New Licensing Category and “Regulatory Sandbox” for Financial Innovators

Fintech companies in Switzerland often fall under the scope of the banking legislation and, in consequence, require a licence from FINMA. As such an authorisation entails financial and organizational burden, many financial innovators are discouraged from entering into the Swiss market.

To lower these barriers to entry, the Federal Council has now initiated a legislative project (press release of April 20, 2016): on the one hand, the introduction of a new licensing category is being considered. Financial innovators, which receive client funds but do not issue credits (contrary to a “classical” bank) should benefit from lower license requirements. On the other hand, an exemption from the licencing requirement for start-up companies could be implemented (“Regulatory Sandbox”). The Federal Department of Finance was instructed to draw up possible concepts for such regulation by autumn 2016.

Additionally, the Federal Council stated that Fintech companies administering forwarding accounts set out in Article 5(3)(c) of the Banking Ordinance should be exempt from the banking license requirement if (i) they accept third-party funds solely for the purpose of forwarding them, (ii) they are not paying interests on the funds received, and (iii) the processing (forwarding to a predefined beneficiary or transfer back to investors) is determined beforehand. This exemption may especially be relevant for crowdfunding business models.

To read the full article in German, please click here