The fintech space has expanded significantly in recent times. The emergence of agile new players has disrupted the status quo, providing customers with state-of-the-art services and giving long-established financial institutions plenty to think about. Globally, the fintech market is predicted to be worth approximately $324 billion by 2026, exhibiting a CAGR of 23.41%.
This rapid growth has encouraged regulator scrutiny. Although customers are largely satisfied with the development of innovative fintech solutions (consumer adoption of fintech services stands at around 64% globally), the sensitive nature of the information being handled by these businesses, combined with their relative inexperience means it would be remiss of regulators not to take a closer look.
For fintech businesses, this increased regulatory spotlight naturally brings challenges.
In the European market, in particular, acquiring regulator approval is not necessarily as straightforward as it might initially appear. The European market is fragmented - in terms of both payments culture and regulations. For any fintech firm that wants to do business here, they will first need to acquire detailed insights into their chosen market before acquiring the relevant license. While this may present some difficulties, fortunately, help is at hand.
Here’s how we do it.
Before fintech firms begin applying for a license, they should first determine what it is they are trying to achieve as there are a variety of reasons why a business may require an EU license. For example, they may be based in the UK experiencing Brexit-related difficulties, or they could be headquartered in a different jurisdiction entirely and looking to passport their services throughout mainland Europe.
Regardless of the objectives, it is wise for fintech firms to gain an understanding of the payments culture in their chosen market
Despite the best efforts of the EU, Europe is not a homogenous market. In Germany, for example, cash remains favored for a large proportion of payments, even though digital solutions are well established in the country. This kind of local knowledge is easily missed and can lead to fintech firms making early missteps when entering a new market.
Payments culture varies hugely from country to country within Europe and so it is crucial for fintech firms to perform some market research and address which verticals are worth focusing on as a new entrant in the market. Similarly, organizations may want to determine which partnerships they could create with local players - this is where PaymentGenes can help. We provide a step-by-step approach that includes a global overview of various markets and a detailed engagement strategy to determine the barriers to entry, partnerships opportunities, and which challenges new businesses could address. All of these issues are part of the process of becoming a regulated entity.
There are a few different licenses for fintech firms to consider, each with different regulatory requirements. Depending on whether your business is a payment institution, an e-money provider, a payment initiation firm, a payment information services provider, or a cryptocurrency payment app will affect the type of regulatory approval that you will require.
With our experience in the European regulatory space, we will help you make the comparison between the different licenses that are available to you.
In addition, we will inform you if it’s possible to apply for an exemption to an EU fintech license. This is not always viable, but for businesses that are only managing a low volume of transactions, it could significantly speed up their entry into the market.
At PaymentGenes, we are in the middle of a fintech network. We spread knowledge throughout the fintech ecosystem and help companies position themselves within Europe. We can support companies who may not be familiar with the European market to conduct a successful launch through our proprietary marketing channels. We work extensively with our clients, not only to help them secure a license but also to support them create a local team full of industry-approved senior management personnel that will help them to achieve regulatory approval.
One of our major advantages is our experience working with De Nederlandsche Bank (DNB), a highly regarded regulator that can grant fintech firms access to the entire EU market. We know what kind of process DNB uses to grant approval, we understand what approach works and what doesn’t. And we have helped many fintech firms secure a license through this regulator.
Our approach to supporting your DNB license application involves multiple stages:
This stage consists of a review of your existing documentation, where we identify any gaps and make a plan for your license application. Depending on the maturity of your documentation and your ability to fill any identified gaps with your team and our support, the expected throughput time of your application process will be nine to twelve months. The actual license application process is expected to take between six to eight months. Following this stage, we will provide some general feedback on the structure of your documentation and specific advice regarding any missing elements.
At this point, we will advise you regarding any adjustments that need to be made to your documents for DNB to approve them, as well as supporting the creation of any mission documents. This process is expected to take up to three months depending on the necessary changes and any new documents that need to be drafted.
After completion of phase two, we will be able to file your license application in the DNB portal. Fulfilling requirements within the portal environment and uploading the documents takes approximately a day.
This phase will take between six and eight months. Every few weeks we will receive questions from DNB that we will need to answer as soon as possible for the application to progress without delay. We may request weekly group meetings to allocate tasks and keep track of costs.
In addition to our relationship with DNB, we work with several other partners that can help businesses entering the EU fintech market. Some of our most valued partners are:
a SaaS-based card issuing platform that is connected to both Google Pay and Apple Pay and can offer prepaid, commercial, debit, and credit cards. The company also provides a unique My Carbon Action solution that delivers insight into the carbon footprint for each transaction.
a composable banking platform that enables customers to compose a banking experience that is tailored specifically for them without being tied to a specific vendor, product, or technology. PaymentGenes acts as a consulting partner for payments and card functionalities, covering the complete process from product definition to a certified launch.
Thanks to our strong cooperation with MasterCard and Visa, PaymentGenes helps with establishing card scheme membership or finding your BIN sponsorship to enable issuing of your payment card with the shortest time to market possible.
Getting it right - the first time
We understand the application process for an EU fintech license. We also understand that the initial delivery of your application will have a huge impact on its speed and chances of success. For that reason, it is essential that fintechs get their applications right the first time.
Don’t leave anything to chance. Find out how PaymentGenes can support your license application today or schedule a one-to-one down below!
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