Conotoxia sp. z o.o. has been in a vicious circle for several months. On the one hand, the delays in processing customer orders are due to the redesign of IT systems forced by the Polish Financial Supervisory Authority (KNF). On the other hand, implementing this work was the rationale for the KNF to revoke the Company's payment licence. In simple terms, Conotoxia sp. z o.o. has lost its licence because it tried to fully implement the recommendations imposed by the Authority.
Following an audit at Conotoxia sp. z o.o. at the end of 2023, the Authority forced the Company to resign from its existing agent, Cinkciarz.pl sp. z o.o, which had successfully handled customer deposits and withdrawals for years. Doing so de facto turned the Company's entire business upside down. The post-audit recommendations issued by the Authority were not based on any specific arguments justifying such a far-reaching interference with the procedures applied in Conotoxia sp. z o.o. operations. Implementing the requirements imposed by the KNF resulted in the need for a complete rebuilding of the IT infrastructure used by the Company. Also, it required the Company to cooperate with several banks.
The KNF's decision has halted the Company's expansion
During the Authority's audit, Conotoxia sp. z o.o. was in a growth phase. It achieved revenues of nearly 20 million PLN per year, with a turnover of almost 10 billion PLN. The Company's growth rate was 150-200% year-on-year. The Authority was aware of the development stage of Conotoxia sp. z o.o. and its potential. Indeed, the KNF received regular updates to its financial forecasts, which indicated further dynamic growth.
When the KNF took action against Conotoxia sp. z o.o., the Company was at an advanced stage of finalising contracts with three large customers using the Conotoxia Pay payment gateway. The value of these orders could increase turnover by 500-1000% per month.
Conotoxia sp. z o.o. was also close to signing a lucrative contract to handle 100,000 cards for a new partner. This information was known to the KNF, and yet recommendations were imposed that hindered the Company's growth at a crucial time, when all the products offered by the Company - multi-currency cards, payment gateway and money transfers - were ready to scale at a much higher level. The Authority's actions coincided with Conotoxia sp. z o.o. gaining a position that could realistically threaten traditional banks operating in the Polish market and become a competitive alternative to the services they offer in each of these three key product branches.
Tremendous challenges and unrealistic deadlines
The recommendations formulated by the KNF forced the Company to immediately establish cooperation with more banks and completely rebuild the IT infrastructure in place to date. Contrary to market realities, the Authority indicated a completely unrealistic 6-week deadline for Conotoxia sp. z o.o. to fully implement the process, which, in the common opinion of IT and payment systems experts, requires 6 to 10 months of intensive work. The deadline for implementing the KNF's recommendations has been set in complete disregard of reality, and the Company could not find and still has not found any rational explanation for the demands in this regard.
The IT infrastructure supporting the Conotoxia sp. z o.o. business is comparable to the systems of a medium-sized bank. It consists of dozens of websites that handle thousands of transactions per day and hundreds of online shops (merchants). The Authority was fully aware of the scale of the Company's operations and, in making its decision, could not have been unaware that rebuilding them in such a short time was not feasible.
The decision to abandon the use of the agent, Cinkciarz.pl sp. z o.o., forced the Company to open new accounts in banks with which it had not previously cooperated because the existing partner (mBank S.A.) did not handle all the currencies offered to customers. The cooperation between Conotoxia sp. z o.o. and Cinkciarz.pl sp. z o.o. was based on a vast network of currency bank accounts, which guaranteed efficient handling of domestic and international transactions. Moreover, Cinkciarz.pl sp. z o.o. was finalising new accounts and expanding the range of currencies available, which would provide even better customer service. The KNF must have been fully aware that transferring such a complex operating model to a new banking system in just six weeks was pure fiction.
The unwanted role of the 'lender' - consequences of errors and imposed obstacles
The Company's need to adapt to the KNF's recommendations coincided with modifications to its IT infrastructure already underway. These modifications stemmed from the need to eliminate from the Company's operating model the errors that arose at the process design stage. Conotoxia sp. z o.o., by providing the Conotoxia Pay payment gateway, was unexpectedly forced to act as a 'lender' to e-commerce merchants. The Company immediately took corrective action to modify the billing process and synchronise the timing of the actual receipt of funds from payment providers with their release to online shops.
Deploying these changes required the reconstruction of IT systems both on the part of Conotoxia sp. z o.o. and Cinkciarz.pl sp. z o.o. as the agent. The Group was implementing mechanisms to enable detailed reporting of transactions from payment method providers, linking them to bank account entries and introducing complex systems to assign transfers to the relevant transactions. This immense undertaking burdened the Company and its technology resources but was necessary to meet customer expectations.
The obligation to comply with the KNF's recommendations further complicated the process. According to the Authority's recommendations, funds from suppliers should flow directly into Conotoxia sp. z o.o.'s bank accounts, which had not previously been used to process transactions. The KNF, by issuing this request and setting a deadline for changes, completely ignored the fact that these accounts needed to be integrated into the settlement systems.
Currently, despite the design of mechanisms to synchronise payments from suppliers with the provision of funds to merchants, the process still is unable to operate smoothly. The lack of integration of new bank accounts with the settlement system is the result of forced, ill-considered changes. The Company calculates the estimated time to repair the system and bring it to full usability in three to four months.
Conotoxia sp. z o.o. has not stopped its work on infrastructure redevelopment. The Company has been and will continue to take all steps to see the processes through to completion. Below, we present a plan for integrating Conotoxia sp. z o.o.'s infrastructure into the banking system, together with a description of the various stages of the process and their duration. This information is presented publicly to indicate to a wide audience how complex an IT infrastructure matter we are dealing with in the case of fintechs like ours in the situation of completely remodelling the system solutions used.
Plan for system integration with mBank S.A. (WebService):
1. Preparation of infrastructure and resources:
- Signing an agreement with mBank and obtaining credentials for the API: 2-4 weeks
- Provision of test environment by mBank: 2-4 weeks
2. Implementation of basic structures:
- Defining the new bank in the system: 1 day
- Assigning accounts to mBank: 1 day
3. Implementation of bank service functions in the BANKS IT system:
- Range of functionality including, but not limited to, establishing and maintaining sessions, downloading transaction confirmations, and handling different types of transactions (Elixir, SEPA, SWIFT, Direct Payment): 4-6 months
4. Adaptation of existing system functions:
- Adaptation of the mechanism that generates data for deposits, improvement of the mechanism for assigning a bank to perform transactions, integration of new accounts: 2-3 weeks
5. Testing and implementation:
- QA testing, deployment to production environment, internal testing in production: 2-4 weeks
6. Reporting: 2-3 months
Estimated labour input:
- Preparation phase (contract, credentials, test environment): 4-8 weeks
- Functional implementation: 4-6 months
- Adaptation of system mechanisms: 2-4 weeks
- Testing and implementation: 2-4 weeks
- Total time: 6-10 months
Risks and limitations:
- Delays in mBank processes, including enquiry and order processing
- Problems with the availability of the test environment from mBank
- Complexity of handling new features (ISO 20022)
Summary: The integration process with mBank via WebService is complex and requires special coordination and time. When the KNF decided to revoke the Conotoxia sp. z o.o. licence, intensive work on integration and infrastructure development was still taking place, was not interrupted and has continued. This process is estimated to take 6-10 months and involves many technical and organisational challenges. It also generates massive costs for Conotoxia sp. z o.o. and leads to a deterioration in the quality of the services the Company provides to its customers.
Management Board of Conotoxia sp. z o.o.