FINMA Embarks On Plan To Facilitate FinTech Innovation

FINMA has taken steps towards facilitating fintech innovation via licensing.

Switzerland’s Financial Market Supervisory Authority (FINMA) has released a new publication that helps mitigate regulatory measures that were previously seen as stifling, in particular facilitating a number of innovations for fintech groups, according to a FINMA statement.

The release of the new manifesto suggests that FINMA has been interested in taking definitive steps to help streamline fintech innovation via the introduction of a new licensing category for groups. This includes a license exempt area for start-up companies.

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More specifically, FINMA has supported the implementation of a new licensing category for financial innovators with a license-exempt realm, i.e. sandbox. This licensing carries advantages for emergent businesses in the form of groups with a business model of carrying out certain banking activities, albeit with limited acceptance of client assets and no lending activity.

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This provision is important for fintech firms or startups as the aforementioned licensing requirements would be less extensive than for a traditional banking license. For example, financial services providers who do not accept more than $51.5 million (CHF 50 million) in deposits could apply for this type of financial innovators’ license provided that they hold 5% of the deposits and at least ($309,200) CHF 300,000 capital as collateral.

Moreover, the issuance of these licenses will also help lower the entry threshold for providers of payment systems, applications for managing assets digitally and crowd funding platforms.

FINMA has also unveiled several new initiatives that help bolster digital client identification. One key component of these rules is the establishment of business relationships or onboarding through digital channels. Financial intermediaries can essentially onboard clients by means of video transmission, putting this medium of identification on the level of in-person identification. As other forms of online identification, apart from video identification, are also permitted, the circular covers a range of methods of onboarding via digital channels, FINMA notes.

Finally, FINMA has also tinkered with some changes to technology neutrality, which it sees as critical innovation to the competitiveness of Switzerland’s financial center. As such, the group wants to maintain a more neutral approach to certain business models and technologies, which should help the overall playing field in terms of overall transparency.

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