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From Resistance to Collaboration: Open Finance in Bulgaria

The development of open banking in Bulgaria was discussed by panelists from Evrotrust Technologies, Postbank, Iris Solutions and Open Banking Europe at Konsentus’ March Roundtable. The guest speakers explored how initial market resistance has given way to opportunities for innovation and commercialisation.

Key takeaways:

  • Open banking and open finance are opportunities to address financial inclusion in Bulgaria
  • Digitally savvy consumers will be open to new services from both banks and fintechs
  • The strong base of innovative Bulgarian fintechs can help accelerate change
  • Collaboration between participants is key
  • Driving safety, security and transparency in the ecosystem will address existing low levels of trust

Brendan Jones, CCO at Konsentus, set the scene by discussing Bulgaria’s transformation from a centralised model to a more open, market-based economy. Home to a number of IT schools and univerisities, which even offer a master’s degree in fintech – Bulgaria is a vibrant hub of 90* authorised fintech third-party providers (TPPs), 85 of which passport in open banking services from other countries in the EEA.

John Broxis, Managing Director at Open Banking Exchange, provided insight on the 22 countries with TPPs authorised to passport their services into Bulgaria. The highest number of these TPPs come from Lithuania and Ireland, both of which are popular with companies setting up European entities. The high number of countries with TPPs passporting into Bulgaria suggests it is an attractive market, open to innovation and change – But that change is still to come! Today a significant proportion of TPPs in Bulgaria do not specialise their service offering with 21% providing more than 4 services, in comparison to the EEA average of 10%. As the market matures, we are likely to see reduction in  this number as TPPs refine their offering and specialise services.

Alexander Stanev, COO at Evrotrust Technologies, discussed development from a bank’s perspective. He focused on how open banking can be harnessed to increase revenue, attract new users, and launch innovative products and services. He acknowledged that although there are a growing number of TPPs authorised to provide open banking services in Bulgaria, to order to deliver value, banks must understand the true benefits and support a changing ecosystem. Establishing this consensus among the banking community is crucial for the effective rollout of open banking and open finance.

Vasil Panchev, CIO at Postbank, highlighted that although open banking had initially been slow in Bulgaria and was perceived by banks as a compliance issue, attitudes are changing. The advantages of being able to provide value-added services and attract and retain new customers is mutually beneficial to both banks and fintechs.

Figure 1: Merdihan Ismailov explains the timeline of open banking in Bulgaria

A TPP’s perspective was provided by Merdihan Ismailov, CDIO at IRIS Solutions. One of the first licenced TPPs in Bulgaria, IRIS Solutions helps financial institutions go beyond compliance and monetise investments to extract value from open banking. In a market where banks have historically been resistant to change, they see themselves as playing a valuable role in enabling the digital transformation journey.

Following a slow start, they’ve seen the tempo change in the last year with new innovative use cases launching in market, a rise in transaction volumes and more TPPs being approved to provide open banking services.

This changing ecosystem and added complexity requires a trusted and secure ecosystem, so that the foundations and infrastructure that have already been put in place, can be built upon in months and years to come which will enable the opportunities to address financial inclusion and accelerate change.

*Data as of February 2022