Foreword

FinTech innovation has the potential to drive productivity gains, enhance economic growth, encourage innovation that spurs job creation and improves the quality and diversity of financial services. It can promote financial inclusion for the underserved or underbanked parts of the population, such as SMEs without collateral or prior credit history, or citizens in remote areas of the country. Data is at the core of FinTech financial applications. The provision of many such services is enabled by financial innovations where data usage is a cornerstone. Fostering FinTech innovation can strengthen competition in the market, while at the same time allowing the penetration of international markets.

The level of innovation and technical complexity of certain FinTech applications lead to a perceived uncertainty by the market about the existence and/or applicability of relevant regulatory/supervisory frameworks. Such uncertainty hinders the full exploitation of the benefits of financial innovation. This highlights the benefit of regulatory sandboxes for the entire ecosystem, including regulatory and supervisory authorities. In this regard, sandboxes and other innovation facilitator arrangements are critical as they allow small-scale testing of innovation in a controlled environment supervised by the competent authorities, assisting them to better understand the regulatory treatment of this testing phase, while also allowing engagement in a constructive dialogue with supervisory and regulatory authorities.

Against this backdrop, a technical support Project has been launched in May 2022, funded by the European Union via the Technical Support Instrument (TSI) and in cooperation with the European Commission’s Directorate-General for Structural Reform Support (DG REFORM), together with the Organisation for Economic Co-operation and Development (OECD) as the designated implementing partner. The project falls in the area of administrative and regulatory reform, and seeks to unlock the potential of FinTech applications and the use of data in financial services in the Czech Republic and to examine the possible establishment of a sandbox in the country to enable FinTech innovation on the basis of data sharing and usage. The development of the FinTech sandbox features as a milestone of the Digital pillar of the Czech National Recovery and Resilience Plan (RRP), which is focused on digital technologies and aims at creating sandboxes in regulated sectors in line with EU priorities. Its successful completion will have a significant importance from political, economic and social perspectives, contributing to the top EU priorities – Green and Digital Transition.

This report provides an overview of the FinTech market in the Czech Republic (firms, activities, products and competitive environment, enabling environment and challenges) and the relevant local ecosystem in which it operates. The report also provides an overview of the current regulatory and supervisory frameworks relevant for FinTech in the country and an assessment of the potential impact of the new EU legislative proposals on this sector. The report also underlines the existing obstacles to FinTech development in the Czech Republic, including access to data, and relies on input provided by the Czech FinTechs through an online OECD survey, and to bilateral consultations with stakeholders involved in the Czech FinTech ecosystem.

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