Name
Global FinTech Guide
Country Name
Austria
SectionTitle
Loan services / factoring / loan broking / finetrading
Body
FinTechs belonging to this category act as a loan creditor (even short and very short-term loans), are broking loans or receivables or conduct factoring of loans, which were given to private or business customers. In this business area you also find “peer-to-peer” (P2P) services, in which FinTechs enable a multitude of users to give loans (and brokered by the FinTech-platform) to other users or companies.

Finetrading is hereby a financial service of FinTechs, where they buy due receivables and grant the debtor an extension of payment time.

As an ancillary service some FinTechs offer alternative credit assessment services to check the solvency of a borrower.

Introduction

Attitude of the country towards loan-giving-, factoring-, brokerage-, finetrading- and ancillary services

In Austria, loan services provided by FinTechs are used as an alternative to financing models by traditional credit or financial institutions, e.g. in cases the traditional credit or financial institutions are not interested in providing the required loan. These alternatives recently became more and more attractive to a broad audience and this trend is expected to continue over the next couple of years.

Legal affairs

Obligations and requirements to provide loan-giving-, factoring-, brokerage-, finetrading, and ancillary services described above

Loan, loan broking, factoring and finetrading services are regulated in the Austrian Banking Act (Bankwesengesetz – "BWG"). Additionally, anti-money laundering and data protection regulations are to be complied with.

A license under BWG is required when providing loan business or factoring business. The financier is deemed to conduct loan business (granting of money loans and acceptance credits) if they grant money loans commercially or on a scale which requires commercially organised business operations. Factoring is a modern form of financing for companies that sell their outstanding receivables from the delivery of goods or the provision of services to a factoring bank and receive immediate liquidity in return.

License costs depend on the specific business mode. 

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 loan, loan broking, factoring and finetrading services which conduct banking or financial services in the form of deposit business, portfolio management or contract broking, 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 loan-giving-, factoring-, brokerage, finetrading-, and ancillary services or what FinTech’s must be aware of in this business area

One of the key markets in Austria is the so called buy now pay later ("BNPL") vis-à-vis both consumers as well as SMEs. For the longest time, BNPL products were offered in the online shopping business. Today, BNPL products can be found in almost every business sector, e.g., house improvement or car repair costs, just to name two prominent examples.

Economic conditions

Market size for loan-giving-, factoring-, brokerage-, finetrading- and ancillary services and biggest companies in this business area

Loan services provided by FinTechs are used as an alternative to financing models by traditional credit or financial institutions – e.g. in cases the traditional credit or financial institutions are not interested in providing the required loan. These alternatives recently became more and more attractive to a broad audience and this trend is expected to continue over the next couple of years.

Additional comments regarding the economic situation for loan-giving-, factoring-, brokerage-, finetrading- and ancillary services or what FinTech’s must be aware of in this business area

Particularly in the SME market, there is a strong demand for alternative (re-)financing solutions. Since many SMEs – e.g. due to Covid-19, are facing serious liquidity threats, financing products offered by FinTechs could at least be a swift and flexible alternative to conventional bank products such as loans. It may therefore make sense for established banks to see FinTechs not only as competitors but also as necessary partners in order to meet the increasing expectations of their customers and survive the competition.

Authors

Disclaimer

© 2022, Herbst Kinsky. All rights reserved by Herbst Kinsky as author and the owner of the copyright in this chapter. Herbst Kinsky has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this guide.

The information in this guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

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