Name
Global FinTech Guide
Country _ Name
Germany
SectionTitle
Trading platforms/social trading platforms/signal following
Body
FinTechs belonging to this category operate trading platforms or online marketplaces for investment opportunities or certain financial contracts – e.g. securities, factoring etc. and sometimes furthermore provide contact to financial experts and tools for the decision-making.

FinTech-signalling and social trading platforms provide users with the opportunity to exchange opinions on financial investments and offer signal providers and traders the possibility to make their securities portfolio publicly visible. This way the portfolios can be linked to and followed by other traders via the platform automatically, so that the trading and investment strategy of the followed traders can be copied.

The platform often cooperates with a financial services provider or a credit institution where both the trader and the follower hold their securities accounts, and which execute the orders both of the trader and the follower and to which the platform passes on the trading decisions.

Introduction

Attitude of the country towards trading, social trading or signalling platforms

The acceptance of trading platforms, social trading platforms, and signalling services continues to grow steadily in Germany, although a significant portion of the population remains unfamiliar with or does not actively use these services. Since the Covid-19 pandemic, millions of Germans have become first-time shareholders, with over 12 million people—about one in six—invested in the stock market in 2023. Many rely on popular online broker platforms such as Trade Republic, Scalable Capital, and Flatex to trade primarily stocks and ETFs. Usage of social trading and signalling platforms is increasing, particularly among younger investors, who show higher engagement compared to older demographics. Growing financial literacy, digital habits, and mobile-first preferences are expected to further accelerate the adoption of these platforms in the coming years.


Legal affairs

Obligations and requirements to provide trading, social trading or signalling platforms described above

In Germany, trading platforms, social trading platforms and signal following platforms are generally subject to an authorisation requirement as regulated in the German Securities Institutions Act (Wertpapierinstitutsgesetz – WpIG) and the German Banking Act (Kreditwesengesetz – KWG). In addition to WpIG and KWG, the EU-wide Regulation (EU) 2019/2033 on the prudential requirements of investment firms from 27 November 2019 (Investment Firms Regulation – IFR) as well as anti-money laundering and data protection regulations are to be complied with. The WpIG derives from the Directive (EU) 2019/2034 on the prudential supervision of investment firms from 27 November 2019 (Investment Firms Directive – IFD).

According to WpIG and KWG, a license is required to offer advisory services of the following kind: Portfolio Management, Investment Broking, and Contract Broking. Whether WpIG or KWG provisions apply depends on the scope of business. KWG applies in cases of more than EUR 30 billion on their balance sheets on monthly average in the last 12 months and the conduction of issuing business, proprietary trading, or proprietary business. In all other cases, WpIG applies. Under certain circumstances, the platform's activities may also include the communication of financial analyses, which must be notified to the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdiensleistungsaufsicht – BaFin).

License costs depend on the specific business model and result from fixed and time spent costs. Fixed costs are typically in the range between EUR 3,262.00 and EUR 10,114.00 and additional time spent costs depend on the complexity of respective business model.

Big investment firms are required to hold an initial capital of at least EUR 750,000.00, small and middle-sized Investment firms are required to hold an initial capital from EUR 75,000.00 to 150,000.00 depending on the business model. Additionally, investment firms must fulfill the own funds requirements.

A license is not required, where trading platforms, social trading platforms and signal following platforms are organised in a way that they don't meet the requirements for investment or contract broking or portfolio management services.

Additional comments regarding the legal situation for trading, social trading or signalling platforms or what FinTech’s must be aware of in this business area

The regulation regarding investment firms was introduced in 2021, since it turned out, that the regulation concerning credit institutions would not fit these companies. However, big investment firms, which hold more than EUR 30 billion in assets will still be supervised like credit institutions.



Economic conditions

Market size for trading, social trading or signalling platforms and biggest companies in this business area

The social trading market remains the smallest segment within the FinTech landscape in Germany. In 2019, it comprised just 12 active participants, with around EUR 357 million in assets under management. As of 2023, eToro continues to lead this market, followed by Wikifolio. A survey by BaFin in January 2023 found that 16% of investors aged 18 to 39 had used social trading platforms in the previous two years. While adoption has increased modestly, key concerns persist, especially regarding comparatively low risk-adjusted returns.

Additional comments regarding the economic situation for trading, social trading or signalling platforms or what FinTech’s must be aware of in this business area

The social trading market remains the smallest segment within the FinTech landscape in Germany. In 2019, it comprised just 12 active participants, with around EUR 357 million in assets under management. As of 2023, eToro continues to lead this market, followed by Wikifolio. While adoption has increased modestly, key concerns persist, especially regarding comparatively low risk-adjusted returns.



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