The government wants to make it easier for fintech (financial technology) start-ups to set up shop by easing regulatory hurdles. The proposed “light touch” rules would boost crowd funding and remove the need for a full banking license for some niche services.
Finance Minister Ueli Maurer said it was crucial to press ahead with “innovation-friendly framework conditions” in the new sector in Switzerland.
“We want to remain among the most important players in this sector,” he told a news conference on Wednesday.
His ministry will set to work drafting a consultation paper suggesting changes to the banking laws by the start of next year. These would allow small companies to offer the latest digital innovations without getting bogged down in the scale of red tape that applies to large banks.
“It is a legal framework that is competitive in an international context,” said Jörg Gasser, State Secretary for International Financial Matters. He added that Switzerland was breaking new ground with new conditions that could not be found in any other country. Even Britain, which is perceived by many to be leading the way in fintech in Europe, has opted for other regulatory solutions, Gasser said.
The cabinet suggested the creation of ‘sandboxes’ where start-ups can test out new ideas under controlled conditions, without the need for full regulatory supervision. This would apply to firms that have accumulated less than CHF1 million ($1 million) in funds from third parties.
Another proposal would do create a less onerous banking license for companies that provide deposit services and do not lend money. As a rule of thumb, the fintech license would be limited to firms with less than CHF100 million of outside capital, but the banking supervisor could raise this bar.
A third goal of the revised legislation would help start-ups raise money through crowdfunding. At present, they must give donors the option of withdrawing their money after seven days. That would be raised to a 60 day limit, which would give the company greater security over their funds.
The fintech movement is currently sweeping through the financial services industry, bringing the promise of deep changes within the sector globally. Among the enhancements being discussed, new digital services could bring down the cost and time of transactions and cut out many middle men.
Switzerland is vying for a slice of the global fintech pie with most other advanced economies. A number of players have set up in the so-called Crypto-valley around Zug, but the regulator and government have been criticised for slowing down further growth by their perceived sluggish response to the phenomenon.
The proposed regulatory changes will be greeted by the growing Swiss fintech industry.
The Swiss Financial Market Supervisory Authority (Finma) has sought to loosen the red tape for small innovative players. In March, it eased rules on verifying new clients by allowing video and online identification.
Finma has previously backed the idea of a regulatory sandbox and a special fintech banking license.
The rapidly expanding financial technology industry now encompasses a wide range of digital financial services. A host of new software platforms and apps now offer people a range of new digital options from retail banking to remittances, insurance and wealth management.
These include mobile telephone payment services, automised wealth management advice, price comparison apps, tailored social media groups and crowdfunding systems.
A developing decentralised system called blockchain can store and distribute crypto-currencies (such as bitcoin) and digital contracts (such as land deeds) without the need for banks or formal clearing systems. This promises to reduce fees, improve security and bypass the volatility of central bank controlled fiat currencies.
Huge technology firms like Google, Amazon and Alibaba are also joining the feeding frenzy. And consumers are just as likely to be ordinary households as Wall Street traders and billionaires.