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Bulgaria’s Banking as a Service (BaaS) Landscape: Regulations and Guidelines

As the fintech industry continues to evolve, Bulgaria is positioning itself as an attractive destination for banking-as-a-service (BaaS) providers. However, navigating the country’s regulatory landscape can be complex. Here’s what you need to know.

Specific BaaS Regulations?

Unlike other EU countries, Bulgaria has not issued specific guidelines on BaaS. Instead, potential delivery of BaaS would be governed by applicable Bulgarian laws, contingent upon the nature of the banking or non-banking financial service offered through the platform and in accordance with relevant ordinances and guidelines established by respective regulators.

Guidelines for Payment/e-Money Institutions

  • Payment/e-money institutions may use representatives and investment intermediaries or tied agents. These activities are regulated generally in line with Bulgarian law transposition of applicable EU law (PSD 2, EMD, etc.).

Foreign Passported Financial Institutions

  • In principle, foreign passported payment institutions, e-money institutions, and investment intermediaries may use agents/representatives for the provision of their services in Bulgaria. Such activities are carried out in line with Bulgarian law transposition of applicable EU law (PSD 2, EMD, etc.).

Restrictions on Agent Use

  • The Bulgarian Payment Services and Payment Systems Act only briefly regulates requirements for outsourcing (i.e., use of subcontractors for the performance of operational functions). Compliance entails notifying the BNB, submitting necessary documents, and providing a comprehensive description of outsourced services.
  • Notably, if outsourcing critical functions, it is imperative that such subcontracting does not involve delegation of payment institution management functions to third parties, alter the rights and obligations of the payment institution concerning service users, or violate conditions under which the payment institution’s license was granted.

Outsourcing Regulations

  • Beyond local statutory regulations, requirements of EBA Guidelines on Outsourcing Arrangements or European Insurance apply.

Innovation Hub Initiative

  • The Financial Supervision Commission (FSC) has launched the Innovation Hub initiative to achieve cooperation with supervised entities, fintech companies, and providers of financial innovation in the non-bank financial sector. Interested parties can establish an informal dialogue with the regulator through this initiative.

No Sandbox/Hub Organized by Regulator

  • Companies may try to request a meeting to discuss their business model and applicable authorization requirements.

Seeking Specific Advice

  • Due to the lack of a comprehensive regulatory environment, interested parties should seek specific advice from legal advisors and eventually the BNB/FSC before proceeding with BaaS implementation.

Additional Considerations

  • To the extent that the business model is related to data processing, customer/consumer relations, online service provision, and other commercial and contractual aspects, the service will be subject to general rules of data protection, consumer protection, cybersecurity, e-commerce/platforms, and other sectoral legislation.
  • If the BaaS provided qualifies as a banking/non-banking financial service, anti-money laundering obligations will arise in addition to banking/non-banking financial service regulation, and sector-specific data protection, consumer protection, and cybersecurity obligations will supersede general rules.

Conclusion

Bulgaria’s fintech landscape is evolving rapidly, but navigating the regulatory environment requires careful consideration. With Kinstellar’s expertise in fintech law and commercial opportunities, we’re ready to assist you every step of the way. Contact us today to learn more about how our team can help your business thrive.

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