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Topic Fintechs FinTech Innovation Hub

Innovation is key to any market’s survival. Innovation that is successful over the long term ensures competitiveness, and therefore also safeguards the integrity and stability of the financial market. The primary driving force for innovation in the financial market is currently digitalisation. In this context, the focus is on one concept in particular: fintech.

Update Overview

DateTopicUpdate
12.03.2024Crypto tokensNew FAQ added: Would ETFs (exchange traded funds) like the “bitcoin ETF” traded in the US – enabling investment in crypto assets such as bitcoin – be permitted in Germany and Europe?
09.08.2023Activities in connection with crypto assets in accordance with MiCAUpdate With the entry into force of the MiCA regulation on June 29, 2023, the site was extensively revised
11.05.2023GlossaryThe term "Privacy Coin" has been added
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The definition of "fintech" provided by the Financial Stability Board (FSB) has widely become established as standard. The FSB defines fintech as technologically enabled innovation in financial services that could result in new business models, applications, processes or products with an associated material effect on financial markets and institutions and the provision of financial services.

Fintech is thus a very broad concept that encompasses a wide range of technologies. The concept is therefore often narrowed down according to the financial service provided. The use of innovative technologies in the insurance industry, for example, is referred to as insurtech, which is a portmanteau of the words “insurance” and “technology”.

A further fintech area is regtech, derived from the words “regulatory” and “technology”. The focus of regtech is on fulfilling and documenting regulatory and supervisory requirements in a more effective and efficient way.

Another area is suptech, which is derived from the words “supervisory technology”. Suptech applications support the work of supervisory authorities and can thus be understood as a counterpart to regtech.

No legal definiton for term "fintech"

There is, however, no legal definition of the term "fintech" as yet. Due to BaFin’s technology neutrality, it is immaterial whether the supervised undertakings use innovative financial technology, and what technology they employ. BaFin is guided by the principle “same business, same risks, same rules”.

BaFin is closely following the digital transformation in the financial industry and aims to provide legal certainty for companies that work with new technologies. Since time to market is a decisive factor for every fintech company and every new enterprise, BaFin aims to communicate with these companies as early on, as efficiently and as transparently as possible.

On these web pages, BaFin wishes to provide a fast and structured introduction and overview of business models, technologies, authorisation requirements and applicable supervisory law, and enable companies to contact BaFin in an uncomplicated but structured way. These pages are intended to serve as a guide and to provide information about the assessments and requirements that BaFin has compiled with regard to individual innovative financial technologies and business models. You will also find relevant specialist information on our website.

Please be aware that the business models presented on the website are purely indicative; this does not represent a conclusive legal assessment by BaFin. Binding assessments can only be issued in individual cases based on the specific individual circumstances.

BIS-FSI Fintech Tree

Graph @ BIS-FSI BIS-FSI Fintech Tree

1. Enquiries and contact

We have created a fintech contact form for individual enquiries. This serves as a digital first point of contact with BaFin experts. Enquiries regarding authorisation requirements may be forwarded to the competent regional offices of the Deutsche Bundesbank.

2. Fintech business models

Fintech business models are diverse and – depending on their structure – may also require authorisation from BaFin. On the following pages, you can find an overview of the current most frequent business models, alongside supervisory information:

- Automated investment advice (robo-advice) and automatic trading
- Automated portfolio management
- Signalling and automated order execution
- reception and transmission of orders in crypto assets on behalf of third parties;
- execution of orders in crypto assets on behalf of third parties;
- advice on crypto assets;
- operating a trading platform for crypto assets;
- placing of crypto assets;
- exchange of crypto assets for other crypto assets;
- exchange of crypto assets for fiat currencies that constitute legal tender;
- custody and management of crypto assets on behalf of third parties.

3. Innovative financial technologies

New innovative technologies are also driving digital transformation in the financial industry. Big data, artificial intelligence, distributed ledger technologies such as blockchain, and cloud services are just some of the key concepts in this field.

Alongside innovations such as progress in artificial intelligence or distributed ledger technology, there are a range of additional technological fields such as cloud services that, owing to overall technical progress, have long become part of daily operations in the financial market, and that are thus also considered as part of BaFin’s supervision. The following overview is therefore focussed on selected developments that, as a result of their potential to disrupt the financial system, raise new questions with regard to their supervisory or regulatory implications.

4. Further information

More on this topic:More on this topic

Here you can find further information about innovative business models and financial technologies

5. Frequently asked questions

When do I need to submit an application for authorisation and what do I need to observe when submitting an application?

Anyone wishing to provide certain banking and financial services in Germany requires authorisation from BaFin. The type of authorisation required depends on the planned business model and the legal and actual design of the planned products and services. The question of whether a business model requires authorisation, which type of authorisation is required and what scope the authorisation must have is determined on a case-by-case basis. Non-binding information and guidelines on market entry can be found on the BaFin website.

What do I have to do if I want to provide technical services for an institution?

Providers of purely technical services do not require authorisation from BaFin to conduct their activities as long as these activities are not classified as banking business or financial services. However, if they provide services for companies supervised by BaFin, their services may constitute material outsourcing by the supervised entity. For example, services are deemed to constitute material outsourced activities and processes if the services provided are critical for the supervised entity. This is also the case if the services concern the compliance obligations, for example in relation to money laundering prevention, the internal audit function or risk management, incumbent upon the entity outsourcing its activities or processes. If a technical service constitutes material outsourcing, the supervised entity must fulfil certain minimum requirements set out by BaFin when designing the contract with the outsourcing company. Alongside numerous other requirements, it must in particular be ensured that the supervised institution, alongside BaFin and any auditors, receive unlimited information rights with regard to the services provided, and that the institution has the power to issue instructions in order to comply with supervisory obligations at all times. Appropriate termination periods must also be agreed. Supervisory obligations incumbent on the institution that outsources its activities and processes can therefore have implications for technical service providers through such contractual agreements.

With the entry into force of the Act to Strengthen Financial Market Integrity (Gesetz zur Stärkung der Finanzmarktintegrität – FISG), BaFin received further powers and, as of 2020, has direct access to banks’ outsourcing providers. The FISG spells out which information and inspection rights BaFin has: previously, BaFin’s only means of intervention was via the banks, but now it has direct powers to intervene in order to avoid or remedy irregularities at companies to which functions are outsourced. BaFin may now also impose administrative fines on such companies. If institutions outsource activities to companies domiciled in third countries outside the European Economic Area, both parties must contractually appoint a person authorised to accept service to whom inspection orders may be served by BaFin at short notice, for example. Furthermore, the FISG has reintroduced the notification requirement for material outsourcings, thereby ensuring that BaFin has a comprehensive overview of the outsourced activities and processes and accompanying (concentration) risks.

A collection of all FAQs on FinTech can be found on our overview page.

Additional information

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