In the wake of Brexit, Warsaw is looking to take business from The City of London, a bid that would have seemed fanciful just a decade ago. But quietly, Poland is already establishing itself as one of Europe’s leading centres for financial technology – a sector that is still fledgling but is rapidly developing its global potential.

Fintech developers are increasingly leveraging Poland’s sophisticated financial sector, large domestic population, a solid environment for information and communications technology (ICT) start-ups, and a degree of government support. Some international players have started to use Poland as a testing-ground for fintech products to be offered globally. However, private capital for start-ups is still fragmented, which is a concern for the entire tech sector.

“Poland is widely considered as being in the vanguard of global financial digitisation,” Maciej Sadowski, co-founder and CEO of StartUp Hub Poland, a non-profit foundation supporting start-ups in CEE, tells bne IntelliNews. “We are a playground for Western partners to test and popularise the most advanced customer interfaces and payment methods. Already, as far as standards are concerned we are ahead vis-a-vis regional markets and even Western neighbours.”

Indeed, Poland already has a range of fintech success stories to its name. Sadowski cites Cinkciarz, a fast-growing currency exchange programme; Finanteq, an e-wallet developer popular with Polish banks; and Kontomierz, which offers business-to-customer and business-to-business financial information services, including KontoX, an application programming interface for read-only access to bank accounts. In January last year, German consumer finance group Kreditech acquired Kontomierz for a “seven-digit amount” plus Kreditech shares, with the aim of accelerating the international expansion of both companies.

Others include Metrosoft, a provider of advanced financial platforms; Atsora, an accounting platform that won the Emirates NBD Fintech Challenge 2016 earlier in the year; Koala Metrics, which provides behavioural and demographic profiles of mobile users to help e-commerce and telecom operators better understand their customers; and VoiceLab, which works in speech-processing technology. The StartUp Poland Foundation, an industry association, lists a range of fintech companies on its register.

One of the most promising features of the Polish fintech landscape is growing co-operation between banks and tech companies; the latter are not developing their products in a vacuum, and the former are not shying away from embracing new technologies. The mutual benefits of cooperation are strong.

“Very often Polish fintech startups are founded by people with a strong financial background, which is a strong advantage,” says Igor Zacharjasz, startups and ecosystem leader at Alior Bank’s “Innovation Lab”, which works on research and development to accelerate the bank’s innovation efforts. “The knowledge and experience of the founders makes discussions with banks and financial institutions far easier. Investors in fintech startups are growing impatient with their ability to build scale, and partnerships are seen as a way to accelerate it. Banks have a large customer base and stable infrastructure. Startups provide out-of-the-box thinking and agility to adapt quickly to change.”

Alior Bank has dedicated a whole team at its Innovation Lab to seek out startups that fit its strategy. It has won praise for its Dronn project developed with Polish startup VoicePin. Dronn is “an intelligent virtual agent” that uses artificial intelligence (AI), natural language processing (NLP), automatic voice recognition (ASR), semantic analysis and speech synthesis (text to speech, TTS) in order to respond to customers in a natural conversational style and guide them through personalised conversations. The deployment of Dronn for debt collection campaigns and marketing surveys has helped Alior develop one of the most sophisticated call-centre operations on the market as well as creating cost savings.

Marcin Sidelnik, director at PwC Poland, sees growing potential for “taxtech”, particularly as Poland rolls out its new standard audit file for the tax (SAF-T) system, which aims to standardise tax reporting. The new system was introduced for bigger companies on July 1, and must be implemented by small businesses by July 1, 2017.

“In the last year we have been seeing growing interest from IT companies in developing business software in order to support tax processes broadly,” Sidelnik tells bne IntelliNews, adding that IT support for electronic delivery of tax returns and creating advanced data visualisation for tax and accounting is particularly in demand. “The taxtech sector should develop and expand, so one would expect that number of companies in this sector will grow and further increase competition and product innovation.”

Poles apart

One of the reasons that the Polish fintech sector is relatively advanced is the rapid development of the country’s financial sector since the fall of communism. The absence of tight regulation was one factor that allowed fintech to grow as banks expanded, as was a willingness by local and international players to adopt new products that they might have shied away from in more mature and less dynamic markets. The enthusiasm of customers also helped, of course.

“Our banking system is quite new, modern and fully open for products and services that can strengthen players’ market position,” Michal Zukowski, director of the National Centre for Research and Development, tells bne IntelliNews. “E-banking development shows that the Polish financial sector is able to implement quickly and effectively new methods of payment and money management.”

Of course, other countries in Central and Eastern Europe have also seen rapid banking growth, but Poland benefits from its relatively developed economy – and most of all, its market of 38mn consumers. As well as providing a large pool of potential customers for fintech, this also allows developers and banks looking to offer the technology internationally fairly robust “proof of concept”, at a relatively lower price than in Western European countries, StartUp Hub Poland’s Sadowski explains.

Estonia is widely seen as CEE’s near-runaway tech leader, with the government encouraging or even requiring digitisation of business processes and many aspects of daily interactions with the public sector, with knock-on effects for ICT businesses. However, Estonia is a small market.

“Poland has a very modern banking environment, with the sector leapfrogging other more advanced economies in Europe in terms of digital and mobile retail banking,” Krzysztof Kowalczyk, founder and managing partner of HardGamma Ventures, an early-stage ICT-focused venture capital fund in Warsaw, tells bne IntelliNews. “No other country in CEE tops Poland in terms of fintech, although there are some interesting things going on in the region; just look at the Baltics and the string of money remittance platforms which have sprung up there. But, in reality, only the UK remains in terms of major competition.”

The Polish economy’s strong performance – it was the only EU member to avoid recession in 2009 – and access to EU funding targeting innovation (better used here than in most CEE countries) have also helped. The sector is also supported by organisations such as the MIT Enterprise Forum Poland, and D-Raft – which will launch The Heart, a hub for linking corporations and tech developers, in Warsaw in the autumn.

Finally, there is a degree of commitment to the sector from the government. While the current conservative Law and Justice administration has faced substantial criticism for its approach to constitutional safeguards, the media and social policy, it is not backward-looking when it comes to technology.

Zukowski identifies two figures who are particularly attuned to the needs of the fintech sector and the conditions needed for its development: Deputy Prime Minister and Minister of Development Mateusz Morawiecki and Minister for Digital Affairs Anna Strezynska.

Morawiecki was CEO of Bank Zachodni, a leading bank, and has launched the so-called Morawiecki Action Plan”, which among its broad development goals aims to support new technologies, start-ups, and venture capital funds. Strezynska, former head of the Office of Electronic Communications, has taken a new approach to bitcoin and blockchains; together they “make investors more confident of the new-born start-up ecosystem in Poland,” notes Zukowski.

Despite the positivity abounding around fintech in Poland, there are still barriers to the sector’s development, mostly linked to the broader start-up environment in Poland. “Poland has the intrinsics of a leading startup hub: people are educated, entrepreneurial, and thrifty,” Fedele Di Maggio, who worked across the CEE financial sector before founding DiPocket, a London fintech start-up, tells bne IntelliNews. “However, compared to other centres, the startup ecosystem – venture capital and angels, accelerators – is less developed and the regulatory environment is less conducive to the creation of new businesses as it does not follow a risk-based, materiality approach. In addition, in my experience young Polish graduates are very cautious when considering employment opportunities in startups, which makes it harder to extend the team beyond the founders.”

Di Maggio says that the lower availability of funds, as well as a stronger focus on operations rather than marketing, hold back Polish startups from international expansion. He feels that a softer touch on early-stage innovators from the Financial Supervision Authority (KNF), without imperilling systemic stability, would be beneficial, and encourage greater venture capital participation in the sector. Nonetheless, with the right changes, he sees Poland as a European leader, capitalising on the broader EU market.

Like some leading Polish bankers, Sadowski sees Brexit as an opportunity for Poland; he also argues that the country should look to attract budding developers from the struggling economies of Russia and next-door Ukraine. “The legislative situation is at a crossroads,” he says. “Either Poland will adjust to average Eastern [European] regulations, or will leapfrog today’s standards and become Europe’s, or even the world’s, most attractive hub for equity crowdfunding and fintech.”