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FinTechs and German Banking Regulations

In recent years, the keyword „FinTech“ has entered even the political language in Germany. „FinTechs“ are companies that are using modern and innovative ideas that are typically implemented digitally. With their flexible internal structures, they can enter into competition with established banks and financial services providers.

Obstacles for many of these companies are the regulatory requirements applying to the financial sector. The relevant rules and regulations are of such complexity that compliance causes considerable expenditures of time and costs to the companies concerned and represent a challenge even for established institutions and financial market actors. In order to enable FinTech companies to enter the German market in a legally compliant and conforming way, our specialist attorneys at law, who are experts in this field, can provide a quick overview and competent professional advice. 

FinTechs access different areas

The term of „FinTech“ is not subject to any strict definition. In principle, the term 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 even business models associated with alternative „money“ (Bitcoin), or smart contracts (Ethereum). There is no limit to ideas and options in this field. Therefore, a specialized law firm 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. 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 ZAG covers activities relating to payment transactions. Institutions that issue electronic money also fall under the ZAG. The Directive on Payment Services II (PSD), which will soon be codified in German law, will cover activities that have so far been subject to no regulations. For example, in future, even service providers that only aggregate account information or trigger payment transactions will 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 DSL 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.

Apart from Berlin, 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 may also be beneficial to FinTechs. For example, numerous banks have founded „incubators“ for FinTechs, where young entrepreneurs can raise money and seek advice.

WINHELLER has offices in both cities and also in Hamburg, Karlsruhe, and Munich. This enables us not only to provide you with legal expertise, but also to use our network to connect you with other founders, banks, or supervisory authorities. 

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 expert attorneys will assist you in getting through the regulatory thicket.

At the same time, we will be happy to also assist you in other fields of law (like labor law, corporate law and tax law/tax advice especially for financial service providers) in an advisory capacity and to make contacts with providers of ideas or money.

Your German FinTech attorney

Are you looking for an attorney specializing in FinTechs or do you wish to get advice on founding a FinTech? Your contacts for FinTechs and banking regulations in Germany are Attorney Dr. Annette Wagemann and Attorney Dr. Sebastian von Allwörden (both Certified Specialists for Banking and Capital Markets Law). Please do not hesitate to discuss the details of your project with them. The best way to reach us is by e-mail ( or please call on +49 (0)69 76 75 77 80.




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