FINTECH MARKET

The Development of FinTech Products and Services

With its main industries resting on the tourism and fishing sectors, the Seychelles is emerging as the second-best country in information and communication technology (ICT) development in the African region as per the International Telecommunication Union’s ICT Development Index, with a mobile penetration of more than 100%. Further plans to develop the ICT sector are equally in view as the geographically isolated position of the Seychelles makes connectivity a key issue.

As part of the efforts to develop the ICT sector, the government of the Seychelles has published a national ICT policy that seeks to promote the use of ICT in all sectors affecting the economy of the country. Further, as such developments are crucial for the financial sector, during Mobile Money Global 2012, the world’s largest independent mobile money transfer conference and expo, the Central Bank of Seychelles announced its project to launch a total countrywide mobile payment solution in the Seychelles. The objective of the conference was to provide a countrywide mobile payment service in the Seychelles and to put Seychelles at the forefront of technological advancements globally. The project was ultimately put into place with the assistance of ProgressSoft as the solution provider, partnering with the main stakeholders, namely the Central Bank, the government, all commercial banks and mobile network operators (MNOs) in the Seychelles.

ProgressSoft has been associating with the Central Bank to provide a nationwide electronic cheque clearing solution that is running live across all banks in the country, realising a same-day clearing cycle and truncation of paper cheques. It is anticipated that this solution will help to reduce money laundering because micro payments and auditing of all cash transactions would now be monitored. Moreover, the Central Bank is seen to be having more control over all payments, resulting in a reduction of the unnecessary overheads of printing notes. Alongside the launch of this project, Seychelles Payment Services (SPS) has been established to provide a mobile payment service across the country.

The banking sector has been equally marked with another technological development with the launching of the Seychelles Electronic Funds Transfer (SEFT) system by the Central Bank in collaboration with ProgressSoft, commercial banks and the Seychelles Credit Union (SCU). SEFT is a domestic funds transfer system used to expedite money transfers by the banking institutions safely and efficiently through an online communication channel. The system was recently upgraded to be in line with the Central Bank’s objective to modernise the Seychelles’ payment systems and the upgraded version includes additional features such as online access to registered customers to effect payment.

The FinTech market in the Seychelles is still at an early developing stage; however, given the Central Bank’s high interest in making the banking sector more technology-oriented, it is anticipated that FinTech products and services under consideration to be offered would be favourably looked upon by the authorities.

The Market for FinTech Products and Services

As mentioned under 1.1 The Development of FinTech Products and Services, the market for FinTech products and services in the Seychelles is still at a developing stage, although the market has a promising future given the enthusiasm on the part of the Central Bank to make its banking sector more technology-oriented.

The Key Market Participants in the Specified Activities

There are no key market participants in the specified activities so far.

FinTech Technologies/Companies

New FinTech companies have not begun to displace traditional financial service providers yet. The FinTech market in the Seychelles is yet to be established so traditional finance service providers continue to dominate the market with their traditional banking systems and payments.

Partnerships Between Traditional Institutions and FinTech Companies

There is no knowledge of traditional financial institutions partnering with FinTech companies for co-development, technology testing or other reasons in the Seychelles.

Approach to fintech regulation

See 1.1 The Development of FinTech Products and Services.

Approach to fintech regulation

See 1.1 The Development of FinTech Products and Services.

FINTECH REGULATION

Regulatory Regimes for Specified Activities or FinTech Companies

A number of legal and regulatory steps (described in 1.1 The Development of FinTech Products and Services) have been taken in recent years to make the Seychelles a jurisdiction that will allow FinTech innovation to thrive.

Regulatory or Governmental Agencies for Specified Activities or FinTech Companies

The Central Bank of Seychelles is responsible for licensing and regulating banking business in the Seychelles and the Department of Information Communications and Technology in the Ministry of National Development (DIC) provides information systems to support decision-making in government and the delivery of government services in terms of efficiency and effectiveness. Although the FinTech market is at an early developing stage, with FinTech companies considering whether to become established in the Seychelles, it is anticipated that the Central Bank of Seychelles together with the DIC shall be the main regulators for the FinTech sector as it develops in the Seychelles. The role of the Central Bank is to advise the government on banking, monetary and financial matters, including the monetary implications of proposed fiscal and credit policies or operations, and to promote a sound financial system in the Seychelles.

Capital and Liquidity Requirements

FinTech companies are not subject to any specific regulatory requirements, nor any capital, liquidity or transaction limitations, other than those required for any normal Seychelles registered company/partnership. Developments in the laws affecting FinTech companies are nonetheless anticipated as the sector develops.

“Sandbox” or Other Regulatory “Neutral Zones”

There are no such zones or initiatives currently established in the Seychelles.

Change of Control Approval Requirements

There is no knowledge of any change of control approval requirements and processes for FinTech companies in the Seychelles. It is unlikely that any such requirements are currently in place in the Seychelles.

Recent Developments or Notable Proposed/ Forthcoming Regulatory Changes

See 1.1 The Development of FinTech Products and Services.

Burden of Regulatory Framework and Protection of Customers

Regulatory Impediments to FinTech Innovation at Traditional Financial Institutions

At present, there are no additional specific FinTech requirements.

Outreach by Regulators or Government Authorities to Engage with FinTech Innovators

The Central Bank has announced plans to make the banking sector more technology-oriented. As such, it is anticipated that the government will be engaging with potential FinTech innovators to promote the development of the FinTech sector in the Seychelles.

unregulated specified activities

See 2.7 Burden of Regulatory Framework and Protection of Customers.

Foreign FinTech Companies

Depending on the type of regulations and requirements to be put in place in the Seychelles, FinTech companies would either be able to operate as domestic companies incorporated under the Companies Ordinance, 1972 (the “Ordinance”) or an international business company (IBC) incorporated under the International Business Companies Act, 2016 (the “IBC Act”) or as a special licensed company (CSL), incorporated under the Companies Ordinance, 1972 and governed under the Companies (Special Licence) Act (the “CSL Act”). They would, therefore, have to comply with the specific requirements as imposed under the relevant acts.

Regulatory Enforcement Actions Against FinTech Companies

There have been no regulatory enforcement actions against FinTech companies in the Seychelles recently.

“Shadow Banking”

There is a general prohibition against undertaking banking activities without a licence and penalties for breach are serious. Robust money transfer business regulations are in place.

Form of Legal entity

Potential Forms of Charter

The main types of entities existing under the laws of the Seychelles are:

A domestic company, which is incorporated under the Ordinance and is required to have a minimum of two shareholders and directors, with 100% foreign ownership allowed. A tax rate of 25% is applicable on the first SCR1 million of profits and 33% above SCR1 million. Financial institutions are incorporated under the Ordinance and licensed by the Central Bank pursuant to the Financial Institutions Act.
An international business company, which is incorporated under the IBC Act. A minimum of one shareholder and director is required, while business is conducted outside the Seychelles and is tax exempt.
A special licensed company, which is incorporated under the Ordinance and is governed by the CSL Act. It is tax resident in the Seychelles and is taxable at a rate of 1.5% on worldwide income.

Key Differences in Form

The choice of entity to be used will depend on whether the business is incorporated or registered in, but carrying on business outside, the Seychelles, or if the intention is to carry on local trade.

recent legal changes

The new IBC Act provides more flexibility for IBCs (which could potentially be used by FinTech entities) to address the concerns of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), to be in line with the Financial Action Task Force (FATF) standards and to work towards a re-enforcement of the anti-money laundering framework of the Seychelles.

Some of the key reforms brought to the new IBC Act include an extended list of prohibited activities for IBCs:

carrying on securities business in the Seychelles (outside the Seychelles is allowed, subject to the IBC being licensed to do so in the country in which it carries out such business);
carrying on gambling business, including interactive gambling business in the Seychelles (outside the Seychelles is allowed, subject to the IBC being licensed to do so in the country in which it carries out such business); and
carrying on business as a mutual fund, unless it is licensed to do so under the Mutual Fund and Hedge Fund Act of Seychelles, or under the laws of a recognised jurisdiction.

Legal Infrastructure (Non-regulatory)

Desirable Changes to Facilitate Specified Activities

There are no changes to areas of law (other than regulatory areas) that are necessary or desirable at this stage to facilitate any elements of the specified activities, save for the updated laws referred to in 1.1 The Development of FinTech Products and Services.

Access to Real Time Gross Settlement Systems

In the Seychelles, FinTech companies must access real-time gross settlement systems through regulated financial institutions.

Special Insolvency Regimes

FinTech companies are subject to the same insolvency regimes as any type of company registered in the Seychelles.

Electronic Signatures

The Electronic Transactions Act, 2001 (ETA)generally puts electronic signatures on an equal footing with “wet ink” signatures under the laws of the Seychelles.

Digital signature under the ETA means the authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the ETA. The authentication of an electronic record is effected by the use of an asymmetric crypto system and hash function. Hash function means an algorithm mapping or translation of one sequence of bits into another, generally smaller, set known as “hash result” such that an electronic record yields the same hash result every time the algorithm is executed with the same electronic record as its input, making it computationally unfeasible (i) to derive or reconstruct the original electronic record from the hash result produced by the algorithm and (ii) that two electronic records can produce the same hash result using the algorithm. Any person by the use of a public key of the subscriber may verify the electronic record and the private key and the public key are unique to the subscriber and constitute a functioning key pair.

An electronic record is attributed to the originator if it was sent (i) by the originator himself, (ii) by a person who had authority to act on behalf of the originator in respect of that electronic record, or (iii) by an information system programmed by, or on behalf of, the originator to operate automatically

Standards for Proving Identity in Electronic Transactions

There are no standards for proving identity in electronic transactions prescribed so far under the ETA.

Data Privacy and Cybersecurity

Data Privacy and Cybersecurity Regulatory Regimes

The Data Protection Act in the Seychelles is not yet in force. The Computer Misuse Act, 1998 makes it a criminal offence for any person to secure unauthorised access to a computer, program or data held in a company. Further, it is a criminal offence for a person who intentionally and without authority:

impairs the operation of a computer;
prevents or hinders access to a program or data held in a computer;
impairs the operation of a program or the reliability of data held in a computer;
alters, erases or adds to the content of a program or data held in a computer;
uses a program or data held in a computer;
copies or moves a program or data held in a computer (i) to a different location in the storage medium in which it is held or (ii) to any other storage medium; or
has a programme or data held in a computer output from the computer in which it is held, whether by having it displayed or in any other manner.

Computer is defined as an electronic, magnetic, optical, electrochemical or other data processing device, or a group of such interconnected or related devices, performing logical, arithmetic or storage functions and includes any data storage facility or communications facility directly related to, or operating in conjunction with, such device or group of such interconnected or related devices.

The Electronics Act equally provides for numerous offences under the said act, namely the offence of tampering with a computer source document, of failing to furnish information, of acting in breach of confidentiality and privacy, and, among others, of fraudulently dealing with the digital signature certificate

Recent and Significant Data Privacy Breaches

There have been no recent and significant data privacy breaches or other cybersecurity attacks involving FinTech companies.

Companies Utilising Public Key Infrastructures or Other Encryption Systems

The DIC issued a certification practice statement, effective 20 July 2011, in relation to certification authorities within the OISTE/WISeKey Root Public Key Infrastructure in the Seychelles.

biometric data

Biometric data is not subject to specific regulation in the Seychelles. It is equally to be noted that the Data Protection Act is not yet in force in the Seychelles.

Intellectual Property

Intellectual Property Protection Regime

In August 2014, the Seychelles introduced its new Copyright Act, 2014, which expressly includes computer programs within the definition of “literary and artistic works” and therefore protects them during the life of the author and for 50 years after his or her death.

The Copyright Act provides for only two instances where reproduction and adaptation of computer programs are permitted: (i) for use of the computer program with a computer for the purpose and extent for which the computer program has been obtained, or (ii) for archival purposes and the replacement of the lawfully owned copy of the computer program in the event that the said copy of the computer program is lost, destroyed or rendered unusable.

The main IP rights available to protect branding are registered trade marks. FinTech companies will generally own a combination of an established brand or trade name (which can include logos or icons) protected as registered trade marks.

Trade mark rights under the new Industrial Property Act, 2014 (designed to comply with the Trade-Related Aspects of Intellectual Property Rights (TRIPS) compliance for World Trade Organisation Accession) give registered owners the right to prevent others from using identical or confusingly similar marks to their registered mark.

The owner of a registered mark has the exclusive right to prevent any unauthorised person from using in the course of trade any sign that is identical or similar to the registered mark for goods or services that are identical or similar to the goods and services in respect of which the mark is registered where such use would result in a likelihood of confusion.

The owner of an unregistered mark that is well known in the Seychelles has the exclusive right to prevent any unauthorised person from using in the course of trade any sign that is identical or similar to the unregistered well-known mark for goods and services that are identical or similar to the goods and services for which the unregistered well-known mark is used provided that such use is likely to confuse the public.

Trade Secret Regime

The Industrial Property Act prohibits any unfair competition concerning undisclosed information and provides that any act or practice that, in the course of industrial or commercial activities, in relation to industrial property rights results in the disclosure, acquisition or use by others of undisclosed information without the consent of the person lawfully in control of that information (rightful holder) and in a manner contrary to honest business practices shall constitute an act of unfair competition.

The disclosure, acquisition or use of confidential information by others without the consent of the rightful holder may, in particular, result from:

industrial or commercial espionage;
breach of contract;
breach of confidence;
inducement to commit industrial or commercial espionage, by breach of confidence or contract; or
the acquisition of confidential information by a third party who knew or was grossly negligent in failing to know that this acquisition entailed one of the foregoing acts

Undisclosed information means any information that is a secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among, or readily accessible to, persons within the circles that normally deal with the kind of information in question; has a commercial value because it is secret; and its legitimate holder has taken reasonable steps, under the circumstances, to keep it secret.

Copyrights, Patents, Trade Marks

Financial technology is potentially copyrightable. As mentioned above, under the new copyright laws in the Seychelles, copyright will automatically subsist in works such as computer programs.

For FinTech companies, software is not, of itself, patentable, although processes or methods performed by running software may potentially be patentable. Importantly, such processes or methods would need to be new, involve an inventive step and be industrially applicable to be patentable.

Protection of Intellectual Property or Trade Secrets

There are no other ways for FinTech companies to protect their IP or trade secrets, save as described above.

Joint Development of Intellectual Property

Although the FinTech sector is at an early stage in the Seychelles, there are no restrictions under the laws of the Seychelles preventing collaborations between technology developers and service providers. Co-developers would be able to modify their IP rights contractually and specify such rights in their written agreement. As per the Industrial Property Act, an application for a patent shall relate to one invention only or to a group of inventions so linked as to form a single general inventive concept.

Intellectual Property Litigation

IP for FinTech companies is not a significant source of litigation in the Seychelles at this stage but potentially it could be as the sector grows.

Open Source Code

Computer source code is regulated under the Electronics Act. As such, it is an offence for anyone who knowingly or intentionally conceals, destroys or alters, or intentionally or knowingly causes another to conceal, destroy or alter any computer source code used for a computer, computer program, computer system or computer network, when the computer source code is required to be kept or maintained by law for the time being in force. Computer source code means the listing of programs, computer commands, design and layout, and program analysis of computer resource in any form.

Open-source code is otherwise not separately regulated or protected in the Seychelles. The issues relating to collaboration and ownership identified above apply equally to unplanned collaborations over a period of time. It is possible for every contributor to the open-source code to own the copyright to their contribution, although in practice most contributors are likely to agree to license their material under the same licence as the original work. In such circumstances it can be difficult to ascertain who should make a legal complaint if someone decides to use the program in a way that violates its licence. To avoid this issue, contributors can explicitly assign the copyright in their contributions to a body that administers the open-source project, thus keeping ownership centralised and making enforcement of the licence easier. An alternative approach would be to have contributors license their contributions to the project’s administrative body under a licence agreement that permits the body to re-license the contribution.

Tax Matters

Special Tax Issues, Benefits or Detriments

An IBC incorporated under the International Business Companies Act, 2016 is exempt from income tax in the Seychelles. A special licensed company, incorporated under the Companies Ordinance, 1972 and governed under the Companies (Special Licence) Act, is liable to business tax at a rate of 1.5% on its worldwide income. Beneficial owners are advised to seek independent tax advice in relation to any tax implications in their jurisdiction. There are currently no specific tax conditions or attributes designed for FinTech entities in the Seychelles.