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How are the following key activities in the fintech space regulated and what specific legal issues are associated with each? (a) Crowdfunding, peer-to-peer lending; (b) Online lending and other forms of alternative finance; (c) Payment services (including marketplaces that route payments from customers to suppliers (eg, Uber and AirBnb); (d) Forex; (e) Trading; (f) Investment and asset management; (g) Risk management; (h) Roboadvice; and (i) Insurtech.

Answer ... (a) Crowdfunding, peer-to-peer lending

A loan intermediary is an independent intermediary that mediates between borrowers and lenders to help them negotiate and conclude a loan agreement. The loan agreement must be entered into between the lender and borrower themselves. The loan intermediary cannot itself provide any funds or assume any risks for losses in mediated loans. Loan intermediaries are regulated by Section 2-18 of the Financial Undertaking Act and Chapter 5 of the Financial Contracts Act. On 1 June 2019 a new provision on debt-based crowdfunding entered into force in the form of Section 2-18 of the Financial Undertakings Regulation of 9 December 2016. Loan intermediaries are also subject to suitability requirements. This area is still evolving and further regulation of crowdlending platforms is expected.

(b) Online lending and other forms of alternative finance

Many banks offer various online lending products. A widely used common digital ID and signature solution facilitates digital banking in Norway. In general, the provision of credit on a commercial basis to a customer, whether corporate or individual (no distinction is made in law), is usually a regulated activity. The legal definition of ‘financing activity’ is broadly scoped. One of the issues with lending is ensuring compliance with consumer protection regulations – for example, obtaining correct and sufficient information from the lender before granting the loan, conducting an appropriate credit assessment and complying with mandatory contractual terms. On 12 February 2019 the Ministry of Finance published a new regulation on prudent consumer lending practices. The new regulation sets out detailed rules on debt servicing capacity, maximum debt to income and amortisation, including a requirement on five-year instalment payments.

(c) Payment services (including marketplaces that route payments from customers to suppliers (eg. Uber and AirBnb)

To the extent that an entity holds customers’ funds as part of the payment chain, the Norwegian FSA will most likely consider that it is conducting a payment service which is subject to the licencing requirement, unless exempt. Online merchants often offer third-party payment solutions instead of offering payment services themselves. Where a Norwegian business provides payment services as a commercial activity, it will require authorisation by the Norwegian FSA under the Financial Undertakings Act. In order to obtain authorisation, an applicant must meet certain criteria, in line with EU regulations, including in relation to its business plan, initial capital, processes and procedures for safeguarding client funds, sensitive data, information and communications technology requirements and compliance with the anti-money laundering legislation.

(d) Forex

A foreign currency exchange service is a regulated service in Norway. A foreign exchange service can be offered by a bank, credit institution, financial institution, e-money provider or holder of a payment licence. Sector-specific regulations apply to foreign currency exchange services under the Norwegian Exchange Register Act of 28 May 2004. Currency exchange transactions above a certain threshold must be reported and stored in the Foreign Currency Exchange Register, which is administered by the customs authorities. Often, it is the banks and card companies that report transactions.

(e) Trading

Trading services are regulated under the Norwegian Securities Trading Act of 2007, which incorporates the EU Markets in Financial Instruments Directive II (MiFID II) Regulation. Compliance with the MiFID II Regulation is demanding for fintech companies. There is no particular regime applicable to fintech companies in this space. A couple of new fintech players have set up new digital platforms (eg, Huddlestuck) or deployed new AI technology (Quantefolio) to distinguish themselves from established firms in this space.

(f) Investment and asset management

The Norwegian Securities Fund of 2009, the Alternative Investment Fund Act of 2014 and the Norwegian Securities Trading Act of 2007 apply to fund structures and asset management, depending on the set-up. No particular regime is applicable to fintech companies in this space. There are also challenges for fintech companies seeking to enter this area due to the complex regulation. However, some fund structures are investing in new sectors, new technology is being made available to investors (eg, Quantfolio) and some fintech companies are endeavouring to make saving more attractive and fun for the retail segment (eg, Dream).

(g) Risk management

Banks, credit institutions and other finance entities are subject to risk management rules and internal control requirements. As a result of these increasing requirements, the industry is demanding better tools to manage, monitor and report risk. A couple of fintech companies have emerged in the area of compliance and risk management.

(h) Roboadvice

There are no specific regulations on roboadvice in Norway. The general approach is that providers of IT platforms and enabling tools used by others are not considered to provide regulated services themselves. In addition, the law is technology neutral, in the sense that providers of regulated services (including roboadvicing in the area of investment advice) must fulfil the legal requirements for that service.

(i) Insurtech

Offering insurance is a regulated activity in Norway. The provision of non-life insurance and life insurance requires a licence from the Norwegian FSA. Sector-specific regulations are set out in the Act on Insurance Business of 2005 and the Financial Undertakings Act of 2015. Insurance distribution currently falls under the Norwegian Act on Insurance Distribution of 2005; however, the Norwegian government is working on the incorporation of the Insurance Distribution Directive into Norwegian law. At present, insurers appear to be focused on digitalisation and improvement of the customer experience. However, there appears to be little genuine innovation in the insurance sector in Norway – although there are a few examples of new concepts (eg, Tribe Insurance and Cloud Insurance (software as a service)), and new players (Tillit Forsikring and Tribe Forsikring).

For more information about this answer please contact: Petter Bjerke from Advokatfirma DLA Piper Norway DA