Fintech firms adhere to traditional financial legislation
Published: 19 May 2022
Like other financial firms, fintech firms comply with prevailing legislation. In certain cases, however, fintech operations can circumvent this by using new technology (see the section Fintech activities can lead to circumvention of existing rules).
In general, the fintech firms must apply for authorisation from FI to conduct their operations, and also come under their supervision. Under certain laws, firms can, under certain conditions, apply for exemption from authorisation requirements and, in that case, they are not supervised. Some firms only need to register their operations with FI, in which case they are not supervised either. FI verifies at least once a year however that registered firms fulfil the requirements imposed on them. The legislation applicable to the fintech firms depends on the type of operations they pursue. They must also comply with other, more generally applicable legislation such as the GDPR. Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation).
If for example a firm is a payment institution, it shall comply with the Payment Services Act. See the Payment Services Act (2010:751). This category includes firms that enable private individuals to make payments directly from their bank account when making purchases through e-commerce. It also includes fintech firms that lend money to small businesses or that enable private individuals to pay bills and invoices with a credit card.
If instead a firm is a consumer credit institution, it must follow the Certain Consumer Credit-related Operations Act. See the Certain Consumer Credit-related Operations Act (2014:275). This category includes firms that take over a customer’s existing credits, instalments and personal loans to offer them instead one single consolidated loan. Fintech firms that offer services to compare terms between different lenders or the possibility of consolidating loans and credits are also included here.
Another example of a type of firm into which fintech firms could be categorised is financial institutions. They are special in that they do not need to apply for authorisation from FI, but merely register their operations. This includes firms that provide online lending platforms (see the section Particularly rapid growth in lending from fintech and bigtech firms). This also includes firms that offer services to buy and sell cryptoassets. Financial institutions must follow the Act on Currency Exchange and Other Financial Operations. See the Act (1996:1006) on currency exchange and other financial activities.
There are also numerous other firm types into which fintech firms could be categorised, such as investment firms. Some fintech firms, such as Klarna, are categorised as banking companies and must follow the same laws as the traditional banks. See the Banking and Financing Business Act (2004:297).