Crowdfunding / crowdinvesting / crowdlending
FinTechs belonging to this category operate crowdfunding, crowdinvesting and crowdlending platforms on which money is raised to invest in various projects, mainly start-up companies and real estate projects.
Crowdfunding is not a defined financial service, but generally used to describe donation-based crowdfunding (the investor donates the money to the project), reward-based crowdfunding (the investor receives an often symbolic consideration for his investment), equity-based crowdfunding (crowdinvesting: the investor participates in the profits of the financed project or acquires shares or debt instruments) or lending-based crowdfunding (crowdlending: the investor is reimbursed at the end of the project with or without interest).
Attitude of the country towards crowdfunding, crowdinvesting and crowdlending platforms
All forms of crowdfunding are getting more and more popular in Austria. An obstacle is the tight regulation in this area. Fuelled by the Covid-19 pandemic and driven by new technologies such as mobile apps, customers seek for both new investment as well as financing opportunities. The crowdinvesting and crowdfunding market in Austria can be considered as constantly growing.
Obligations and requirements to provide crowdfunding, crowdinvesting and crowdlending platforms described above
Crowdinvesting and crowdlending platforms potentially are subject to a license requirement according to Austrian Securities Supervision Act (Wertpapieraufsichtsgesetz 2018 – "WAG 2018") and Austrian Alternative Financing Act (Alternativfinanzierungsgesetz – "AltFG"). Furthermore, in 2020 the EU introduced the Regulation (EU) 2020/1503 on European crowdfunding service providers for business (European Crowdfunding Service Provider Regulation – "ECSPR"). Additionally, anti-money laundering and data protection regulations are to be complied with.
The required licence depends on the exact business model.
Among other things, particularly sufficient initial capital consisting of Common Equity Tier 1 capital ("CET1") available in Austria is required to obtain a license. The amount of required CET1 is subject to a case-by-case assessment. For institutions offering both lending and deposit business, the required initial capital is EUR 5m.
When offering banking services, the service providers are to comply with requirements for the initial capital as well as with the funds requirements at all times. According to Art. 92 Regulation (EU) No. 575/2013 (Capital Requirements Regulation - "CRR"), these are: a CET1 capital ratio of 4.5%, a Tier 1 capital ratio of 6% and a total capital ratio of 8%. When calculating the capital ratios, the fixed overheads of the respective asset manager have an important impact.
Additional comments regarding the legal situation for crowdfunding, crowdinvesting and crowdlending platforms or what FinTech’s must be aware of in this business area
Payment service institutions or e-money institutions are required to have financial reserves.
Market size for crowdfunding, crowdinvesting and crowdlending platforms and biggest companies in this business area
Across all crowdfunding models, more than 1.1 million campaigns were already carried out worldwide in 2012. In Austria, the first crowdfunding platform www.respekt.net was launched in 2010, followed by the first crowdinvesting platform www.1000x1000.at in 2012. By now, there are several crowdfunding platforms with different orientations. Since the Alternative Financing Act came into force on 1.9.2015, a significant increase in crowdfunding projects can be observed in Austria.
Additional comments regarding the economic situation for crowdfunding, crowdinvesting and crowdlending platforms or what FinTech’s must be aware of in this business area
The recently introduced Regulation (EU) 2020/1503 on European crowdfunding service providers for business (European Crowdfunding Service Provider Regulation – "ECSPR") provides for uniform rules in the EU for crowd-investment or crowdfunding. It facilitates cross-border offerings for crowdfunding platforms. In addition, swarm investors can now select additional product types. Platforms shall meet stricter requirements. For example, the new EU regulation allows crowd investment platforms to also distribute loans, shares, bonds, profit participation certificates and the like.