FinTechs belonging to this category offer alternative payment services which are supposed to provide a faster and cheaper way for national, European, and international payments for private and business customers by using new technologies.
For example, payment service providers hereby offer solutions to easily integrate several payment services in online shops.
Some FinTechs furthermore provide real cash register systems and online-reservation solutions for restaurants and shops providing their own payment services or making use of the payment services of FinTechs described above.
Attitude of the country towards modern payment services
The world as known from the past in Austria does not longer exist in the same way. Although Austria is a country in which cash is considered to be particularly important and in which cash payments are made relatively frequently, the COVID-19 measures not only introduced new social habits, but also massively advanced digitalisation. In addition to home schooling, remote working and online shopping, the way people pay in Austria has also become increasingly digital. The pandemic has massively accelerated the trend toward card payments. Although cash is still considered the most popular means of payment, accounting for 66% of all transactions at the point of sale, cash usage has declined by 13% within the past two (2) years compared to 2019. In parallel, the number of transactions with debit cards at the point of sale rose massively from 10 to 27%. In particular, the share of contactless debit card payments without PIN entry rose by 16%. In the past 12 months, the payment behaviour of Austrians in retail has changed fundamentally. Cashless alternatives in particular meet the current need for faster and, above all, contactless payment. Ninety-six per cent of Austrians use a debit card, up to 77% of them use them several times a week. The option of digitising the debit card, for example on a smartphone, has also experienced a rise in popularity over the past year. By contrast, Austrians seem to use their credit cards less frequently at the point of sale: only 2% of payments were processed via Mastercard, Visa and Co. All this can be seen from a 2021 study published by CAPI. The fact that online commerce and thus also online payments have risen to new heights since 2019 gives an indication of where the journey will continue to take us in the coming years. In terms of share, the most common means of payment for online transactions in 2020 were bank transfers at 31% and Internet payment methods at 25%. Around 15% of online transactions were carried out using credit cards, followed by direct debit (11%). The payment providers PayPal and Klarna are particularly popular in Austria. The World Payments Report 2021 shows that merchants are increasingly combining the experience of buying online with the experience of stationary retail.
Obligations and requirements to provide payment services or ancillary services described above
In Austria, payment services are regulated in the Payment Services Act 2018 (Zahlungsdienstgesetz 2018 – "ZaDiG 2018"). In addition to the ZaDiG 2018, anti-money laundering and data protection regulations are also to be complied with.
According to the ZaDiG 2018, the commercial provision of payment services in Austria requires a license issued by the Financial Market Authority (Finanzmarktaufsicht – "FMA").
The costs of obtaining the license amount, in general, to approx. EUR 8,000.00. However, the costs can increase depending on which and how many kinds of payment services the license is supposed to cover.
To get a license, among other things, the applicant must have a business model setting out in particular the type of the envisaged payment services and evidence must be shown, that the payment institution has the amount of initial capital of up to EUR 125,000.00 depending on the exact payment service to be offered; for e-money institutions similar requirements apply with the difference, that an e-money institution needs an initial capital of at least EUR 350,000.00.
The license also covers the provision of operational and closely related ancillary services.
Additional comments regarding the legal situation for payment services or what FinTech’s must be aware of in this business area
Many Austrian regulatory requirements are derived from EU law or are influenced by EU-wide developments. EU requirements are implemented and transposed into Austrian law rather strictly. In general, the Austrian market is a good entry market for EU-wide payment businesses.
Market size for payment services and biggest payment service providers
The FinTech market is characterised by a rapidly growing number of Start-ups and companies without a banking license (non-banks). Digital payment services make up the largest FinTech market segment in Austria. The total transaction volume in the digital payments segment will amount to around EUR 26.96bn in 2022. In 2023, further sales growth of 39% is expected.
Additional comments regarding the economic situation for payment services or what FinTech’s must be aware of in this business area
Major challenges for payment companies lie in the field of data security and data protection. FinTechs may have to bear high costs to set up appropriate systems for data security. Data protection is taken very seriously in Austria and can be fined harshly in case of non-compliance with Austrian or European data protection regulation. Furthermore, anti-money-laundering measures must be a major concern of payment service providers.