Term
Fintech
Companies and technologies that innovate financial services such as payments, lending, investing, insurance or accounting using software and data. They often compete with banks on speed and simplicity but are subject to the same licensing rules.
Updated
What it means
Fintech refers to companies and technologies that use software and data to innovate financial services such as payments, lending, investing, insurance or accounting. They compete with banks on speed, simplicity and low fees, often through a mobile app with no branches.
It includes neobanks, payment apps, lending and crowdfunding platforms, investment apps, buy now, pay later services and accounting automation tools. Much of this innovation was enabled by open banking under the PSD2 directive.
Fintech firms are subject to the same licensing rules as traditional financial institutions when they provide regulated services. Depending on the activity, they need authorisation as, for example, a payment institution, an electronic money institution, an investment firm or a crypto-asset service provider.
How it works in practice
For small businesses, fintech services offer cheaper payments, faster account opening, links between bank and accounting software and simpler financing. When choosing, check that the provider holds an EU licence and whether funds are protected.
Funds held with payment and electronic money institutions are not covered by the deposit guarantee scheme as bank deposits are, but must be safeguarded separately from the provider's assets. If the provider fails, getting the money back may still take longer.
The National Bank of Slovakia runs an innovation hub and a regulatory sandbox where fintech firms can discuss their plans and test new services under supervision. Crypto-asset service providers in the EU are subject to the MiCA regulation and its licensing requirements.
What to watch out for
Fast, simple services can hide risks, such as an account frozen by an automated AML check with no quick way to speak to a person. A company should not keep all its money with one fintech provider and should maintain a backup bank account.
When using fintech tools that access bank data or accounting records, check data protection, where data are stored and the contract terms. Third-party access to accounts should be granted only to the extent necessary and reviewed regularly.
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