In Switzerland a new fintech license is ready to go live on 1 January 2019. The fintech license has been created by the parliament this Summer with an amendment to the Banking Act (article 1b Banking Act). The Swiss Financial Market Supervisory Authority (FINMA), which is responsible for granting the license, is now ready to receive applications. The application and licensing process is explained in guidelines now published by FINMA (https://www.finma.ch/en/~/media/finma/dokumente/dokumentencenter/myfinma/1bewilligung/fintech/w_bewillligungfintech_20181203_de.pdf?la=en.). Also as of 1 January 2019 an amendment to the Banking Ordinance which specifies the requirements for the fintech license will enter into force.
Under the fintech license financial institutions will be permitted to accept deposits of up to 100 million Swiss francs. The financial institution has to comply with regulatory requirements, including a minimum capital of CHF 300’000 or 3% of deposits. It also has to comply with requirements regarding its organization, risk management, compliance and accounting. These requirements are much lower than those for banks, which are extremely onerous and very difficult to meet for startups. However, the price tag for this relative light touch regulation is high because an institution operating under this license is not permitted to pay any interests on deposits and is prohibited to invest deposits. This means in practice that the fintech must park deposits in a bank account – if such an account is available – or in highly rated liquid assets. This means in practice that under current market conditions the fintech has to pay negative interest rates of up to 75 basis points for parking deposits.
It is therefore unclear if any viable business model can be operated under the fintech license. The lawmakers targeted primarily operators of crowdfunding platforms, which are collecting and holding funds for more than 60 days. A lighter touch license would also be very useful for payment services providers, but it is currently still unclear whether firms operating under the fintech license will have access to an account of Swiss National Bank, which is a prerequisite for access to SIC, the Swiss interbank payment system. Last, but not least, the fintech license might also be a solution for firms accepting and holding cryptocurrencies.
If you are interested in learning more about the fintech license please do not hesitate and contact us in case you have any questions.
Hans Kuhn | Diego Benz
Contributing Advisors
