Revolut in the crosshairs, but Hungarian fintechs are the collateral damage – another blow to domestic innovation

New interpretation of the transaction fee

According to the legislation recently adopted by Parliament, the 0.45% fee will now be levied not only on banking, but also on internal fintech-based transactions – even if the money movement between customers takes place within the given service provider, with a mere technical balance adjustment. The change will particularly affect electronic money issuing service providers, such as BinX, which have so far been regularly exempted from the transaction fee, as long as the money has not left their system.

Three actors, three interests

The government’s primary goal is to maintain a balanced budget. In addition to maintaining low personal income tax and utility costs, it is trying to make up for the loss of revenue in other areas – for example, financial transactions.

According to commercial banks, market competition is only fair if all actors operate under the same conditions. Revolut – and partly Hungarian fintechs – have a competitive advantage if they are exempt from transaction fees, the obligation to install ATMs or Hungarian-language customer service.

Fintechs, on the other hand, see the regulatory sandbox – i.e. the temporary exemption of innovative companies from certain obligations – as not a privilege, but an investment in the future. If these enterprises are made impossible in the initial development phase, the competitiveness of the entire sector will be damaged.

Domestic actors in danger

The example of BinX neobank clearly illustrates how a small Hungarian fintech can become a victim of domestic regulation. According to János Váradi, the company’s president, the new regulation is not only disproportionate, but also explicitly anti-innovation: it makes it impossible for Hungarian service providers to enter foreign markets, since even transactions between two foreign clients with non-Hungarian implications would be subject to the Hungarian tax.

The president of the Hungarian Fintech Association, Zoltán Ács, sees it this way: while the world’s innovation centers – London, Singapore, Lithuania, Estonia – explicitly support knowledge-based companies, Hungary is now heading in the opposite direction. The government’s goal is to support innovation, but the practical regulation has the exact opposite effect.