Key Provisions

• Risk-Based Classification: AI systems are categorized by risk levels, with stricter rules for higher-risk applications. Systems posing unacceptable risks, such as cognitive behavioral manipulation and social scoring, are banned.
• Prohibitions: Bans predictive policing based on profiling and biometric categorization by race, religion, or sexual orientation.
• General-Purpose AI Models: Those with no systemic risks face limited requirements focused on transparency. High-risk models must adhere to stricter regulations.

An AI Office within the European Commission will oversee rule implementation, supported by a scientific panel of independent experts and an AI Board composed of member state representatives. Non-compliance fines are based on a percentage of the offending company’s global turnover or a set amount, whichever is higher. Public service entities must assess the impact of high-risk AI systems on fundamental rights before deployment.

The AI Act encourages innovation through regulatory sandboxes, allowing controlled testing of AI systems. The regulation mandates increased transparency in developing and using high-risk AI systems, requiring registration in the EU database and disclosure when using emotion recognition technology.

Paynetics stands out in the crowd as one of Europe’s top names in embedded finance, boasting a license as an e-money institution authorized by the Bulgarian National Bank. This gives it the green light to stretch its services all over the European Union.

Expanding Horizons

This collaboration is a big change for CatalystPay, especially when it comes to expanding its European circle of acquiring bank partners. It’s a clear signal of the company’s ambition to serve up flexible and strong payment services that meet the fast-changing needs of digital businesses head-on. 

This partnership underscores our commitment to a multi-acquiring strategy designed to elevate reach, visibility, and sustainable growth for digitally native businesses within Central and Eastern Europe (CEE) and beyond.

Stefan Zisov, Chief Operations Officer at CatalystPay

One of the immediate perks of this partnership is CatalystPay’s new ability to handle settlements in Bulgarian Lev (BGN), alongside a basket of other currencies. This is a big win for digital merchants in Bulgaria, simplifying their settlement processes and cutting out those pesky foreign exchange fees. It’s the kind of strategic edge that local businesses gunning for international growth have been looking for.

A Boost for the Fintech Ecosystem

Partnering with Paynetics cements CatalystPay’s presence in the local and regional market and changes how businesses can scale their operations globally. In today’s world, where digital payments are skyrocketing thanks to an uptick in the digitalization of commerce and services, this partnership is set to cater to the evolving needs of merchants and consumers alike.

By joining forces, the two companies are gearing up to bolster the local and regional fintech ecosystem, promising unmatched access to the local market and helping local entities shoot for the stars with their international aspirations. 

We are excited to announce our strategic partnership with CatalystPay, a leading player in the payment ecosystem. This collaboration will further enhance our capabilities and strengthen our position as Europe’s leading regulated fintech. Together, we aim to revolutionize the payment industry and provide innovative solutions to our clients.

Ivo Gueorguiev, co-founder at Paynetics

A Race Against Time

Banks have been given a deadline of April 8 to get their gears turning, with the full compliance date breathing down their necks on January 9, 2025. It’s all about being able to handle instant credit transfers in euros, and the clock is already ticking loudly. 

The EU is not just about speeding up payments – it’s a strategic play to boost the European economic and financial sector’s independence, reducing the reliance on big names like Visa and Mastercard, and by extension, enhancing the stability and sovereignty of Europe’s financial system.

Craig Ramsey, Global Head of Real-Time Payments at ACI Worldwide, calls it unprecedented in scale and speed. The financial institutions across the EU are now tasked with an incredibly rapid adaptation, a challenge that’s as colossal as it is critical. The sector’s being nudged (okay, pushed) to prioritize this massive change, highlighting the EU’s determination to fortify its financial autonomy.

The ordinance introduces rules for credit administrators and buyers. These are entities or companies involved with non-performing loans, either by buying these debts or managing them. The goal is to standardize operations across the EU and to safeguard consumers.

Romania is aligning its regulations with the rest of Europe, fostering consistency and reliability in managing non-performing loans. At its heart, this ordinance is about protecting consumers by ensuring they are treated fairly and respectfully by credit administrators and buyers.

Key Changes Introduced

Authorization Requirement: Credit administrators in Romania now need to get authorization from the National Authority for Consumer Protection (ANPC) to operate. This includes those based in Romania and other EU member states looking to work within the country.

Rules for Fair Conduct: The ordinance outlines how credit buyers and administrators should interact with debtors:

• They must deal honestly and not deceive or harass debtors.
• Debtors should receive straightforward information about their debts and rights.
• Personal information must be handled securely and respectfully.

Public List: The ANPC will keep a public list of all authorized credit administrators, enhancing transparency and accountability.

This regulation represents a significant step toward improving how financial institutions manage loans that are in trouble, making the system more transparent and consumer-friendly. It encourages a culture of respect and fairness in the financial sector, ensuring that those in debt are given a fair chance.

This year will be defined by evolving legislative frameworks influenced by heightened interest from state-level and international regulatory agents. In this context, we will explore the significant regulatory changes of the past year and anticipate the trends and developments expected in 2024, with a special focus on our country’s fintech sector and its integration within broader European regulatory trends.

2023: A Year in Review for Fintech Regulations

2023 in fintech was a year of regulatory evolution globally and in Europe. It marked a turning point where the fintech landscape rules were redrawn.

In the UK, the government’s focus on regulating crypto assets and fiat-backed stablecoins signaled a serious approach to managing the burgeoning crypto market. The Bank of England’s exploration of a digital currency and regulation of stablecoin-based payment systems further underscored this trend.

The EU wasn’t far behind, with the Markets in Financial Instruments Directive (MiFID) aiming to increase financial market transparency. The entry of Big Tech into the European fintech sector prompted a reevaluation of regulatory strategies, considering the unique challenges posed by these new players.

A landmark development was the EU’s proposed Markets in Crypto-Assets (MiCA) Regulation, which is set to bring much-needed structure to the crypto market. This move aimed to protect investors, particularly in the retail sector, and bring order to the crypto space.

The year also highlighted the challenges of applying traditional financial regulations to the rapidly evolving fintech sector. The European Banking Institute’s focus on the licensing principle in fintech underscored the need for a balanced approach that fosters innovation while ensuring consumer safety.

In essence, 2023 was a transformative year for fintech regulation, characterized by a push towards greater clarity, consumer protection, and adaptation to the fast-paced nature of financial technology. As the industry continues to evolve, this balance between innovation and regulation will remain a pivotal theme, shaping the future trajectory of fintech.

Global Trends and Their Influence on 2024

As we look ahead to 2024, the fintech industry is poised for another year of significant regulatory change. 

One of the key global trends we’re likely to see in 2024 is the continued regulatory focus on digital assets and AI. The regulatory frameworks governing these areas are becoming more complex and multi-layered, with significant progress expected in establishing global standards and best practices. This includes the EU’s AI Act, which will set legally binding rules for AI systems and models, affecting actors across the entire AI value chain globally. 

Tokenization and digital capital markets are also expected to see further development. The exploration of distributed ledger technology (DLT) in transforming the financial and capital markets will likely continue, with an increased focus on debt and fixed-income DLT products, equity, and asset tokenization. This trend is expected to be complemented by funds and other assets following the examples and lessons learned in the debt capital markets space.

In the payments sector, more jurisdictions are considering the introduction of central bank digital currencies (CBDCs), and private-sector initiatives for creating stablecoins and other efficient payment products are developing at pace. Retail CBDCs, in particular, offer new ways of payment that may ultimately present an alternative to traditional card payments.

Operational resilience will remain another global regulatory focus with the growing digitization of customer experiences and increased use of third-party providers. The EU’s Digital Operational Resilience Act (DORA) will become enforceable starting January 2025, with detailed guidance expected to be finalized in 2024.

The post-regulation era for cryptoassets is another thing you need to watch out for. Following the highs and lows of the crypto industry in 2023, comprehensive regulatory regimes are beginning to take effect in key financial centers. This will bring greater credibility and stability to the global market but will also mean closer monitoring and increased enforcement activity.

In Europe, the fintech sector is expected to focus more on third-party compliance. Banking-as-a-Service (BaaS) startups will need to rethink regulation, embedding compliance into their offerings. Account-to-account payments (A2A) providers are also expected to enter the fray, enhancing their global presence and introducing innovations that challenge traditional payment infrastructures.

Romania’s Outlook for 2024

Romania’s fintech regulation is navigating a period of significant change, marked by EU alignment and a focus on creating a conducive environment for fintech innovation. The coming years will likely see further developments as Romania continues to refine its regulatory framework in response to both local market dynamics and broader European trends. 

As the fintech landscape continues to evolve, Romania has not established a specific legislative package exclusively for fintech businesses. Instead, the regulatory environment is adaptive, applying existing financial regulations to fintech activities while also preparing for upcoming EU regulations that will significantly impact the sector.

Key Regulatory Highlights

EU Alignment: Romania’s regulatory stance on fintech is heavily influenced by its commitment to align with EU policies and regulations. This includes preparing for implementing the Markets in Crypto-Assets (MiCA) Regulation, which is set to introduce a comprehensive framework for crypto assets, significantly affecting how cryptocurrencies and related services operate within Romania.

Digital Services and Markets Acts: The country is also gearing up for the Digital Services Act and the Digital Markets Act, part of the EU’s digital package aimed at creating safer digital spaces and fairer markets. These acts will likely introduce new obligations for digital platforms and fintech companies, focusing on transparency, accountability, and consumer protection.

Cryptocurrency Regulation: While Romania does not have specific national legislation for cryptocurrencies, it follows the EU’s lead in regulating this space. Fintech companies involved in cryptocurrency must navigate existing financial regulations with a keen eye on the forthcoming MiCA Regulation. This approach underscores Romania’s cautious yet progressive stance on digital currencies, balancing innovation with the need for consumer protection and market stability.

Regulatory Sandbox: There’s an interest in exploring regulatory sandbox options, allowing fintech startups to test their innovations in a controlled environment under regulatory supervision. This reflects a growing recognition of the need for a flexible regulatory framework that can adapt to the rapid pace of fintech innovation while ensuring consumer protection and financial stability.

AML and KYC Compliance: Anti-money laundering (AML) and know-your-customer (KYC) compliance remain critical regulatory requirements for fintech companies in Romania. As the sector expands, especially in cryptocurrencies and digital payments, adhering to these regulations is paramount for maintaining the integrity of Romania’s financial system.

Bottom Line

The past year has set a precedent for regulatory evolution, with significant changes that have reshaped the landscape of financial technology. Looking ahead, the fintech industry must continue to navigate these regulatory waters with agility and foresight. 

The increasing convergence of technology, finance, and regulation presents challenges and opportunities. For fintech companies, staying ahead means complying with current regulations and anticipating future changes. For regulators, the task is to balance the promotion of innovation with the protection of consumers and the financial system’s stability.

A Swift Change for Europe

These changes, set to be enforced 20 days after publication in the EU Official Journal, aim to enhance the velocity and security of money transfers. Small and medium-sized enterprises (SMEs), in particular, stand to benefit as transaction wait times become a thing of the past. 

This shift revises the protocols of the Single Euro Payments Area (SEPA), requiring banks and other payment service providers (PSPs) to expedite credit transfers with unprecedented speed.

An Inclusive Regulation

Interestingly, the regulation extends beyond Eurozone countries. Member states using different currencies but facilitating transactions in euros will also need to comply, albeit after a slightly extended transition period. A noteworthy provision allows for exceptions during non-business hours due to potential liquidity concerns.

Michiel Hoogeveen, a Member of the European Parliament (MEP), believes this regulation is a significant modernization of the European single market’s payment system. He expressed satisfaction that customers would no longer have to endure the delay of two or three working days to access their funds.

Safeguarding Against Fraud

To increase security, the European Parliament mandated that PSPs implement ID verification and fraud detection mechanisms without imposing additional charges or fees. This initiative aims to minimize the risk of erroneous transfers or fraud, further ensuring the integrity of instant transactions. These regulations align with broader efforts by the European Commission to clamp down on VAT-based fraud.