AUSTRIA Law and Practice

Contributed by: Markus Fellner, Florian Kranebitter and Florian Henöckl, Fellner Wratzfeld & Partners

1. Fintech Market

1.1 Evolution of the Fintech Market

The digitisation of the financial markets is currently accompanied by exciting and rapid developments in the industry. Austria is following this trend and is establishing itself as a regional driver for innovation in the financial sector.

Financial technologies, or fintechs, are quickly changing the finance and banking sectors, with the result that sometimes even entire markets are being moved to the internet. Fintechs make it possible to trade, invest or borrow money without ever having to deal with a traditional bank.

In general, the diversity of fintech start-ups is increasing in Austria. From innovations in card payments, smart payment options to quick and easy granting of small loans, the number of people and companies with new ideas for the financial industry is constantly increasing.

The COVID-19 pandemic led to an exceptional situation with profound consequences for Austrian society and its economy. However, while investors have held back on funding for financial start-ups, Austrian fintech companies have generally been able to assert their position in the market. This is due to increased co-operation between incumbents and fintech firms as thirdparty providers. In addition, some established banks have developed innovative products, mostly in co-operation with fintech companies.

Even after COVID-19, the general economic situation has not really eased, perhaps further worsened by geopolitical crisis factors. Therefore it should be a declared goal to create a fintechfriendly environment.

The Digital Finance Strategy

With the Digital Finance Strategy, proposed by the European Commission on 24 September 2020, on the basis of which a regulatory framework – a regulatory framework for Markets in Crypto-assets (MiCA), a pilot regime for trading and settling in crypto-asset market infrastructures (DLT-pilot) and a framework on digital operational resilience to prevent and mitigate cyber threats (DORA) – is to be introduced at European level, it can be assumed that a fintechfriendly environment will be promoted and the fintech industry will experience a further rise. With a clear regulatory framework for it in place, the fintech market will probably become more attractive and interesting for a large number of companies due to increasing legal certainty and the associated economic predictability. Nevertheless, increased regulation always harbours the risk that interest in a certain market will decrease. In this respect, it is also necessary, at the national level, to implement the European requirements as purposefully as possible and to make complying with them easy for companies, especially start-ups – the support of the Austrian Financial Market Authority (FMA) will be crucial.

2. Fintech Business Models and Regulation in General

2.1 Predominant Business Models

The Austrian Financial Market Authority (FMA) has been dealing with the subject of fintech in Austria for some time, in particular with the questions of what a fintech is and what challenges it faces.

Fintechs are financial innovations based on information technology that: