2018 is a game-changing year for banks and payment services providers as the Payments Services Directive 2 (PSD2) came into effect on January, 13. The new EU Directive aims to increase innovation, transparency and competition within the sector, requiring European banks to open their infrastructures to licensed third-party providers. This will enable more companies to get into the payments space, says Steve Grech, Truevo Payments CEO and Chairman of the recently launched Financial Institutions Malta Association (FIMA).
Malta’s payments sector is on an expansion course. The number of licensed financial institutions has grown to 48 at the end of 2017, of which 35 were authorised to provide payment services and 14 were licensed to issue electronic money. The newly launched Financial Institutions Malta Association (FIMA) seeks to be the voice of those financial institutions that call Malta home. MaltaProfile spoke to FIMA Chairman Steve Grech about Malta’s rise as financial services centre, regulatory changes and how Malta should be positioning itself for the future.
Q: How would you describe Malta’s journey as an International Finance Centre so far?
I think it has been a fantastic journey. I remember the days not so long ago when the Maltese financial services sector consisted only of a handful of local banks. We now have around 30 licensed credit institutions, close to 50 financial institutions plus a number of other regulated sectors all forming part of the Maltese financial services sector. Many of these are foreign owned, which is a testament to Malta’s ability to attract international business in this sector.
Q: Can you comment on the recent performance of the payments sector and what could be done to strengthen the sector further?
There have been a number of challenges during the past two years, and there will always be challenges going forward. This is due to constant changes and developments in the EU sphere, and also in global markets, which have a ripple effect on the local financial services sector. Challenges arise from new regulations and standards that are being implemented and from de-risking policies constantly undertaken by the bigger banks and European bodies. Despite all this, I believe that the Maltese sector has kept abreast of these challenges and is still attracting new business and new investors.
Q: What regulatory changes and developments does the payments industry need to watch out for in the coming years?
One of the main shakers challenging the status quo this year is the Payment Services Directive 2 (PSD2). I believe that although it will create some challenges to the way financial institutions carry out their business, it will also present new opportunities to those players that are agile and clever enough to realise the potential and are able to identify opportunities brought about by the changes to the regulations. Other challenges will arise from new anti-money laundering laws and data protection regulation.
Q: Within Malta’s entire financial sector, what areas would you identify as offering the greatest opportunity for growth?
I believe that in particular Payment Institutions and Electronic Money Institutions still have potential to grow and expand the range of services that are presently being offered, and they should be able to provide more competition to the traditional banks in various business lines. The PSD2 is intended to open up the market to more players, and if properly implemented, should be a catalyst for progress in this regard.
Q: The availability of talent and a strong infrastructure are two very important pillars in the decision-making process of investors. What comments would you like to make about both?
Malta has always sought to offer a strong talent pool of qualified individuals and also robust and flexible infrastructure to support business requirements. This has been a key factor to attract foreign investors and ultimately led to their decision to base their business in Malta. The local talent pool is now also being supplemented by an increasing number of qualified individuals from other EU states seeking to move to Malta to further or kick-start their careers in the financial services sector. I think this is a positive development and enhances the quality of the workforce.
Nonetheless, we cannot rest on our laurels as other jurisdictions are also adapting their infrastructure to become more competitive and attractive to this sector. I do believe that going forward, Malta needs to take the next big step in education by offering more specialised courses, which in turn will create more opportunities for the next generation.
Q: Reputation is hard to earn but easy to lose. What could be done to improve Malta’s image and profile in order to attract both talent and businesses?
Rightly said. Malta’s success in the financial services sector has not come along by chance but through the hard work, determination and resilience of successive governments, authorities, promoters and key players in the industry. It is now imperative that the good reputation that has been achieved over the past years is protected, maintained and enhanced. This can only be achieved if all stakeholders are committed to ensuring high compliance levels as well as adhering to high standards in the provision and delivery of services.
Q: What key piece of advice would you give someone joining Malta’s finance industry?
The opportunity exists and is real. However, it is in no way an easy task, and success is not guaranteed. It is crucial that any new operator has a well thought out business plan, one that has been analysed in terms of product or service uniqueness, competition, customer take-up, time to break even and a roadmap to future-proof the business model. It is also important to ensure that the project is adequately funded to make it resilient to any unexpected bumps that one will encounter along the way.
Q: How do you believe Malta’s finance sector should be positioning itself for the future?
The key to ensure success in the future will be determined by Malta’s ability to continuously identify the right new opportunities and to embrace new technologies that will lead to the next generation of successful businesses. Malta needs to create fertile ground for new businesses to set up. This has already been done in the past for the iGaming industry, and I see no reason why Malta cannot be successful with the next big thing, which most likely will centre on blockchain technologies.