GERMANY Law and Practice Contributed by: Stephan D. Meyer, Lars Fidan, Elisa Otto and Christian Meisser, LEXR
Most have built in-house or partnered with white-label providers rather than acquiring standalone platforms. Robo-advisory is no longer a differentiator but an expected feature of competitive wealth management. 3.3 Issues Relating to Best Execution of Customer Trades MiFID II sets the benchmark: investment firms must obtain the best possible result for clients across price, cost, speed and execution likelihood. Firms must maintain an execution policy, disclose it and regularly monitor execution quality. MiCA takes a lighter approach. CASPs must act in the client’s best interest but face no equivalent of MiFID II’s detailed framework. For platforms operat - ing across both asset classes, this creates a practical gap that requires careful internal governance. The EU ban on payment for order flow, effective 2026, will further sharpen this issue. Neobrokers that built their model around PFOF will need to restructure their execution arrangements and demonstrate that client outcomes are not compromised. How neobrokers solve this will shape the competitive dynamics of the German brokerage market for years to come. 4. Online Lenders 4.1 Differences in the Business or Regulation of Fiat Currency Loans Provided to Different Entities The regulatory gap between consumer and commer - cial lending is material. Consumer credit triggers full protective requirements: pre-contractual disclosure, withdrawal rights, APR transparency, and a manda - tory creditworthiness assessment. CCD II will extend these requirements further into digital lending models including buy-now-pay-later. Commercial lending faces lighter conduct require - ments but the same licensing threshold: deposit- funded lending at commercial scale requires a KWG banking licence. Crowdlending models that merely intermediate rather than lend on balance sheet may operate under the ECSP Regulation or national inter - mediation rules.
The structuring of the funding model is what deter - mines which regime applies. Getting this right early
avoids costly re-structuring later. 4.2 Underwriting Processes
Regulation prescribes the obligation, not the method. For consumer credit, a creditworthiness assessment is mandatory, drawing on data from agencies such as SCHUFA. The lender must decline if the assessment is negative. CCD II will tighten the requirements around data sources and methodology. How that assessment is conducted is left to the lender, which has created space for AI-driven and alternative- data underwriting models. These must comply with GDPR’s rules on automated decision-making and the EU AI Act’s high-risk classification for credit scoring. The practical challenge is building underwriting sys - tems that are both commercially effective and regula - torily explainable. 4.3 Sources of Funds for Fiat Currency Loans Each funding source has distinct regulatory implica - tions. Deposit-funded lending generally requires a full KWG banking licence. By contrast, marketplace mod - els in which the platform only intermediates and does not lend on balance sheet require a structure-specific analysis and may fall within the ECSP regime or other German intermediation rules. Warehouse funding from banks or institutional investors may mitigate licensing issues at platform level, but does not eliminate the need to assess who originates the loan and which regulated activities are carried out. 4.4 Syndication of Fiat Currency Loans Loan syndication takes place in Germany, though for fintechs it most commonly appears through the front- bank model, where a licensed bank originates the loan and distributes participation interests to institutional investors. The regulatory classification depends on the structure. A straightforward assignment of loan receivables dif - fers from a product that tranches credit risk, which may trigger the EU Securitisation Regulation. Facilitat - ing the distribution of participations can itself consti - tute investment brokerage under the KWG or WpIG.
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