Duties of FinTech Companies in the Financial Sector

Since January 1, 2019, Swiss banking law has recognized the category of FinTech companies. FinTech startups in the financial sector must comply with special due diligence obligations.

FinTech companies in the financial sector are less strictly regulated than traditional banks, but they still have numerous regulations to comply with.

Organization and Administration

Banking law includes various organizational regulations for FinTech companies operating in the financial sector. These companies must have their registered office and the place of actual administration in Switzerland and be organized in the form of a corporation, a limited partnership with shares, or a limited liability company. In addition, the management must be based in Switzerland, meaning the executives must live close enough to carry out their activities here. Furthermore, banking regulations contain rules for the organization of the management board. Members of the management must have a good reputation and ensure impeccable business operations.

Risk Management and Compliance

Just like banks, FinTech companies must implement appropriate risk management and an internal control system. Additionally, FinTech firms in the financial sector must have sufficient compliance to ensure adherence to legal and internal corporate regulations. However, the banking regulations provide for facilitations for demonstrably low-risk business models. FinTech companies also have the duty to take measures to prevent conflicts of interest or ensure that customers do not suffer any disadvantages in the event of conflicts of interest.

Recording of Public Deposits

Public deposits received by FinTech companies, that is, customer funds, must be kept separate from the company's own funds or at least shown separately in the accounting. Customer funds must also be held in the currency in which the customer has a right of recovery.

Equity Requirements

The equity requirements for FinTech companies in the financial sector are significantly lower than for traditional banks. There must be equity amounting to 3 percent of the customer funds, but at least 300,000 CHF. The provisions of the Equity Regulations and the Liquidity Regulations are applicable.

Accounting

There are also facilitations for FinTech companies regarding accounting, as the accounting is governed by the provisions of the Code of Obligations. However, FinTech firms in the financial sector are required to have their annual accounts audited by an audit firm. The rule provided in the Code of Obligations, which allows for opting-out under certain conditions, does not apply.

Deposit Insurance

A major difference between FinTech companies in the financial sector and traditional banks is that FinTech customers do not enjoy the protection of deposit insurance. In the event of bankruptcy, customer funds are consequently not secured. For this reason, FinTech firms are obliged to inform their customers early about the lack of deposit insurance and the risks associated with the company's business model.

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