Federal Council wishes to allow for innovative forms of financial services

Bern, 20.04.2016 - During its meeting today, the Federal Council instructed the Federal Department of Finance (FDF) to examine the need for regulatory action in the innovative financial technology (fintech) area. At the same time, it reiterated that the existing statutory provisions for the authorisation-exempt processing of financial transactions apply also for fintech firms' services.

Innovation is not only an important factor in the competition between companies; it is also a significant locational advantage for the financial centre. Consequently, the Federal Council has decided that market access should be made easier for new, innovative financial technologies. In particular, this means that barriers to market entry that exist for fintech firms because of the current financial market regulation will be removed.

The fintech sector is very diverse. In short, the sector's services can be divided up into the following main areas: crowdfunding, payment transactions, blockchain technology, virtual currencies, comparison and information portals, investment advice and asset management. Many fintech business models are based on third-party funds being accepted on a commercial basis. Consequently, they generally come under the scope of the Banking Act (BankA) and require corresponding authorisation from FINMA.

The BankA is tailored to business models that can carry a high level of potential risk from a stability and client protection perspective. Accordingly, the authorisation granting requirements are high. Such requirements appear to be inappropriate for fintech firms, as they offer services outside of banks' typical core business area. Therefore, ways are to be sought for completely exempting new, innovative companies from banking legislation based on their risk potential or else for making the authorisation granting requirements commensurate.

Simplifications for fintech firms

Against this backdrop, an independent authorisation category, targeted exemptions from banking legislation and fixed-term simplifications for fintech companies are to be examined in particular. This could facilitate the activity of providers in the areas of virtual currencies, payment systems, digital asset management applications and crowdfunding platforms. The Federal Council has instructed the FDF to conduct a corresponding review and prepare possible concepts. The results should be available by autumn 2016.

Exception for forwarding accounts

At the same time, the Federal Council indicated that fintech firms can come under the exception set out in Article 5 paragraph 3 letter c of the Banking Ordinance and are exempt from the scope of the Banking Act if they accept third-party funds solely for the purpose of forwarding them or paying interest and the processing (forwarding to a predefined beneficiary or transfer back to investors) is determined beforehand. This is regularly the case for crowdfunding platforms.