On 25 October 2019, the National Bank of Hungary (MNB) was one of the first central banks in the CEE region to publish its new Fintech Strategy in line with the national strategy issued earlier this year. But different from Hungary's National Fintech Strategy, the MNB's guidelines offer a more precise roadmap of 24 concrete proposals and initiatives.
The MNB's Fintech Strategy is based on recent research, which revealed that the level of digitalisation within Hungary's banks and financial institutions is remarkably low. Since this Fintech gap poses a danger to the market's financial stability, the MNB's strategy encourages immediate digital development within the banking sector.
The strategy also encourages cooperation between market players and Fintech companies to facilitate digitalisation and innovation within banks, which in turn will help to integrate them into the global financial sector. The MNB is also aware of the benefits which Fintech innovation can have on other financial tools, such as insurance services (InsurTech), capital market products and asset management solutions.
In light of these considerations, the four main goals of the MNB's Fintech Strategy include:
- increasing the competitiveness of financial services;
- improving the effectivity and stability of the financial system;
- supporting an advanced and active Fintech ecosystem; and
- developing financial awareness and professional education.
In order to reach these goals, the MNB created a roadmap of 24 initiatives and proposals that include 14 initiatives within the MNB and ten proposals for government and the Fintech community.
In order to encourage new Fintech services, the MNB will support services based on an instant-payment system and provide standards, guidelines and designs. Unifying the rules of digital identification and creating a fast track for licensing can speed Fintech innovation. The MNB is supporting this innovation through its guidelines on the digital transformation of banks, reforming digital technological standards (e.g. NFC standards) and creating a technology sandbox. It is expected that these guidelines will trigger both digital transformation and cooperation with innovators.
In order to create a strong Fintech network, the MNB also proposes establishing cooperation with universities, national cyber and data protection institutions, Fintech bridges with foreign central banks, a MNB incubator programme and a permanent Fintech Club.
Lastly, the MNB aims to improve financial and technological education with targeted campaigns that promote electronic payment methods, tech competitions and professional training.
Government and the Fintech community
The Hungarian government is best able to support the digital transformation of its banks and spur Fintech innovation with legislation. To this end, the MNB proposes converting its regulation on the Regulatory Sandbox into law. The MNB also wants to make it possible for Fintech companies to use the Regulatory Sandbox with a preliminary license which could lighten the use of the sandbox.
Specific legal provisions on Crowdfunding, STOs and ICOs will also be welcome since none of these areas are currently regulated in Hungary. Digital transformation could also be expedited by simplifying and speeding up online contracting and electronic signature processes, and introducing new tax incentives for digital transformation and investments.
To this end, the MNB suggests publishing a governmental project list on digital demands and plans, and opening the structured central databases to digitalisation, such as the land registry or the tax authority’s income data system. According to the MNB, the Fintech community can help by creating a coordinating forum with governmental export-import agencies and establishing a Fintech alliance to represent the sector.
The MNB's FinTech Strategy can be accessed at this link: https://www.mnb.hu/letoltes/mnb-fintech-strategia-final.pdf in Hungarian.