Conotoxia trapped Polish Financial Supervision Authority: Bureaucracy stifles innovation?

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Imposing changes at a key moment

At the end of 2023, the Polish Financial Supervision Authority carried out a control at Conotoxia sp. z o. oas a result of which it was recommended to terminate cooperation with the current agent, Cinkciarz.pl sp. z o. o. This decision forced the reorganization of the company’s operating model, and thus complete reconstruction of the IT systems used and establishing cooperation with new banks. The previous partner provided extensive infrastructure for customer deposits and withdrawals as well as access to a wide range of currencies. Introducing these changes in the version proposed by the Polish Financial Supervision Authority six-week period turned out to be unfeasible.

The scale of the problem is illustrated by the complexity of the IT infrastructure

The IT infrastructure of Conotoxia sp. z o. o. reminds systems of a medium-sized bank. It supports dozens of websites, thousands of transactions a day and hundreds of online stores. The reconstruction process required not only the adaptation of new system functions, but also the integration of bank accounts with settlements. According to Conotoxia, experts estimate that the implementation of such an extensive project requires from 6 to 10 monthswhile the Polish Financial Supervision Authority set a deadline of six weeks, without taking into account market and technological realities.

Development arrested at a crucial moment

Before the intervention of the Polish Financial Supervision Authority, Conotoxia sp. z o. o. was in the phase of intensive growthreaching revenues of PLN 20 million per year and turnover reaching PLN 10 billion. The company was close to finalizing contracts with three large clients using the Cinkciarz Pay payment gateway, which it could have increase its turnover by 500-1000% per month. The regulator’s actions coincided with the moment when the products offered by the company, such as multi-currency cards, payment gateway and money transfers, were ready for massive expansion.

Challenges resulting from lack of integration

The recommendations of the Polish Financial Supervision Authority have been introduced additional complications during the ongoing reconstruction of settlement processes. The company’s current operating model required synchronizing payments from payment method providers with their transfer to online stores. Changing bank accounts to new ones, not integrated with settlement systems, extended this process even further. Conotoxia sp. z o. o. estimates the time needed to bring the infrastructure to full operation at 3-4 months.

System integration plan with mBank SA (WebService):

1. Preparation of infrastructure and resources:
   • Signing the contract with mBank and obtaining API credentials: 2-4 weeks,
   • Provision of the test environment by mBank: 2-4 weeks,
2. Implementation of basic structures:
   • Defining a new bank in the system: 1 day,
   • Assignment of accounts to mBank: 1 day,
3. Implementation of bank service functions in the IT BANKS system:
   • Scope of functionality including: establishing and maintaining sessions, downloading transaction confirmations, handling various types of transactions (Elixir, SEPA, SWIFT, Direct Payment): 4-6 months,
4. Adaptation of existing system functions:
   • Adaptation of the mechanism generating data for payments, improvement of the mechanism for assigning a bank to the transaction, integration of new accounts: 2-3 weeks,
5. Tests and implementation:
   • QA tests, implementation in the production environment, internal tests in production: 2-4 weeks,
6. Reporting: 2-3 months.

Estimated time consumption:

• Preparatory phase (contract, credentials, test environment): 4-8 weeks,
• Function implementation: 4-6 months,
• Adaptation of system mechanisms: 2-4 weeks,
• Tests and implementation: 2-4 weeks,
• Total time: 6-10 months.

Risks and limitations:

• Delays in mBank processes, including processing inquiries and orders,
• Problems with the availability of the test environment from mBank,
• Complexity of supporting new features (ISO 20022).

The case of Conotoxia sp. z o. o. shows how far-reaching decisions of regulators can affect the functioning of fintech companies. The requirements imposed by the Polish Financial Supervision Authority, although aimed at improving operational processes, in practice inhibited the company’s development and created obstacles that were difficult to overcome in a short time. Conotoxia sp. z o. o. claims that it continues to work on rebuilding its infrastructure, but this process requires significant financial outlays and time, which delays its further development and scaling of the products offered.