Improving regulation, expanding government support for innovation, and deepening cooperation with financial institutions and banks are key conditions for moving Azerbaijan's fintech ecosystem to a new stage of development, Report informs, referring to the Asian Development Bank (ADB).
"In conditions of limited sources of funding for innovation, government incentives become crucial, promoting the advancement of innovative solutions from the development stage to practical implementation and meeting real consumer needs," the bank emphasizes.
ADB notes that the Central Bank of Azerbaijan (CBA) has established a regulatory "sandbox" aimed at accelerating innovation in the financial market, enhancing competitiveness, and supporting sustainable financial solutions.
"Using this testing mechanism can contribute to the growth of payment services, including the issuance of payment cards and electronic money (e-money), as well as the formation of agent networks to expand financial inclusion. Providing new payment services, such as money transfers, e-money, and payment cards, and expanding the use of open application programming interface (API) technologies will create additional opportunities for market competition," the report states.
Another important area of innovation support, according to ADB, is the development of collaboration between the banking and fintech sectors. Several financial institutions are already establishing partnerships with fintech companies to maintain competitiveness and adapt to changing market conditions.
In particular, some fintech companies operate as payment aggregators, providing commercial banks with infrastructure solutions for processing digital payments for mass services. They maintain a widespread network of payment terminals that collect cash payments on behalf of banks, while commercial banks, in turn, provide fintech companies with platforms to execute digital transactions. Such cooperation contributes to the expansion of the digital financial services market.
ADB also emphasizes that financial inclusion has become an important driver of economic growth in Azerbaijan and has been accompanied by active development of financial technologies. "Services aimed at expanding access to financial services are mainly provided by banks, non-bank credit institutions, and insurance companies," the report states.
The bank notes that the law "On Payment Services and Payment Systems" has expanded the regulatory sandbox regime for fintech startups, providing more favorable conditions for testing products and services. One of the priority areas should be the implementation of open API technologies. Considering the government's Open Banking Roadmap, fintech companies could participate-directly or indirectly-in digital payment systems, reducing transaction costs and increasing payment efficiency.
At the same time, ADB recommends expanding the platform of the Azerbaijan Fintech Association to deepen cooperation and exchange of experience among its members and international financial institutions, with the goal of adopting best international practices and accelerating innovation processes. In terms of infrastructure, the bank also considers the potential privatization of state-owned enterprises in the telecommunications sector, which could increase transparency in the industry and stimulate investment and innovation.