Regulatory barriers for fintech companies in Central and Eastern Europe

Abstract

Fintech is the delivery of financial products and services to consumers using a combination of innovation and technology. Fintech offers new solutions that have the potential to replace traditional banking operations. The paper presents, as the first contribution of its kind, a summary of the legislation and innovation facilitators provided by Central and Eastern European (CEE) countries for fintech companies. The purpose of this paper is to identify the barriers and challenges created for fintech companies by the current legislation. Another goal is to see how the regulatory environment adapts to the challenges presented by these technology-based companies operating in the financial and banking sectors. Using a comparative analysis, the most progressive countries regarding the preparation of legislation and the facilities that they create for fintech companies are Estonia, Lithuania, and the Republic of Slovakia. The least developed countries in terms of legislation and facilities for fintech companies are Albania, Bosnia and Herzegovina, Kosovo, and Serbia. Regulators in some CEE countries have created Regulatory Sandboxes and Innovation Offices, but fintech companies face many challenges, such as a lack of regulations, the prohibition of fintech companies’ activities, and the existence of two different regulators. The study also analyzes the results of the DiGiX index for the years 2018 and 2020.