Payments Industry Entering Era Of Consolidation, Says German Regulator

May 16, 2023
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In a wide-ranging annual report, Germany’s Federal Financial Supervisory Authority (BaFin) has echoed others in Europe by noticing an increase in mergers and acquisitions. It has also said complaints were up and the number of licence applications were down.

In a wide-ranging annual report, Germany’s Federal Financial Supervisory Authority (BaFin) has echoed others in Europe by noticing an increase in mergers and acquisitions (M&A). It has also said complaints were up and the number of licence applications were down.

BaFin is seeing “tendencies towards consolidation”, it acknowledged in its 2022 Annual Report.

Namely, this is taking place via cross-border takeovers and mergers, the regulator pointed out.

Meanwhile, BaFin says it received just 11 new applications for authorisation and registration in 2021, compared with 21 the previous year.

Despite this slowdown in new applications, the regulator says there is still steady growth in the payments sector.

The report also discloses that BaFin fined one institution €350,000 following an audit in 2021 and it ordered several other institutions to “visibly” improve compliance measures.

BaFin noted an increase in complaints related to fraudulent payments, although did not provide an actual number.

As with other jurisdictions in Europe, BaFin observed that these often involved offers made online that later turned out to be a bad actor.

In many cases as well, payment orders that had already been executed could no longer be reversed, BaFin stated.

Overall, the regulator received 14,984 complaints in 2022, up from 12,538 in 2021 and 5,791 in 2018.

Crypto’s difficult year

The market environment for crypto-assets was “challenging” for providers and investors in 2022, BaFin said.

This was characterised by sharp price declines for crypto-assets and great uncertainty.

In 2022, BaFin issued two permits in accordance with crypto custodian laws in the country. A total of five crypto custodians now have such permission.

Despite the significantly more difficult market environment, seven new applications were made in 2022 for this type of supervision.

However, BaFin pointed out that some providers withdrew their licence applications and, in two cases, BaFin refused permission.

BaFin has taken an increasingly tough approach to crypto as usage has grown, but also reflecting the recent market chaos.

Earlier this year, BaFin made public that it had fined ETC Issuance, a crypto-asset exchange, €190,000 due to a failure to comply with the German Securities Act.

The watchdog said that currently a key focus in its regulation of crypto-asset service providers is security relating to the storage of customers’ private keys that enable access to their crypto accounts.

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