that digitization of processes can not only contribute to the optimization of costs as well as time and work efficiency, but in certain circumstances it is even indispensable. Therefore, it is hard to resist the impression that due to the pandemic, the FinTech industry has gained the trust of a large number of users who were skeptical about it so far.

As an example, it can be indicated that during the pandemic, the number of non-cash transactions increased significantly. The concern to avoid transmission of the virus through contact with a coin or a banknote motivated some people to change the current method of payment to more “smart” ones, e.g. by telephone. Interestingly, along with the rapid increase in non-cash payments, the limit of “contactless” payments was also raised from PLN 50 to PLN 100 in Poland, which additionally facilitated the entire process. The interest in remote customer service has also increased – which for many financial institutions was an incentive to develop solutions in the spirit of paperless, e.g. implementation of the rules of customer video-verification.

FinTech, like any industry relying on the processing of huge data resources, is particularly exposed to the risks associated with cybercrime. On the other hand, the motives behind hacking attacks are specific – usually it is not about the leakage of confidential information itself, but most of all about gaining access to funds at the disposal of fintechs. Breaking the security measures in the IT infrastructure usually leads to measurable material losses consisting in the transfer of the customer’s property values.

One of the biggest challenges in this area is to ensure an appropriate level of information security. The activities of entities from the FinTech sector are very often not directly regulated by law, which also translates into the lack of clear guidelines regarding the management of information technology and ICT environment security. The legal requirements for fintechs, in the overwhelming majority of cases, are not as restrictive as those for traditional financial market entities. Enforcing an appropriate standard of professionalism may turn out to be very difficult in practice, considering that the activities of fintechs are not always strictly supervised by competent authorities, such as the Polish Financial Supervision Authority. Some entities from the FinTech industry, however, follow the regulations and guidelines intended for regulated financial market entities on the basis of good practices, which certainly increases the level of customer protection.