Financial regulation

Regulatory bodies

Which bodies regulate the provision of fintech products and services?

Switzerland has not enacted a comprehensive framework governing the provision of fintech or crypto-related financial services. Such activities are subject to the general Swiss financial market laws and regulatory licensing requirements. The Swiss Financial Market Supervisory Authority (FINMA) is the competent prudential supervisory authority for banks, securities firms, asset managers and insurance companies. Further, various recent initial coin offerings (ICOs) were executed through foundations domiciled in Switzerland. Foundations incorporated under the laws of Switzerland are supervised by separate supervisory authorities at the communal, cantonal and federal level. Foundations established for the purpose of executing an ICO are typically supervised by the Federal Authority for Foundation Supervision.

Regulated activities

Which activities trigger a licensing requirement in your jurisdiction?

Whether or not specific business activities performed by a fintech company qualify as a regulated activity in Switzerland will need to be determined on a case-by-case basis. Fintech companies often fall into one of the following licensing categories:

  • Banking licence: under the Federal Act on Banks and Savings Institutions (FBA), only licensed banks are permitted to accept deposits from the public on a professional basis. Pursuant to the FBA and the Federal Ordinance on Banks and Savings Institutions (FBO), the acceptance and storage of crypto-assets as well as related custody services are also deemed regulated deposit taking. Therefore, any fintech company that accepts deposits or provides custody services in relation to crypto-assets, on a professional basis, will – subject to certain exemptions – require a banking licence under the FBA. In addition to the regular banking licence, permitting the holder to engage in regulated banking activities, since 1 January 2019, the FBA has provided for a (simplified) fintech licence. The fintech licence permits the respective licence holder to accept deposits up to the threshold of 100 million Swiss francs, provided that the deposits are not invested and are not interest-bearing. If the maximum deposit threshold of 100 million Swiss francs is exceeded, the company must notify FINMA within 10 days and must apply for a regular bank licence within 90 days. With the fintech licence, companies not engaging in the classic banking business (interest rate differential business), for example, by using short-term deposits for long-term lending or investment activities, now have a viable regulatory alternative under which such companies can implement their business model.
  • Securities firm licence: under the Federal Act on Financial Institutions (FinIA), only licensed securities firms are permitted to engage in regulated securities dealing. A fintech company will qualify as a securities firm, requiring a licence under FinIA, if it engages, on a commercial basis, in either (1) dealing in securities in its own name but on its clients’ account; (2) dealing in securities on a short-term basis on its own account and thereby either (a) impacting systemic stability of the Swiss financial market or (b) being directly admitted to a trading venue within the meaning of the Financial Market Infrastructure Act (FMIA); or (3) market making activities. In light of the outlined legal framework, fintech companies will typically require a licence as a securities dealer, if their business model includes trading of digital assets, qualifying as ‘securities’ within the meaning of the FMIA, for the account of its clients. Under Swiss law, securities are financial instruments that are standardised and suitable for mass trading. Pursuant to FINMA’s practice, to the extent that digital assets grant a claim against the relevant issuer, namely asset tokens or futures contracts on cryptocurrencies, and are suitable for mass trading, such digital assets will qualify as securities.
  • Licensing requirements under the Financial Market Infrastructure Act: operating a platform that offers multilateral trading in securities within the meaning of the FMIA in Switzerland requires a licence as a trading venue (stock exchange or multilateral trading facility). A trading venue is an institution for multilateral trading in securities whose purpose is the simultaneous exchange of bids between several participants and the conclusion of contracts based on non-discretionary rules. Fintech companies operating a platform that offers trading in digital assets may require a licence as a trading venue, if the instruments traded on such platform qualify as ‘securities’ within the meaning of the FMIA. It should also be noted that trading venues domiciled outside Switzerland require a recognition by FINMA, if they admit Swiss supervised entities to their trading facilities. Finally, in 2021 a new licence category, DLT trading venue, was introduced under the FMIA. Licensed DLT trading venues are authorised to provide services in the areas of trading, clearing, settlement and custody of ledger-based securities to both regulated and unregulated financial market participants, including retail investors.
Consumer lending

Is consumer lending regulated in your jurisdiction?

Generally, the granting of loans on a commercial basis is considered financial intermediation, which is subject to the Federal Anti-Money Laundering Act (AMLA). Thereunder the financial intermediary is subject to the duty (1) to become a member of a self-regulatory organisation; (2) to determine the identity of the contracting party and the beneficial owner of the transferred assets; and (3) to clarify the financial background and purpose of the business relationship or transaction, if the financial intermediary becomes aware of indications that the funds in question were obtained through criminal activities or are intended to finance terrorism. Further, the Federal Act on Consumer Credits (CCA) stipulates the general substantive rules governing consumer credits and sets out the supervisory licensing requirements for providers of consumer credits in Switzerland. Under the CCA consumer credit providers (and arrangers of consumer credits) are subject to a number of obligations, namely the duty to determine the creditworthiness of the consumer, formal requirements applicable to the credit agreements, rules governing the calculation of interest payments and respective maximum interest thresholds. The CCA sets out sanctions in case of a violation of such duties. The provision of consumer loans to consumers in Switzerland is subject to a licensing requirement. The licensing requirement is triggered by the provision or the solicitation of a consumer credit to a consumer domiciled in Switzerland. To obtain a licence under the CCA the credit provider must (1) ensure an irreproachable conduct of business operations in Switzerland; (2) have sufficient education and experience in the area of financial services; and (3) have adequate liability insurance or provide respective securities. Further, the credit provider must hold Common Equity Tier 1 capital in the amount of 8 per cent of the credit outstanding in Switzerland, or at least 250,000 Swiss francs, whichever is higher.

Secondary market loan trading

Are there restrictions on trading loans in the secondary market in your jurisdiction?

The trading of loans or participations therein on the secondary market is not subject to a licensing requirement in Switzerland.

Collective investment schemes

Describe the regulatory regime for collective investment schemes and whether fintech companies providing alternative finance products or services would fall within its scope.

In Switzerland the offering of units in a collective investment scheme is governed by the Federal Act on Collective Investment Schemes (CISA) and the FinIA, with licensing requirements applying both at the level of the fund, the fund management company and the asset manager for collective investment schemes. Pursuant to CISA, a financial instrument qualifies as a collective investment scheme for the purposes of Swiss law if it meets the following five criteria: (1) assets (2) that are raised from at least two independent investors (3) for the purpose of being collectively managed (4) for the account of such investors, (5) whereby the investors’ investment needs are met on an equal basis. Typically, the products offered by fintech companies, such as peer-to-peer lenders, marketplace lenders or crowdfunding platforms, do not qualify as collective investment schemes and will not be subject to CISA. In contrast, in cases where the business model of a fintech company involves the pooling of funds or risks in connection with an investment, such activities will likely be subject to CISA and the requirements set out thereunder.

Alternative investment funds

Are managers of alternative investment funds regulated?

The Alternative Investment Fund Managers Directive is not applicable in Switzerland. However, pursuant to the FinIA, companies, managing funds and collective investment schemes, in their own name but for the account of its clients, require a licence as a fund management company. In addition, asset managers providing asset and risk management services to collective investment schemes require a licence as a manager of collective assets and are subject to prudential supervision by FINMA. To the extent that the managed collective investment schemes are limited to qualified investors and the assets under management of the investment manager do not exceed (1) 100 million Swiss francs or (2) 500 million Swiss francs and the investments do not include leveraged financial instruments, the respective investment manager is exempt from the licensing requirement under the FinIA.

Peer-to-peer and marketplace lending

Describe any specific regulation of peer-to-peer or marketplace lending in your jurisdiction.

Swiss law does not provide for specific regulations applicable to peer-to-peer or marketplace lending. However, to the extent that a company operating a lending platform accepts and forwards funds committed to the platform, the operating fintech company is typically subject to the AMLA and the requirements set out thereunder, such as the duty (1) to become a member of a self-regulatory organisation; (2) to determine the identity of the contracting party and the beneficial owner of the transferred assets; and (3) to clarify the financial background and purpose of the business relationship or transaction, if the financial intermediary becomes aware of indications that the funds in question were obtained through criminal activities or are intended to finance terrorism. Further, if loans are granted to consumers over the platform, the loans will subject to the Federal Act on Consumer Credits and the fintech company operating the platform may – depending on the specific set-up – qualify as an arranger of consumer credits, requiring a licence under the CCA.

Crowdfunding

Describe any specific regulation of crowdfunding in your jurisdiction.

Crowdfunding is not subject to specific legislation in Switzerland but is governed by the general Swiss financial market laws. In July 2020, FINMA published a fact sheet on crowdfunding and provided guidance on the regulatory treatment of crowdfunding platforms. Pursuant to FINMA’s guidance, as general rule, crowdfunding platforms are not subject to a licensing requirement in Switzerland, if the platform operator does not accept and channel the funds through its own accounts. In contrast, to the extent that the operator of a crowdfunding platform accepts funds exceeding 1 million Swiss francs (below such threshold the operator is exempt from the licensing requirement), rather than forwarding them to the borrower within 60 days and in consequence holds such funds in its own account for a longer period (in order, for instance, to ensure that the amount is available at the end of a lengthy financing period), the operator is deemed to be engaging in regulated deposit taking requiring a licence under the FBA. To the extent the funds do not exceed 100 million Swiss francs and such deposits are neither invested nor interest-bearing, the crowdfunding platform can be operated under a fintech licence pursuant to the FBA. In addition to potential licensing requirements, provided the platform operator channels funds through its accounts, the operator will be engaging in financial intermediation, subject to the Swiss anti-money laundering framework. Finally, it should also be noted that an entity raising funds for its own account over a crowdfunding platform may – depending on the specific set-up - be deemed to be accepting deposits within the meaning of the FBA. To the extent that the outstanding loans exceed 1 million Swiss francs, the borrower under a crowdfunding platform, accepting funds from numerous lenders, may be subject to the licensing requirements stipulated under the FBA.

Invoice trading

Describe any specific regulation of invoice trading in your jurisdiction.

Invoice trading and factoring is not specifically regulated in Switzerland. Invoice trading and factoring generally do not require a licence under the financial market laws of Switzerland. In addition, invoice trading is generally not deemed to constitute financial intermediation subject to the Swiss anti-money laundering framework, whereas it will have to be determined on a case-by-case basis whether the underlying and acquired claims results from an activity subject to Swiss anti-money laundering regulations.

Payment services

Are payment services regulated in your jurisdiction?

The European Payment Services Directive 2 (PSD2) is not applicable in Switzerland. Under the FMIA, an entity that operates a payment system (ie, a facility that clears and settles payment obligations based on uniform rules and procedures) is subject to a licensing requirement in Switzerland, provided (1) the licensing requirement is necessary for the proper functioning of the Swiss financial market or the protection of financial market participants; and (2) the payment system is not operated by a licensed bank. Licensed payment system providers are further subject to reporting obligations towards the Swiss National Bank. The Swiss National Bank also has the competence to subject foreign payment systems that are of systemic relevance to Switzerland to its supervision. As a licensing requirement will only apply under the FMIA, to the extent a payment system is of systemic relevance in Switzerland, most fintech companies providing payment services will not be subject to a licensing requirement in Switzerland. However, the provision of payment services generally qualifies as financial intermediation subject to the Swiss anti-money laundering framework.

Open banking

Are there any laws or regulations introduced to promote competition that require financial institutions to make customer or product data available to third parties?

Swiss law does not provide for specific regulation applicable to open banking. In Switzerland, open banking applications must adhere to the general banking secrecy, data protection and regulatory outsourcing requirements. While not widely applied and implemented in Switzerland, there are various industry initiatives monitoring the relevant developments. Notably the Swiss Bankers Association has announced that it is actively monitoring the technical innovations in the open banking domain and intends to, together with market participants, contribute to the establishment of framework conditions that facilitate business models based on open banking and thus increase the competitiveness of Switzerland’s financial centre

Insurance products

Do fintech companies that sell or market insurance products in your jurisdiction need to be regulated?

The provision of insurance services in Switzerland requires a licence under the Federal Insurance Supervisory Act (ISA). The provision and the solicitation of insurance contracts and services is strictly regulated under the ISA. Therefore, fintech and insurtech companies providing services under which the (monetary) risk in relation to certain events is transferred to a third party against the payment of a premium, it will have to be determined whether such services are subject to the ISA and the requirements set out thereunder.

Credit references

Are there any restrictions on providing credit references or credit information services in your jurisdiction?

The provision of credit references or credit information is not specifically regulated under the laws of Switzerland and such services are generally not subject to a general regulatory licensing requirement. However, any company providing credit information must comply with the Swiss Federal Act on Data Protection, which applies not only to natural persons but also to legal entities. Furthermore, the gathering of information from non-public sources may qualify as private detective services, which – depending on the specific set-up – may be subject to licensing requirements in certain cantons. Further, the cross-border provision of private detective services may trigger reporting obligations to the Swiss Foreign Department under the Federal Act on Private Security Services Abroad.