Lemonway Case: InnovUp’s Appeal to Bankitalia to Prevent the Halt to Italian Lending Crowdfunding

InnovUp – Italian Innovation & Startup Ecosystem, the non-profit and impartial association that represents the entire Italian innovation supply chain, is the spokesperson for the concerns expressed by the associated lending crowdfunding platforms, highlighting the major critical issues that the sector could face following the Lemonway affair.

The French payment institution currently manages, among others, the transactions of over 200 crowdfunding platforms in 29 European countries and most of the Italian ones.

The Bank of Italy’s measure against Lemonway

In fact, on August 8th, the Bank of Italy issued a provisional measure that reduces Lemonway ‘s operations as part of an inspection investigation, which appears to be linked to issues of adapting internal procedures, AML ( Anti-Money Laundering ) and KYC ( Know Your Customer ) in relation to the entry into force of the new European Regulation 1503 of 2020.

The measure adopted by the Bank of Italy currently provides for a ban on French fintech entering into new agreements for the provision of payment services, introducing new products or services for customers and opening new payment accounts for users of platforms already affiliated with it.

However, until October 31st, 2024, this measure does not apply to the payment services offered by Lemonway to operators of crowdfunding portals already authorised, such as ECSP, under European Regulation 1503 of 2020.

The “Sword of Damocles” over the lending crowdfunding sector

Until this date, the opening of new wallets, the disbursement and repayment of loans will be able to continue regularly without any consequences for the already authorised lending crowdfunding portals that use Lemonway and their users (investors and project-owning companies).

However, the operation of new portals authorised after the adoption of the aforementioned provision which have not changed payment service providers in the meantime remains blocked.

However, the date is rapidly approaching with no indication from the portals as to what might happen after October 31st in relation to Lemonway’s operations.

It is not clear, for example, whether more serious inhibitory measures will be issued, whether the restrictive measures already adopted will be extended and so on and, therefore, without any clarity on the continuation of its activity which, at present, is strictly dependent on that of Lemonway.

There are no alternatives to Lemonway on the market yet

If one provider is inadequate, an alternative may be found.

But, as Tommaso Baldissera Pacchetti, CEO and founder of CrowdFundMe, one of the leading platforms in Italy in crowdinvesting, reports in an interview with Bebeez.it, there are alternative providers, including Italian ones, for example TP Pay of the TAS group, whose mechanisms are however based on different logics than those adopted by Lemonway.

In other words, the execution software needs to be rewritten. And that takes time.

“A realistic estimate is about 4 months, but then you have to proceed with the transfer of accounts from Lemonway to the new provider. Many checks are needed because errors are not allowed,” another operator said.

InnovUp’s request to the Bank of Italy

Given this scenario, InnovUp intends to ask the Authorities whether they have actually assessed the position of the portals authorized to operate for less than a year, which require a period of approximately 9 months to adequately manage a possible transition to other operators.

For lending crowdfunding platforms, in fact, the technical times to replace a crucial supplier such as Lemonway, the main financial partner of the sector in Italy, a market where alternatives are currently limited, require several months.

It is therefore considered appropriate to also adequately consider the usefulness for portals to have a suitable period of time to evaluate and implement alternative solutions, if necessary/indispensable, thus avoiding having to interrupt fundraising campaigns already underway by issuers and no longer being able to involve new investors.

InnovUp President Cristina Angelillo commented: “As a trade association representing the innovation supply chain, of which crowdfunding platforms are an integral part, we express concern for the future of a market that, in the coming months, could undergo significant changes. A market that, in recent months, has already suffered strong slowdowns due to the new European legislation and lengthy national authorization processes and that, now, could register a new setback. A damage not only for the sector, but for all the innovative companies that use crowdfunding as a fundamental tool to finance their development projects.”

Who is InnovUp?

InnovUp is the non-profit and impartial association that since 2012 represents and unites the Italian innovation supply chain: Startups, Scaleups, innovative SMEs, Innovation Centers, incubators, accelerators, science and technology parks, startup studios/venture builders, crowdfunding platforms, professional firms, consulting firms and corporations.

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