According to Merchant Machine, 77% of Hungarians had access to the internet in 2021. Of all Hungarians using the internet, 58% use the internet for online banking, which is 8% below the EU average. Additionally, Hungary ranks 25th in the integration of digital technologies and 21st for digital public services among EU countries.
Hungary falls under the PSD2 legislation and has adopted Berlin Group’s NextGenPSD2 standard. PSD2 is a European Directive that regulates electronic payment services and was implemented in all EEA countries in 2016 and went live in September 2019.
In their European Open Banking league, Yapily scored Hungary 2 out of 10 as Open Banking is a very low priority for regulators, and there is no guidance around implementation. There is no independent implementation body, such as OBIE (The Open Banking Implementation Entity) in the UK to standardise technical requirements and consumer journeys. This would ensure that all industry participants are aware of the direction of the ecosystem. Any other approach would be too slow to deliver considerable benefits in a reasonable timeframe.
The EU Commission has announced its intention to adopt an Open Finance regulatory framework.
Hungary has paid special attention to interoperability in the instant payments area. The interoperability of payment solutions and data-entry methods is ensured by legal requirements in order to avoid closed-loop services. The Central Bank of Hungary acknowledges that the regulatory requirement solves the issue of interoperability concerning payment solutions on the one hand but cannot be considered optimal from a market perspective on the other hand since the developers of mobile payment applications have to ensure the reading of several different QR-codes for instance if they want to reach a wide coverage. A solution for this issue can be to create a standard for QR codes at least on a national level but aiming for international interoperability to the largest extent.
According to The Global Findex Database, 88% of Hungarian adults had bank accounts in 2021, leaving 12% unbanked. Hungarian consumers are particularly interested in the benefits that Open Banking payment initiation services can provide and how access was used to aggregate financial information and store it in one place. In a recent study researching the Open Banking adoption among consumers, 37% of Hungarian consumers were interested in receiving intelligent assistance to manage payments, 31% were interested in having their data used to develop convenient new payment methods and 30% in aggregating financial information and storing it in one place.
According to Yapily, Open Banking is a very low priority for regulators in Hungary, and there is no guidance around implementation.
In 2019, 130 Fintechs operated in Hungary. 77% of them belonged to small and medium-sized enterprises. If taking into account only the Hungarian-owned companies in the sector, the ratio is slightly lower – 71% of which 51% are small companies and 20% belong to the category of medium-sized companies. Foreign Fintechs in Hungary tend to be larger firms that are already on the market and have only recently added Fintech to their portfolio. 24% of the Fintechs in Hungary specialise in the areas of financial software development and systems integration, and 21% in payment services, while also data analytics and business intelligence stand out.
Hungary ranks 23rd in human capital among EU countries in the Digital Economy and Society Index (DESI) 2022. The human capital measures digital skills, the proportion of employed people working as ICT specialists, female ICT specialists, and enterprises offering ICT training.
The Magyar Nemzeti Bank (The MNB) has established a regulatory framework for the purpose of testing innovative technologies of Fintechs and traditional financial service providers, including banks, investment firms and insurers. The regulatory sandbox provides a solution for managing the potential risks entailed by innovation without hampering it. The regulatory sandbox is only open to Fintech firms and incumbent institutions that meet the criteria established by the MNB. In international practice, applicants must typically prove that the following requirements are met:
The proposed financial service is based on a unique, new or developing technology.
The proposed financial service provides additional value to consumers or a solution to an existing problem.
The applicant wishes to launch normal operations after testing on the territory of the given jurisdiction.
Hungary has adopted the Berlin Group’s NextGenPSD2 technical standard.