FinTech Lawyer in Germany

FinTechs access different areas

The term FinTech is not subject to any strict definition. It refers to any company that offers digitalized financial services. These include services like

• organizing payment processes (e.g. PayPal, Sofortüberweisung),
• credit brokering (e.g. Smava, Lending Club),
• account management,
• investment consulting (Robo-Advisors) and
• business models associated with cryptocurrencies or smart contracts.

There is no limit to ideas and options in this field. Therefore, specialized FinTech law firms should verify in each individual case, whether or not a particular business idea is subject to regulation and, hence, requires a special operating license.

Compliance with legal provisions of banking supervisory laws

If this is the case, the pertinent regulations subject the company concerned to complex duties relating to its conduct, information policies and organization. The regulations have to be complied with if a company wishes to offer a service requiring a special license. In this context, the German Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz, ZAG) and the German Banking Act (Kreditwesengesetz, KWG) are especially noteworthy in the area of FinTech law. Both acts subject numerous services to licenses and compliance duties.

While the Banking Act stipulates the rules governing

• banking business operations, like deposit or credit transactions, and
• the provision of financial services, like investment consulting or proprietary trading;

the Payment Services Supervision Act covers

• activities relating to payment transactions.

The Directive on Payment Services II (PSD), which was codified in German law, covers activities that had so far been subject to no regulations. For example, even service providers that only aggregate account information or trigger payment transactions now have to apply for a license to be issued by the Federal Financial Supervisory Authority (BaFin). In this regard, the German legislator has already responded to the new FinTech business models by expanding the applicable German regulations.

Even within the scope of the ZAG, the requirements may vary considerably from case to case. In addition, various payment services providers have to meet special requirements concerning their information technology infrastructure to comply with the standards set by the European banking supervisory authority.

Ensure cooperation with the financial supervisory authority

These examples show that it is sometimes very difficult to get through the regulatory thicket in the financial sector. But, infringements upon applicable provisions may be punished by the financial supervisory authorities with severe fines and, in some cases, the criminal prosecution authorities may even impose imprisonment. Therefore, prior to starting business activities of this kind, a thorough due diligence review should be conducted. Our experienced attorneys specializing in banking and capital markets law will be able to assist you with the legal classification of your business model.  

Should your planned project be subject to regulatory supervision, we assist you in cooperating with the appropriate authorities (in Germany these are BaFin and Bundesbank). We help you file the complex application for a license with the right supervisory authority and represent you in the licensing procedure. At the same time, we provide advice on how innovative responses to old problems (e.g. identification checks via Skype or Holo-Lens) may be accepted by the supervisory authorities. This process will lead to a license for your business model and a lasting and trusting cooperation with the supervisory authorities.

How to select the best FinTech location in Germany

Apart from legal security, selecting the best location for the company will be decisive for its future success. Basically, due to the high level of legal security and the efficient work of the courts, Germany is a very good location for a FinTech startup. The high level of dependence of the business models on the internet requires the company to choose a city with a good internet infrastructure. Numerous startups typically set up a business in Berlin. Berlin's atmosphere together with a good supply situation and cheap prices make Germany's capital an attractive choice for young companies.

Frankfurt/Main also provides perfect conditions for FinTechs. The proximity to DE-CIX Internet exchange node even provides traditional banks competitive advantages over more remote regions. The concentration of financial institutions in Frankfurt/Main may also be beneficial to FinTechs. For example, numerous banks have founded incubators for FinTechs, where young entrepreneurs can raise money and seek advice.

The perfect time for setting up a FinTech

The ever increasing network, the secure regulatory framework and growing internet affinity of European citizens provide ideal conditions for setting up new FinTech companies. Germany being a legally secure, stable, pro-European country is the preferred location within the European Union. Our experienced FinTech lawyers will assist you in getting through the regulatory thicket.

Our legal services for FinTechs

In addition to supporting you in obtaining all necessary licenses, we will be happy to also assist you in other fields of law (such as labor law, corporate law and tax advice especially for financial service providers) in an advisory capacity and to make contacts with providers of ideas or money.