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 Portuguese social and political climate are quite receptive to modern payment services. In fact, payments by card represent 86,5% of all payments. In a country where payment services were highly centred in the traditional banking system, the reaction to the appearance of FinTechs was conservative. Nevertheless, FinTech has been growing since then and traditional institutions have embraced these new entities and have been entering into cooperation agreements to optimise processes and take advantage of the opportunities offered by FinTech and DLT features.
The pandemic increased the non-presential payments. In 2021, there was an increase of 3,7% of payments based on payment cards, direct debits, and transfers. Electronic payments increased by 14,9% and contactless payments represented 40% of all payments made with national and international cards in the physical points of sale in Portugal. This era represents new opportunities for the FinTech sector. The major players are present in Portugal, whether physically or through the free provision of services. One example is Revolut which in 2021 started to offer its banking services in Portugal.
Obligations and requirements to provide payment services or ancillary services described above
In Portugal payment services are regulated under Decree-Law 91/2018 on payment services and e-money issuance (PSD II Portuguese Law). The provision of payment services in Portugal is subject to authorisation from the Bank of Portugal, which covers the ancillary services that may include credit granting. The authorisation depends on compliance of certain requirements applicable to the company, its key members, and shareholders, including corporate governance, and fit and proper.
The applicable minimum share capital may vary between EUR 20,000 to EUR 125,000 depending on the services provided for payment institutions and at least EUR 350,000 for e-money institutions. Further prudential requirements apply. As far as we are aware the regulator does not charge for authorisation process. Payment service providers and e-money institutions are subject to AML duties.
Additional comments regarding the legal situation for payment services or what FinTech’s must be aware of in this business area
Portugal launched the Portugal FinLab in 2018 which is a communication channel between innovative technological companies or innovative projects and the financial regulators (the Bank of Portugal, the Portuguese Securities Market Commission (CMVM), and the Pension Funds and Insurance Supervisory Authority (ASF)). Portugal FinLab is already in its third edition – in each edition the finalists chosen among the applicants are assisted by the regulators in the implementation of their project.
Market size for payment services and biggest payment service providers
During 2021, Portuguese made 3,1 billion retail payments through the interbanking system, in the amount of 564,3 million Euros, which represents an increase of 13,7% and 12,5%, respectively, in face of 2020.
In accordance with the FinTech House 2021 report, 27% of the 30 major FinTechs relate to payment and money transfers, which have raised more than 437 million Euros, being 85% B2B models.
In terms of the major national players, a note to Feedzai, the first national unicorn FinTech, and Raize, a crowdfunding platform which in 2021 surpassed 51 million invested funds.
Additional comments regarding the economic situation for payment services or what FinTech’s must be aware of in this business area
As Portugal is part of the European single market, the market of the international FinTechs operating in Portugal without necessarily having a physical presence is very relevant, such as Revolut.