June 18 (SeeNews) - Fintech companies in Bulgaria need a clear and predictable regulatory environment on both national and EU level in order to grow and be competitive on the European market, industry and government representatives say.
In their present form, EU and national regulations are not developed well enough to meet the needs of the growing number of fintech companies, representatives of the sector said on Tuesday during Digital Finance Outreach 2020, an online discussion organized by the European Commission and the Bulgarian Fintech Association (BFA).
"There is a lack of clear regulatory environment in Bulgaria. We should create a predictable regulatory environment, which will facilitate the adoption and development of the good European practices. I am pretty sure that if we create such an environment at the national level, the EU initiatives will work smoothly and we will benefit from them," Polya Peykova, a state expert at Bulgaria's finance ministry, said during the discussion.
According to Peykova, the industry has to develop even faster now, as a result of the coronavirus crisis which has accelerated the process of digitization of the economy.
"We are all aware that we have to run faster, our role as an institution is to provide a safe and predictable regulatory environment for the growth of fintechs. One of the major needs which has been identified in a survey of major stakeholders in fintech industries, both in banking and insurance, and also in IT and startups, is the need for a clear regulatory navigation and we are working very hard to create the best design and the best workable solutions," she explained.
The EU regulations for the fintech sector introduced so far have been successful in laying down the foundations but there’s still a lot to be done at the practical level, Miroslav Vichev, CEO of local online card payment services provider Borica opined.
For example, EU's Payment Services Directive (PSD2), started very strongly back in 2016, but the level of detail and definition was not brought to a level that enables it to work efficiently, Vichev noted.
There are certain gaps, for example in electronic identification, that have to be plugged by the national regulation, Vichev said, adding that it is still left to a large extent to market actors to decide how to interpret EU regulations.
According to Iliyan Kotev, Head of IT Governance and Organosis at Eurobank Bulgaria, which operates under the brand name Postbank, EU regulations can get in the way of the financial institutions in their efforts to address the needs of customers.
"We are developing a new solution and we have trouble making it attractive to the customer, while at the same time complying with EU regulations. We should work on that together with the local regulators and the European Commission."
Ivo Georgiev, co-founder of local fintech company Paynetics, commented: "I don’t think that the EU is prepared. Only recently have we seen examples of successful large-scale businesses come out of Europe and the main reason is the regulation when it comes to fintech innovation."
According to Georgiev, a lot of barriers can be removed, and incentives can be put in place without jeopardizing the solvency of banks.
The regulatory framework on a national level is still not beneficial enough for the operations of Bulgarian fintech companies, as it gives advantage to foreign competitors, Georgiev said.
"In certain situations, I think in Bulgaria maybe the regulator is more concerned about following the strict rules and procedures rather than stimulating the business. We have had situations in the past where local businesses are put at a disadvantage compared to other European businesses," he explained.
As many as 65 companies in Bulgaria have been identified as fintech - 41 of them are start-ups and 24 are already established companies. Over half of the enterprises were founded after 2015, and 54 of the identified companies are based in Sofia - the heart of Bulgaria’s fintech ecosystem and one of the fastest developing destinations for fintech in Southeast Europe, according to data provided by Eurobank Bulgaria's representative during the discussion.