Answer ... The German legislature has not yet enacted fintech-specific regulations. Therefore, fintech companies are subject to the same provisions as traditional companies in the financial services sector. The applicable requirements and rules depend on the business model of the respective fintech. Depending on its structure, a fintech may require authorisation or approvals by the Federal Financial Supervisory Authority (BaFin), or by another supervisory authority (eg, a trade supervisory authority).

Depending on the business model, the applicable law may include:

• the Banking Act;
• the Payment Services Supervision Act;
• the Capital Investment Code;
• the Insurance Supervision Act;
• the German Securities Prospectus Act;
• the Capital Investment Act;
• Regulation (EU) 2017/1129;
• the Securities Trading Act;
• the German Industrial Ordinance; and
• various European regulations, including the Market Abuse Regulation.

Answer ... Germany has not implemented a regulatory sandbox, but has adopted a level playing field approach to regulation. BaFin applies the principle of “same business, same risk, same rules” – which means that all players that provide the same financial services with the same risks are subject to the same level of regulation and supervision.

Whether a fintech business model requires authorisation by a supervisory authority depends on its structure and on the circumstances of each individual case. Most business models (eg, alternative payment methods, automated portfolio management and crowdfunding) require authorisation pursuant to the Banking Act or the Payment Services Supervision Act. Insurtech companies are subject to insurance supervision if they conduct insurance business. If this is the case, they require authorisation pursuant to the Insurance Supervision Act from the competent German supervisory authority, usually BaFin. Mere insurance broking requires an authorisation under the German Industrial Ordinance.

In contrast, the use of blockchain technology is in principle not subject to authorisation, as this is simply a form of technology. Supervisory assessments depend on how the technology is applied and which activities are to be conducted with it – for example, a token could be regarded as a regulated financial instrument. Due to the wide range of potential applications of blockchain technology, general statements about notification or licensing requirements cannot be made.

Answer ... Fintech business models requiring authorisation pursuant to the Banking Act, the Payment Services Supervision Act or the Insurance Supervision Act are supervised by BaFin. Fintech business models requiring authorisation pursuant to the Industrial Ordinance are supervised by other competent supervisory authorities at regional level. Upon application, BaFin grants authorisation to institutions if they meet certain requirements and monitors them on an ongoing basis. BaFin may grant licences subject to conditions or limit licences to individual financial services. If financial services are provided without the required licence, the supervisory authority may order the immediate termination of the business operations and the immediate settlement of the transactions vis-à-vis the company and the members of its bodies. Coercive measures may be imposed on companies and members of their bodies involved in the initiation, conclusion or execution of the unauthorised transactions. BaFin’s measures range from written warnings to fines and even withdrawal of an institution’s authorisation. The provision of banking services, financial services or payment services without permission is a criminal offence. BaFin’s powers apply irrespective of whether the fintech company is located inside or outside of Germany if the fintech’s services are offered to German customers.

Answer ... BaFin’s supervisory activities are competition neutral and technology neutral. BaFin supervises a company if it engages in business or provides services that are subject to mandatory authorisation or registration. The statutory scope of this (technical) supervision is determined irrespective of the technology deployed for these business activities. By contrast, the specific risks of these technologies are taken into consideration by BaFin in its monitoring of the requirements concerning proper business organisation that are imposed by the relevant technical supervision legislation. The principle of “same business, same risk, same rules” applies, in combination with the principle of proportionality.

Answer ... There are several trade associations and interest groups for fintechs in Germany. The interests of fintechs are represented not only by pure ‘fintech associations’, but also by larger associations in the financial industry and the start-up scene:

Fintech platform of the Federal Association of German Start-ups: This is a registered association with its headquarters in Berlin and a lobby group for the German start-up industry. It was founded in 2012 to represent the interests of start-ups in Germany. At present, the association has more than 1,000 members. It covers a wide range of industries, professions and topics, with various platforms and networks, including a fintech platform. The members of the fintech platform cover a wide range of segments, including payments, lending, crowdfunding, investment, banking, insurtech, blockchain and technology services.

German Blockchain Association: The German Blockchain Association was founded in 2017 by the blockchain community in Germany. It has since grown to more than 60 members. They include the leading start-ups in the blockchain sector in Germany. The association focuses on education and training for both decision makers in politics and industry-leading companies.

The German IT Association (Bitkom): Bitkom is the trade association of the German information and telecommunications industry. Bitkom, which was founded in 1999, represents more than 2,700 companies in the digital economy, including around 1,000 mid-sized companies, 500-plus start-ups and a considerable number of global players.

Association of German Banks: The Association of German Banks represents the interests of private banks in Germany. The association was founded in 1951. It represents about 180 private financial institutions and more than 20 fintechs as associated members.

German Crowdfunding Association: The German Crowdfunding Association is an interest group and network of commercial crowdfunding platforms in Germany, founded in 2015.