BELGIUM: An Introduction to FinTech Legal

General Introduction and Market Overview 

Belgium has always been a frontrunner when it comes to financial services and technology, even before it was called “FinTech”. Critical market infrastructure players such as Swift and Euroclear are based in Brussels and have been providing services to financial institutions worldwide for many years.

The FinTech hype got a boost around 2013/2014 due to developments mainly in the field of alternative financing (crowdfunding, peer-to-peer lending, etc), rapidly followed by significant evolutions in the payments sector obviously powered through the regulatory innovation brought by PSD2. Popular payment solutions offered by FinTech companies in Belgium include retail payment platforms and remittance services, but an important part of the market is working on B2B payment services such as professional FX payments for small and medium-sized enterprises. As a result of Brexit, very high-profile UK payment service providers, the likes of MoneyGram, TransferWise, Ebury and WorldRemit, selected Brussels as their outpost to continue serving the continent. The arrival of these players added a lot of maturity to this sector in Belgium.

Outside the Brexit context, Brussels has become an attractive choice for foreign FinTech companies from the Americas, Asia and even other European countries to set up their European headquarters, apply for a licence, and try to conquer the European continent with their products and services from Belgium. This shows that the current growth in the Belgian FinTech sector is not based on political circumstances (such as Brexit) or mere coincidence, but is rather the result of a steady, sustainable and attractive local ecosystem.

Next to alternative financing solutions and payment platforms, we also see in Belgium several automated investment solutions (robo-advisers) and an important number of infrastructure and enabling technology service providers offering RegTech, data and accounting solutions. Although Belgium counts a few local champions developing well internationally, blockchain and crypto initiatives/ICOs remain rarer phenomena in the Belgian market.

After the COVID-19 crisis, as everywhere, contactless payments grew exponentially in Belgium. In general, the payment sector remains very strong in Belgium, but other sectors have expanded recently, such as consumer credit, with the rise of ‘Buy Now Pay Later’ solutions, or credit to enterprises, with the appearance of more digital solutions for B2B financing.

FinTech Ecosystem 

The relation between FinTech companies and incumbents has evolved over the years from an initial denial of their existence by the traditional banks, through a phase of mistrust and competition, to today’s situation where a lot of collaboration is happening. Now, banks and other traditional financial groups are heavily investing in FinTech startups, but are also becoming their best clients as more and more FinTechs are focusing on B2B services, given the client acquisition cost that comes with serving consumers directly.

In early 2016, the non-profit organisation ‘FinTech Belgium’ was launched to represent and bring together all FinTech companies established in or linked to Belgium. Through numerous specific events and general summits, this association has gathered the FinTech sector together and facilitated several collaborations in the field.

More recently, another non-profit organisation, PayBelgium, has been created to represent the Belgian payments industry and its interests to policymakers. It focuses on developing common policy positions and engaging with the regulators to defend the industry’s interests. Also, the traditional banking sector regularly participates with FinTech incubators, and both Febelfin (the Belgian Financial Sector Federation) and EBF (the European Banking Federation) are actively involved in structuring the FinTech ecosystem.

Regulation… 

Belgian financial regulation is mainly based on EU directives. Most of the time, a maximum harmonisation approach is taken by the Belgian legislature, avoiding gold-plating practices. Therefore, the main pieces of financial legislation (PSD2, MiFID2, Banking Directive, IDD, etc) that matter to FinTech initiatives are very similar (if not identical) to the legislation applied in other European jurisdictions. Through the system of mutual recognition/EU licence passporting, financial services licences obtained in Belgium can be easily passported to other EU countries without the need to apply each time for a new local licence in targeted markets.

When certain subsectors remain overlooked by the European legislature, the Belgian authorities try to put in place dedicated pieces of legislation until appropriate action is taken at the EU level. One example of this is the regulation adopted by the Belgian financial regulator (FSMA) to regulate advertisement of cryptocurrency to retail clients.

…and Regulators 

In the financial services industry at large, three regulators are relevant for FinTech companies in Belgium. The National Bank of Belgium (NBB) is the competent supervisor when it comes to the prudential regime applicable to credit institutions (banks), (re)insurance companies, e-money and payment institutions, and large stockbroker companies (next to more general central bank macro-economic responsibilities). Due to the nature of its competences (payment services and (challenger) banking, among others), the NBB is a regulator that is very often confronted with FinTech initiatives. It has put in place dedicated teams dealing separately with each type of licence. Generally speaking, while the NBB’s supervision has become stricter over the last years (as is the case in general in the EEA), the NBB is firm but pragmatic, open towards innovation and tech-savvy, with supervision of high quality. The Financial Services and Markets Authority (FSMA) is the competent supervisor when it comes to the prudential regime applicable to smaller investment companies, regulated credit providers, crowdfunding platforms, and banking, investment and insurance intermediaries. The FSMA is also in charge of the supervision of virtual asset service providers (offering services related to cryptos), as well as of oversight of the rules of conduct applicable to insurance and investment services, next to more general authority over public offers, listed companies and the financial markets. It is also the FSMA (in its role of supervisor of financial markets and information) that closely follows the evolution of cryptocurrencies and ICOs, mostly by issuing warnings on the dangers associated with these types of assets and investment structures.

The FSMA and the NBB have set up a joint ‘FinTech portal’ to point FinTech companies towards the right regulator in accordance with their (contemplated) activity.

The Federal Public Service Economy (FPS Economy) has very specific powers over the rules of conduct applicable to regulated credit and payment services.

Outlook  

FinTech companies from around the globe continue to be attracted by the Belgian professional and tech-savvy regulators who accept interacting in English, the central location of Belgium in Europe, the highly skilled and multilingual workforce, the presence of key EU institutions, and the fact that Belgium, being at the crossroads of different cultures and benefiting from a very cosmopolitan population, is an interesting test market for their new products and services.

While the sector did not expand greatly in 2022-2023 due to the general economic atmosphere, it remains an area of focus for Belgium and we expect it to continue growing in the years to come.