Amendment for a fintech regulatory sandbox in Switzerland

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Switzerland's three-pillar regulatory framework reducing barriers to fintech market entry through a regulatory "sandbox" enabling deposit-holding without licensing, a tiered Fintech License for emerging companies, and an extended settlement
What are the main aims and objectives?

The primary aim of the Banking Act and Banking Ordinance amendments is to modernize Swiss financial regulation to support innovation and maintain Switzerland's competitiveness as a global financial center amid rapid fintech industry growth. The amendments address a critical policy challenge: rigid banking license requirements were unsuitable for emerging fintech business models that did not require traditional banking oversight, creating unnecessary barriers to market entry and innovation. The Swiss Federal Council recognized that regulatory modernization was essential to enable innovative financial service delivery while maintaining appropriate consumer protection. 

Specific objectives include reducing market entry barriers for fintech companies through graduated regulatory categories; enabling entrepreneurs to test business models in the regulatory sandbox without immediate licensing burdens; establishing an intermediate Fintech License for companies accepting substantial deposit volumes; promoting innovation and technology commercialization across diverse financial service models; creating regulatory frameworks adaptable to emerging technologies without requiring frequent legislative amendments; and maintaining consumer and market protection appropriate to company risk profiles and deposit volumes. The amendments reflect a policy shift from binary regulation (traditional banking license or no authorization) toward proportionate, tiered regulation accommodating diverse company development stages. The framework aims to balance two competing objectives: enabling rapid innovation and market entry while maintaining financial stability and consumer protection through appropriate regulatory oversight scaled to risk exposure.

How does the program work?

The proposed amendments to the Banking Act (BankA) and Banking Ordinance (BankO) aim to regulate fintech and other firms which provide services outside normal banking business according to their risk potential. 

A form of deregulation with three supplementary elements is being proposed:

First, the exception provided for in the Banking Ordinance for the acceptance of funds for settlement purposes should apply explicitly for settlements within 60 days (instead of only for settlements within seven days as was the practice up to now). For securities dealers, what should remain crucial is that the planned main transaction is organised and directly foreseeable. This change requires an amendment to the BankO.

Furthermore, an innovation area should be created: the acceptance of public funds up to CHF 1 million should not be classified as operating on a commercial basis and can be exempt from authorisation. This change should allow firms to try out a business model before they are finally required to obtain authorisation in the case of public funds of over CHF 1 million. This change also requires an amendment to the BankO.

Finally, there should be simplified authorisation and operating requirements relative to the current banking licence in the areas of accounting, auditing and deposit protection for companies that accept public funds of up to a maximum of CHF 100 million but do not operate in the lending business. This requires an amendment to the BankA. Less stringent requirements particularly in the areas of minimum capital, own funds and liquidity would have to be regulated within the scope of implementing regulations to be issued later.

What is the overall cost?

No available information.

How was it implemented?

The Swiss Federal Council recognized that rigid banking regulation was unsuitable for innovative fintech business models and that regulatory modernization was necessary to maintain Switzerland's position as a leading global financial center. Switzerland's traditionally liberal regulatory approach and consistent ranking as the world's most innovative economy created receptive policy environment for fintech innovation support.

In February 2017, the Swiss Federal Council initiated public consultation on proposed amendments to the Banking Act and Banking Ordinance, seeking stakeholder feedback on fintech regulatory measures. The consultation period ended on 8 May 2017, with participation from FINMA, industry participants, and civil society. In June 2018, the Swiss Parliament adopted the Financial Institutions Act (FinSA) and Financial Services Act (FinIA), incorporating the legal basis for the new Fintech License in Article 1b of the Federal Banking Act. In November 2018, the Federal Council adopted detailed amendments to the Federal Banking Ordinance specifying regulatory capital, liquidity, governance, and audit requirements for fintech licensees.

On 1 August 2017, Pillars 1 and 2 became effective, enabling extended settlement periods and sandbox operations. FINMA issued updated Circulars 2008/3 and 2013/3 providing regulatory guidance for sandbox companies. On 1 January 2019, the Fintech License (Pillar 3) became operational. FINMA established the fintech desk to process no-action letter requests and provide regulatory clarity. By 2022, FINMA had processed hundreds of no-action letter requests, establishing regulatory practice through issued guidance and feedback.

What impact has been measured?

Switzerland's fintech ecosystem expanded following the amendments: 483 active fintech companies operated as of end 2023, representing 11% annual growth. However, direct attribution of this growth specifically to regulatory amendments (versus other factors including Switzerland's existing financial center status, tech talent availability, and macroeconomic factors) cannot be isolated.

The Fintech License achieved limited success, with only 4 companies currently licensed as of late 2024, significantly fewer than anticipated when introduced in 2019. This low uptake indicates the license parameters (CHF 100 million deposit cap, regulatory burden, approval timelines) may not have aligned with market needs, prompting 2025 proposed reforms.

Switzerland maintained its #1 ranking on the Global Innovation Index for 14 consecutive years, with the fintech regulatory framework contributing to Switzerland's reputation as a fintech-friendly jurisdiction. Switzerland ranked as the world's most innovative economy, attracting international fintech talent and companies.

What lessons can be learned?
  • Tiered regulatory frameworks accommodate innovation diversity: The three-pillar structure successfully demonstrated that regulatory categories proportionate to risk enable innovation across multiple company development stages simultaneously, rather than requiring single uniform regulatory standards.
  • Sandbox deposit protection gaps created consumer vulnerability: The sandbox regime, while enabling innovation, required explicit disclosure that sandbox deposits lack FINMA supervision and deposit guarantee protection, creating regulatory tensions between innovation promotion and consumer protection objectives that the 2022 evaluation report identified as inadequate.
  • Intermediate licensing category uptake may require redesign: The Fintech License's low adoption (4 companies licensed by 2024) suggests regulatory design misaligned with industry needs, with feedback indicating lengthy approval processes and CHF 100 million cap were simultaneously too restrictive for growth-stage companies and too permissive for sandbox-graduating companies. The October 2025 Federal Council consultation proposed introducing Payment Instrument Institution license and Crypto-Institution license replacing Fintech License.
  • Regulatory clarity through no-action letters proved valuable: FINMA's fintech desk processing approximately 100 annual no-action letters provided critical pre-application regulatory certainty enabling company decision-making, reducing uncertainty costs, and supporting market participation.
  • Regulatory evolution requires ongoing assessment: The 2022 Federal Council evaluation report triggering 2025 proposed regulatory reforms demonstrates that initial frameworks require periodic review and adjustment based on implementation experience and stakeholder feedback.
  • Technology-neutral frameworks enable emerging innovation accommodation: The framework's explicit technology-neutral approach enabled accommodation of unanticipated innovations including cryptocurrencies, blockchain, and stablecoins without requiring additional legislation, suggesting design principle value.
  • Consumer protection and innovation innovation create policy tensions: The framework's innovation-enabling emphasis created explicit tensions with consumer protection objectives (unprotected sandbox deposits, no FINMA supervision), requiring policymakers to make deliberate choices about acceptable risk and protection levels.
  • Deposit-holding deserves particular regulatory attention: The framework's specific focus on deposit-holding thresholds and protections (7→60 days, CHF 1 million sandbox, CHF 100 million license) reflects recognition that deposit-taking requires graduated supervision appropriate to volumes and consumer exposure.
  • Deposit cap reconsideration justified by use case: The 2025 proposed reforms eliminating the CHF 100 million Fintech License cap for Payment Instrument Institutions (replacing it with deposit cap-free licensing) suggests that deposit cap constraints unintentionally prevented legitimate fintech business model scaling and constrained market innovation.

CURATED BY

Sarolta Borzasi

Director for Government + Investor Engagement
Embassy of Hungary London
United States