Swiss financial market regulator Finma has decided to allow the digital identification of customers, paving the way for a better market access for fintech companies. Some hurdles will remain.

Finma today released the regulation on the use of video and online identification of customers, which will become effective tomorrow, March 18.

The regulation revolves around the question of which demands a financial services company must satisfy in the identification of a potential client when it opens a business relationship. This is a precondition for many business models of fintech companies.

Video Rather Than Online

The main points of the regulation are:

  • Financial intermediaries are allowed to identify new customers via video stream or online. Finma prefers the video link. The use of online identification remains restricted to people who already have an established business relationship with a Swiss bank.
  • Finma asserts the principle of technology neutrality in Switzerland's financial market. Rules that discriminate against certain technologies will be removed.
  • The regulator has softened the demand of its draft proposal of December 2015 for a stringent control of identification documents through adequate technological means. This demand would have created an extra burden on digital onboarding and Finma now allowed for a milder form of control.

New Licensing Category

Finma furthermore proposes a new licensing category for financial innovators and a license exempt area (sandbox). This category will be for business models, which carry out some banking activities, but with limited acceptance of client assets and no lending activity. Because the risks are lower and the scope of business limited, the licensing requirements would be less extensive than for a banking license.

Financial services providers who do not accept more than 50 million francs in deposits could apply for this type of license provided they hold 5 percent of the deposits and at least 300,000 francs in capital as collateral. The issuance of such licenses would lower the entry threshold for providers of payment systems, applications for managing assets digitally and crowd funding platforms.

Finma also opens a desk dedicated to the demands of the fintech industry.