Is the Polish Financial Supervision Authority killing Polish fintech? Conotoxia fights for survival

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Conotoxia complained against the Polish Financial Supervision Authority to the Provincial Administrative Court in Warsaw. The decision to withdraw the authorization to provide payment services, according to the company, has negative consequences for its customers.

The decision adopted by the authority may also very likely lead to irreversible damage to the Company’s clients and the Company itself, resulting in an effect exactly opposite to the intended one. Instead of ensuring market stability and the safety of service users, the decision may lead to significant difficulties and delays in the provision of services to the Company’s customers. The only way to minimize this risk and correct the errors made in the Commission’s actions is to suspend the enforcement of the decision and repeal it.

– we read in the complaint

In its complaint, the company emphasizes that For years, the Polish Financial Supervision Authority did not raise any objections to the way in which the company stored customer funds using the bank accounts of its agent, Cinkciarz.pl. A sudden change in the interpretation of regulations, in Conotoxia’s opinion, is unjustified and harms the interests of both the company and its clients.

Starting from 2017, the Commission was aware that the Company used the Agent’s bank accounts to store funds entrusted by customers and did not raise any objections to this state of affairs. The mere possession by the Agent of funds of the Company’s clients did not constitute a violation of the regulations, provided that the principles of separation of funds provided for in the provisions of the Act were observed. The provisions of the Payment Services Act in this respect have not changed since 2017.

The change in position made by the Commission is radical from the Company’s perspective. It undermines one of the most important assumptions on which the Company based its current operating model, i.e. the admissibility of using the Agent’s accounts for the purposes of executing payment transactions ordered by customers. Despite such a significant change in its position, the Commission did not in practice provide any substantive justification for changing its approach.

Conotoxia wrote in the complaint

Conotoxia accuses the Polish Financial Supervision Authority violation of the provisions of administrative procedure, incorrect interpretation of substantive provisions and violation of the principle of proportionality. The company questions, among other things, the way in which the Polish Financial Supervision Authority calculated the value of funds that should be protected and the interpretation of the provisions regarding the obligation to deposit user funds in separate bank accounts.

In the complaint, Conotoxia highlights a broader issue: difficulties that payment institutions encounter in cooperation with banks. The company claims that banks refuse to conclude agreements and annexes that would enable Conotoxia to meet the new requirements of the Polish Financial Supervision Authority. Conotoxia emphasizes that this problem has been repeatedly reported to the Polish Financial Supervision Authority, also by the Working Team for the Development of Financial Innovations (FinTech) operating at the Commission.

The Commission seems to base its Decision on the assumption that bank accounts in which a payment institution stores customer funds should be operated on the basis of special agreements concluded with the bank maintaining the account. The interpretation proposed by the Commission is dangerous because in practice it may lead to harm to users of payment services. It suggests that only funds deposited in accounts that meet some formal requirements not provided for by law could benefit from exemption from enforcement and bankruptcy under the regulations. This would mean that whether users of payment services benefit from the protection provided by law is determined by the bank’s arbitrary decision as to whether it will mark a specific account in a special way or agree to introduce appropriate provisions into the account agreement.

– explains Conotoxia

Conotoxia announces that will take all actions to stop the effects of the Polish Financial Supervision Authority’s decision and protect the interests of its clients. This case may be of significant importance for the entire fintech sector in Poland, revealing potential problems in the relations between payment institutions, the Polish Financial Supervision Authority and banks.