Fintech Market Overview

This article does not constitute legal advice.

Payment services in Germany

Fintech Software

One of the first sectors in the German financial industry where fintech firms became active and visisble was the payment services sector. This one of the reasons why the payment services market was fragmented; but recently it has begun to consolidate. The second Payment Services Directive (PSD II) which was implemented into German law at the beginning of 2018 brought significant changes from the fintech perspective. The corrected payment services regime has proposed new business opportunities, mostly for agile fintech companies. This happened because account information services and payment initiation services as new payment services were introduced under the revised ZAG. The providers of these services have received a legal claim for access to payment accounts against the banks that support these payment accounts for their customers. Thus, traditional banks can no longer prevent their competitors from accessing the accounts of customers who consent to this access (open banking), and this has been considered a game changer. But according to experiences so far providing the needed application programming interfaces requires a lot of time. Even more, some market observers have accused credit companies in using the PSD II rules as a tool to prevent competition by fintechs (for example, by no longer offering the previously set connections via the German independent online banking protocol (FinTS)).1

Additional business opportunities have brought additional regulatory burdens. Providing payment services requires a license, unless certain exceptions apply. Providers of account information and payment initiation services also require a license despite these service providers do not acquire possession of their customer's funds at any time. Regarding this consideration, the regulatory requirement for a license to provide payment initiation or account information services are not so tight than for a license to provide traditional payment services.1

The corrected ZAG aims to expand technological innovation and competition on the payment market. Payment services providers and electronic money issuers have been granted the right to gain access to some key technical infrastructure under the relevant provisions (Section 58a of the ZAG); these provisions have been labeled as “Lex Apple Pay” by some market observes. “System companies”assisting the provision of payment services or the carry out e-money business in Germany by technical infrastructure services are obliged, after demand of a payment services provider or e-money issuer, to grant required access to these technical infrastructure services against consideration and without undue delay. If the company has no more than 2 million registered users or if no more than 10 payment services providers or e-money issuers use the relevant technical infrastructure this obligation does not apply. There are other reasons why the company may not grant access; for example if the security and integrity of the technical infrastructure services would be jeopardized. The last statutory rules are not bases on EU laws and probably are a reaction to some system providers refusing to grant access to their systems to encourage more competition in the area of mobile payments.2

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  1. https://thelawreviews.co.uk/title/the-financial-technology-law-review/germany
  2. http://dipbt.bundestag.de/dip21/btd/19/151/1915196.pdf
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