Fintechs – technology-enabled financial innovations
Fintech is a portmanteau of the term “financial technology” and has not yet been defined by law. What it covers are technology-driven financial innovations that bring forth new financial instruments, services or intermediaries. Fintech products can be consumer (business to consumer: B2C) or business (business to business: B2B) solutions, back office applications or different ways of performing core functions of traditional financial intermediaries (such as lending, payments or asset management). In the narrower sense of the term, fintech is often used to describe the businesses providing such technology-enabled financial innovations. These players carve out, automate and rearrange parts of the value-added chain of traditional financial intermediaries. Fintechs tend to be start-ups, but that is not always the case. Indeed, established businesses might also be engaged in activities that count as fintech business.
This broad understanding of the term means that not all fintech enterprises will be covered by the supervisory regime. A fintech enterprise will be of interest to the supervisory authorities whenever it conducts business that requires authorisation, irrespective of the technology applied. Business that requires authorisation is banking business pursuant to section 1 (1) of the Banking Act (Kreditwesengesetz), financial services pursuant to section 1 (1a) of the Banking Act as well as payment services pursuant to section 1 (2) of the Payment Services Oversight Act (Zahlungsdiensteaufsichtsgesetz) and e-money business pursuant to section 1a (2) of the Payment Services Oversight Act. Anyone conducting business that requires authorisation without said authorisation will be subject to criminal prosecution.
Fledgling businesses often will not know whether their business model needs to be authorised pursuant to the Banking Act or the Payment Services Oversight Act, which is why they are invited to discuss any issues which might arise in this regard with staff at the Bundesbank's Regional Offices.