On 15 June 2018, the Swiss Parliament adopted an amendment to the Banking Act that creates a new category of licence allowing companies that are principally active in the financial sector to accept or solicit from the public funds of up to CHF 100 million. This legislative amendment is expected to come into force on 1 January 2019. This new category of licence is commonly referred to as a ‘FinTech licence,’ because it will be most useful for companies that are active in the FinTech sector. However, it will also be open to companies that are not active in that sector, provided, however, that they are mainly active in the field of finance. The creation of this new licence follows other measures recently adopted by the Federal Council and the Swiss Financial Market Supervisory Authority (‘FINMA’) to improve the regulatory framework and remove barriers to market entry for FinTech companies in Switzerland. Caroline Clemetson and Grégoire Tribolet, of Schellenberg Wittmer Ltd, provide an overview of the current regulatory framework in Switzerland, and the conditions applicable to this new licence. / read more

On 18 July 2018, the European Banking Authority (‘EBA’) published its Guidelines on fraud reporting under the Revised Payment Services Directive (Directive (EU) 2015/2366) (‘PSD2’) (EBA/GL/2017/17) (‘Guidelines’). These Guidelines define how payment service providers (‘PSPs’) should report cases of fraud to their regulator. Here Dr Nils Rauer and Andreas Doser, of Hogan Lovells, discuss how the Guidelines sit with the rest of PSD2, and how data protection rules under PSD2 and the General Data Protection Regulation (Regulation (EU) 2016/679) (‘GDPR’) apply to fraud prevention by PSPs. / read more

In July 2018, the Financial Conduct Authority (‘FCA’) clarified through its publication of the finalised version of its ‘FG 16/5 Guidance for firms outsourcing to the ‘cloud’ and other third-party IT services,’ that its guidance no longer applies to banks. Luke Scanlon, Head of Fintech Propositions and Legal Director at Pinsent Masons, discusses the impact of this change and the background to the FCA’s regulatory framework. / read more

Few would deny the capacity for FinTech to deliver significant benefits to customers across financial services, from banking and payments to digital currencies, wealth management and insurance. A recent study published by the European Parliament - ‘Competition issues in the Area of Financial Technology’ - notes FinTech’s ‘enormous potential in improving financial inclusion … [and] providing more easily accessible and affordable financial services to large masses of the population and small and medium-sized enterprises¹.’ Miles Trower, Partner at TLT LLP, discusses the application of competition law to FinTech and the unique challenges for authorities raised in the study, as well as the challenges for those advising the dynamic businesses that inhabit this space. / read more

On 30 July 2018, the U.S. Department of the Treasury (‘the Treasury’) and the Office of the Comptroller of the Currency (‘OCC’) issued guidance on certain issues confronting the FinTech industry. Specifically, the Treasury released a long-awaited report, entitled ‘A Financial System That Creates Economic Opportunities: Nonbank Financials, Fintech, and Innovation’ (‘the Treasury Report’). Following a specific recommendation in the Treasury Report, the OCC formally announced that it would begin to accept applications for special-purpose national bank (‘SPNB’) charters, and it provided guidance on the procedures and standards that would govern such applications through the issuance of a Licensing Manual Supplement for Special Purpose National Banks (‘the Manual Supplement’). Taken together, the Treasury Report and the OCC announcement reinforce the commitment of the federal government to promote the growth of the US FinTech industry, as Barrie VanBrackle, Partner at Orrick, Herrington & Sutcliffe LLP, explains. / read more

On 22 March 2018, Arizona’s Governor signed H.B. 2434, establishing the first state-level regulatory ‘sandbox’ for FinTech companies in the US. The Arizona regulatory sandbox is designed to reduce regulatory burdens by creating an environment in which participants can develop and test innovative financial products and services without first obtaining a licence. The creation of the sandbox was due, in large part, to a recognition by Arizona legislators that the time and costs associated with understanding and navigating state regulatory regimes have created significant barriers to entry for a number of FinTech companies. Although Arizona’s regulatory sandbox is an important step in promoting financial innovation in the US, the programme does not alleviate certain challenges posed at federal level, or from other states. Jonice Gray Tucker and Christopher Robins, of Buckley Sandler LLP, provide an overview of Arizona’s regulatory sandbox, potential federal actions that may be on the horizon, and practical steps that new entrants into the US market can take in order to navigate the complex web of federal and state laws and regulations. / read more

The forthcoming decision of the Court of Justice of the European Union (‘CJEU’) in Bundeskammer für Arbeiter und Angestellte/ING-DiBA Direktbank Austria Niederlassung der ING-DiBa AG (Case C-191/17) will shape how (overnight) savings accounts will work in future. On 19 June 2018, Advocate General (‘AG’) Evgeni Tanchev published his opinion, which differentiates between payment and deposit accounts. Andreas Doser, Associate at Hogan Lovells, discusses the arguments in the case, the AG’s opinion, and the impact that the CJEU’s decision (for which no date has yet been set) may have. / read more

On 4 July 2018, Malta officially passed into law three bills that establish it as one of the first countries to enact a regulatory framework for blockchain technologies and cryptocurrency. While other nations have decided to wait for a tried-and-tested legal framework on which to base their regulations, Malta has pioneered legislation in the industry. This move could represent an intention to make Malta a hotspot and could, as Denitza Dimitrova, Partner at Denitza Dimitrova Consultus describes, earn it the title of the world’s first ‘blockchain island.’ Dimitrova here provides insight into the three bills and the impact they could have on global attitudes towards regulating blockchain and cryptocurrency. / read more

The second Payment Services Directive (Directive (EU) 2015/2366) (‘PSD2’) is a game changer. It not only focuses on tightening the payments sector’s operating model, but also requires banks and other payments providers to open their infrastructure and customer data assets to third-party payment service providers (‘PSPs’) to enable them to develop new products, bringing PSPs into the scope of regulation for the first time. To this end, the PSD2 mandates certain standards and requirements intended to enable consumers to benefit from safer and more innovative electronic payments. The regulatory technical standards (‘RTS’) of the European Banking Authority (‘EBA’) on strong customer authentication (‘SCA’) and common and secure communication (‘CSC’) and the underlying Regulation (EU) 2018/389 underpin the new security requirements under the PSD2, regulating access by account information service providers (‘AISPs’) and payment initiation service providers (‘PISPs’) to customer payment account data held by account servicing payment service providers (‘ASPSPs’). The EBA published the RTS on SCA and CSC in the Official Journal on 13 March 2018. It will have legal application from 14 September 2019. Tim Wright, Partner at Pillsbury Winthrop Shaw Pittman LLP, discusses the EBA’s RTS. / read more

Following the publication of an issues paper on ‘Blockchain Technology and Competition Policy’ by the Organisation for Economic Co-operations and Development (‘OECD’) in April 2018, Dimitris Sinaniotis, Legal Director at TLT LLP, provides insight into the OECD’s paper and the possible competition law concerns that could arise as use of the blockchain evolves. / read more