The Fintech Landscape in Greece
1. The Fintech Ecosystem
1.1 Types of Fintech Businesses
Greece’s fintech landscape is vibrant and diverse, reflecting a growing demand for digital financial solutions. The market includes both regulated and unregulated entities, with a focus on neo-banks, payment institutions, and electronic money (e-money) institutions. These entities provide a range of services, including instant payments, mobile payments, digital wallets, and payment initiation services.
The COVID-19 pandemic acted as a catalyst for digital transformation, accelerating the adoption of fintech solutions. As traditional banking methods faced restrictions, consumers turned to digital services, leading to a surge in electronic transactions and e-commerce. This shift has prompted fintech companies to innovate, particularly in the areas of Buy Now Pay Later (BNPL) solutions and regulatory technology (regtech), which automates compliance processes like Know Your Customer (KYC) and due diligence.
1.2 Regulatory Restrictions
While there are no outright prohibitions on fintech businesses, the financial services sector in Greece is heavily regulated. Companies must comply with local laws and the directives of the Bank of Greece (BoG). Cryptocurrency-related businesses, for instance, must adhere to stringent regulations under the Greek Anti-Money Laundering (AML) Law and the Markets in Crypto Assets Regulation, which came into effect in June 2023.
2. Funding for Fintech
2.1 Types of Funding Available
Greece has cultivated a robust startup ecosystem, attracting significant attention from multinational corporations. Fintech companies primarily rely on equity financing, supported by private equity, venture capital (VC), and angel investors. Crowdfunding has also gained traction, facilitated by Regulation (EU) 2020/1503.
The EquiFund II program, a continuation of the successful EquiFund initiative, aims to leverage €200 million to support startups in sectors like Life Sciences and Sustainability. This initiative is co-financed by cohesion policy funds and national resources, enhancing access to equity financing for innovative companies.
2.2 Incentive Schemes
Various funding opportunities exist, including Structural Funds, VC Funds, and state aid schemes under the Investment Law. These schemes provide tax incentives for R&D investments and support strategic investments. The Patent Box Scheme further incentivizes innovation by offering tax benefits for patented technologies.
2.3 Conditions for IPO
To list on the Athens Exchange Group (ATHEX), companies must meet specific quantitative requirements, including a minimum capital of €3 million and a track record of profitability. The free-float requirement mandates that at least 25% of shares be allocated to a minimum of 300 shareholders.
2.4 Notable Exits
2023 was a landmark year for fintech exits in Greece, with two significant transactions recorded. One acquisition reached $1.24 billion, marking the largest exit in Greek business history. The country now boasts 53 VC funds with a combined portfolio of 481 companies.
3. Fintech Regulation
3.1 Regulatory Framework
The regulatory landscape for fintech in Greece is shaped by EU directives, particularly the Payment Services Directive II (PSD II), which aims to foster competition and innovation in the payments market. Fintech companies offering innovative payment solutions must comply with the BoG’s regulations, ensuring transaction security and customer protection.
3.2 Regulatory Receptiveness
The BoG has established the FinTech Innovation Hub to engage with fintech innovators, providing non-binding guidance on regulatory compliance. This initiative allows the BoG to better understand emerging fintech solutions and their associated risks.
Additionally, the BoG Regulatory Sandbox enables controlled testing of innovative fintech products, allowing companies to experiment within a defined regulatory framework.
3.3 Challenges for Foreign Fintechs
Foreign fintech companies seeking to enter the Greek market must obtain authorization from the BoG. This process requires a comprehensive business plan, organizational structure, and compliance with local regulations. However, EU-based payment institutions can operate in Greece under the freedom of establishment, provided they meet specific criteria.
3.4 Balancing Regulation
The BoG is actively working to balance the regulation of traditional financial institutions with the entry of big tech players into the fintech space. This involves adapting existing regulations to accommodate new business models while ensuring consumer protection and market stability.
4. Other Regulatory Regimes
4.1 Data Protection Regulations
In Greece, personal data processing is governed by the General Data Protection Regulation (GDPR). Fintech companies must obtain explicit consent from users for data processing, particularly in payment services. Compliance with GDPR is crucial for maintaining consumer trust and avoiding penalties.
4.2 International Data Transfers
Greek data privacy laws apply to organizations outside Greece that process personal data within its territory. Data transfers outside the EU are permitted under strict conditions, ensuring that adequate safeguards are in place.
4.3 Sanctions for Non-Compliance
The Greek Data Protection Authority has the authority to impose various sanctions for GDPR violations, including fines and orders to rectify non-compliance. The severity of sanctions depends on the nature of the infringement.
4.4 Cybersecurity Regulations
Fintech businesses in Greece must adhere to several cybersecurity laws, including those related to network security and electronic communications. Compliance with these regulations is essential for safeguarding sensitive financial data.
4.5 AML Requirements
The Greek AML Law mandates that fintech companies implement robust anti-money laundering measures. This includes customer due diligence and compliance with digital onboarding requirements.
4.6 Additional Regulatory Frameworks
Consumer protection laws also apply to fintech businesses, ensuring fair practices and transparency. The legislative framework surrounding AI is evolving, with specific obligations for medium and large enterprises regarding ethical data use and AI system registration.
5. Technology and Intellectual Property
5.1 Protecting Innovations
In Greece, various intellectual property rights protect fintech innovations, including patents, copyrights, and trade secrets. Patents are granted for new inventions, while software is protected as a literary work under copyright law.
5.2 Ownership of IP
IP rights are territorial, with patents and trademarks registered at the Greek Organization of Industrial Property. Copyright exists automatically upon creation, without the need for formal registration.
5.3 Enforcing IP Rights
IP rights can be enforced in national courts, and certain rights offer EU-wide protection. However, Greek patents are limited to Greece, while copyright protection for software is governed by international treaties.
5.4 Monetizing IP
IP rights holders can exploit their rights through licensing agreements or assignments. Written agreements are required for the transfer of rights, ensuring legal clarity and protection for creators.
This structured overview of the fintech landscape in Greece highlights the dynamic interplay between innovation, regulation, and market opportunities, showcasing the country’s potential as a burgeoning hub for financial technology.