Answer ... Fintech covers a broad spectrum of technology-driven innovation in the financial services sector. Determining which regulatory framework applies to fintech companies is a complicated task. European and Dutch financial legislation will generally apply to a fintech company if the products or services it offers fall under the scope of the existing financial regulatory framework. This framework is intended to be ‘technology neutral’, meaning that it applies irrespective of the underlying technology used.
Traditionally, European financial services legislation is institution driven rather than activity driven. Where incumbents such as banks typically focus on a full service approach as an institution, fintech companies aim to improve customer experience, financial inclusion and competition in respect of just part of the value chain.
A more activity-based regulatory framework would better suit fintech companies. However, due to the Europeanisation of the regulatory framework governing financial services, the Dutch legislature and the Dutch financial regulators have limited discretion to adopt a more flexible approach towards fintech companies.
The most important areas of law in the fintech space are:
- financial regulatory laws and regulations, such as the Dutch Financial Supervision Act (in which the second Payment Services Directive, the Markets in Financial Instruments Directive, the Alternative Investment Fund Managers Directive and outsourcing rules applicable to financial institutions are implemented) and the Prospectus Regulation;
- anti-money laundering and counter-terrorist financing laws;
- data protection;
- e-commerce; and
- consumer protection (eg, the Dutch Civil Code).
Other than in respect of fintech credit platforms, there are no specific Dutch legislative and regulatory provisions that govern the fintech space or particular fintech companies.
Answer ... With regard to fintech credit platforms (ie, crowdlending, marketplace lending, peer-to-peer lending platforms), the Dutch legislature and the Netherlands Authority for the Financial Markets (AFM) have established a specific regime. Fintech companies that operate an online credit platform match lenders with borrowers when attracting a loan. They are considered to be professional intermediaries and have a special duty of care to ensure that lenders (in particular, non-professional/retail lenders) are adequately informed to make an informed investment decision.
Operators of fintech credit platforms are often involved in the credit scoring and risk classification of the borrower, and determine the coupon (range) applicable to the loan before it is published on the online platform.
Upon a loan being financed, the services of the fintech company generally also include facilitating payment flows that relate to the loan through a separate special purpose vehicle or a third-party service provider.
Under the Dutch regime applicable to fintech credit platforms, the operator of the platform must obtain a dispensation from a Dutch law prohibition against acting as an intermediary in respect of attracting or obtaining the disposal of repayable funds from the public in the Netherlands (or from the Netherlands in another EU member state). The granting of the dispensation by the AFM is subject to the platform’s compliance with minimum conditions to ensure prudent and sound business operations, adequate client handling and suitable and reliable management. Additional conditions apply if the fintech company also accepts retail clients.
Answer ... The following table sets out the relevant bodies that are mainly responsible for the laws and regulations relevant to fintech companies.
Primary supervisory responsibility
Dutch Central Bank (DNB)
DNB is both the central bank of the Netherlands, which aims to ensure financial stability and limit systemic risk; and the financial supervisory authority with regard to prudential supervision. With regard to its supervisory authority, DNB is part of a so-called ‘twin peak’ model together with the AFM.
It has primary supervisory authority for banks, pension funds, insurers, payment services providers and electronic money institutions, among others.
Netherlands Authority for the Financial Markets (AFM)
The AFM is the financial supervisory authority with regard to market conduct supervision, which aims to ensure that financial market processes are orderly and transparent and that clients are treated with due care.
It has primary supervisory authority for investment firms, crowdfunding platforms, managers of investment funds, consumer credit providers and other financial services providers, among others.
Netherlands Authority for Consumers and Markets (ACM)
The ACM is the supervisory authority with responsibility for competition oversight, compliance with sector-specific regulations of several industries and enforcement of consumer protection laws (other than relating to financial services).
Netherlands Data Protection Authority (DPA)
The DPA is the supervisory authority with responsibility for oversight of personal data processing.
All supervisory authorities included in this table are authorised to conduct investigations and take enforcement actions, such as imposing administrative sanctions. The supervisory authorities may also publish policy rules and help companies to comply with the statutory obligations by issuing guidelines and interpretations.
Answer ... Both the Dutch government and the Dutch regulators are very positive about fintech developments. The Dutch financial market is controlled by a limited number of incumbents, resulting in a less competitive market. Fintech companies have the potential to influence the dominant position of the Dutch incumbents, albeit that the actual market share of fintech companies and solutions in the Netherlands is still small.
Although in the last coalition agreement the ruling parties agreed to introduce less stringent licensing requirements for fintech companies, this goal has not yet been achieved. The Dutch financial regulatory laws have not changed in a way that makes it easier for fintech companies to access the market. This is mainly due to the impact of the European financial regulatory framework, which generally applies in the Netherlands.
However, in 2016 the AFM and DNB jointly launched two initiatives with the aim of both facilitating fintech and gaining knowledge of fintech developments:
- The InnovationHub is an information portal (which the ACM also supports) where new and existing market parties can raise general questions relating to the regulatory framework applicable to their fintech solutions.
The Regulatory Sandbox (MaatwerkvoorInnovatie) is a more extensive process of knowledge sharing between companies and regulators. The sandbox enables fintech companies to discuss a customised approach if they experience disproportionate regulatory obstacles. This is possible only if the applicable laws and regulations provide room for a more proportionate approach. In August 2019, the initiators published an evaluation report which stated that this has occurred on a few occasions since the creation of the sandbox.
Answer ... A number of associations are active in the fintech sector in the Netherlands, of which Holland Fintech is the most active and important. Holland Fintech offers an independent ecosystem aiming at sharing knowledge and connecting all stakeholders in the fintech sector. Holland Fintech does not focus on a specific type of fintech company or category of fintech activities; it aims to build an inclusive fintech ecosystem (https://hollandFintech.com).
In the field of fintech credit platforms, branch organisation Nederland Crowdfunding is worth mentioning. Despite the relatively large amount of fintech credit platforms in the Netherlands, this branch organisation has a limited number of members. Nederland Crowdfunding has drawn up a code of conduct with which its members must comply. Through this self-regulatory code, which aims to ensure more transparent business operations, member platforms can distinguish themselves from other crowdlending platforms active in the Netherlands (https://nederlandcrowdfunding.nl).
The Dutch Blockchain Coalition – a multidisciplinary group of stakeholders and blockchain believers – is also worth mentioning. It strives to “realise fully reliable and socially accepted Blockchain applications, to create the best possible conditions to allow Blockchain applications to arise, and to facilitate the use of Blockchain as a source of trust, well-being, prosperity and security for citizens, companies, institutions and government bodies” (https://dutchblockchaincoalition.org/).