KYC in a marketplace means that sellers are identified and verified before payout. For Swiss platforms, this is important because payment providers and financial intermediaries must meet anti-money laundering and due diligence obligations under the Anti-Money Laundering Act (GwG) and the FINMA Anti-Money Laundering Ordinance (GwV-FINMA). Any marketplace operator that forwards payments to sub-merchants must ensure that each seller is correctly verified – or outsource this obligation to a licensed Payment Service Provider (PSP).

This guide explains the legal basis, shows which data is required depending on the legal form, and describes how automated onboarding improves compliance and conversion at the same time.

1. What are KYC and KYB?

Know Your Customer (KYC) refers to the legal obligation to verify the identity of a contracting party before entering into a business relationship or carrying out a transaction. In the context of a marketplace, this primarily concerns sellers (sub-merchants) who receive payments via the platform.

Know Your Business (KYB) is the equivalent for legal entities. KYB refers to the review of the company structure, ownership relationships and beneficial owners. For marketplaces on which LLCs, associations or other organisations appear as sellers, KYB is mandatory.

In Switzerland, these obligations arise from Art. 3 GwG (identification of the contracting party) and Art. 4 GwG (determination of the beneficial owner). The specific implementation is regulated by the FINMA Anti-Money Laundering Ordinance (GwV-FINMA) and the regulations of the self-regulatory organisations (SROs).

2. Legal basis in Switzerland

Anti-Money Laundering Act (GwG)

The GwG defines who qualifies as a financial intermediary and which due diligence obligations must be fulfilled. Under Art. 2 para. 3 GwG, persons who provide payment services on a professional basis are deemed to be financial intermediaries. The core obligations include the identification of the contracting party (Art. 3 GwG), the determination of the beneficial owner (Art. 4 GwG), the documentation obligation (Art. 7 GwG) and the duty to report suspected money laundering to the Money Laundering Reporting Office Switzerland (MROS) under Art. 9 GwG.

GwV-FINMA and thresholds

The GwV-FINMA specifies the due diligence obligations of the GwG. For electronic means of payment used exclusively for cashless payment transactions, specific thresholds apply: Under Art. 11 GwV-FINMA, identification may be waived under certain conditions if no more than CHF 5,000 per calendar year and contracting party is paid and the funds are loaded exclusively via a bank account in Switzerland. If this threshold is exceeded, full identification is mandatory. For marketplaces, this means: once a seller receives more than CHF 5,000 per year in payouts, their KYC must be completed.

Self-regulatory organisations (SROs)

Financial intermediaries that are not directly supervised by FINMA must join an SRO. The SROs issue their own regulations, which must at least meet the standard of the GwV-FINMA. For a PSP carrying out KYC on behalf of a marketplace platform, SRO membership is a prerequisite for lawful activity.

3. What data does a merchant need during onboarding?

Natural persons (sole proprietorships)

For natural persons, the following details must be documented in accordance with the Agreement on the Swiss Banks' Code of Conduct with Regard to the Exercise of Due Diligence (CDB 20, Art. 7): surname and first name, date of birth, nationality and the actual residential address. Verification is usually carried out using an official identity document with a photograph (passport or identity card). Sole proprietorships entered in the commercial register are additionally identified using the extract from the commercial register.

Legal entities (LLC, Ltd, association)

For legal entities such as an LLC or Ltd, the following are required: company name, registered office, UID number, current extract from the commercial register (not older than 12 months) and the identity of the persons authorised to sign. In addition, the beneficial owner must be determined. Associations without an entry in the commercial register are identified using the articles of association and an extract from the association register or a comparable confirmation.

Comparison: requirements by legal form

4. Beneficial owners

A beneficial owner is the natural person who ultimately disposes of the assets or controls a legal entity. Determination is mandatory under Art. 4 GwG. For companies such as an LLC or Ltd, the beneficial owner is the person who directly or indirectly holds more than 25 per cent of the shares or voting rights.

In practice, the KYC process requires sellers on a marketplace to provide a declaration of beneficial ownership (the so-called Form A). In complex ownership structures – for example, an LLC held by a holding company – the chain must be traced back to the natural person. If no natural person with more than 25 per cent ownership can be identified, the members of the top management body are deemed to be the beneficial owners.

Special rules apply to associations and foundations: here, the founders, board members and, where applicable, the beneficiaries must be identified as beneficial owners.

5. Why KYC must be completed before the first payout

A common mistake on marketplaces: sellers are allowed onto the platform, orders are processed, but identity verification is postponed. This is not only a compliance risk, but can also have criminal consequences.

Under Art. 3 para. 1 GwG, the contracting party must be identified when the business relationship is established. For marketplaces that process payments via a PSP, this means specifically: before the first payout is made to a sub-merchant, their KYC must be completed. Funds must not flow to an unverified account.

Example: An online marketplace for arts and crafts takes on a new seller. The seller can list products immediately. Only when an order comes in and a payout is due must the KYC be completed. If the seller is an LLC, this includes the extract from the commercial register and the determination of the beneficial owner. As long as the KYC is outstanding, payouts are blocked. The customer has already paid – the funds are held in trust by the PSP.

6. What happens with inactive or high-risk merchants

The GwV-FINMA requires ongoing monitoring of business relationships. For a PSP that manages sub-merchants on a marketplace, this results in specific action obligations:

Inactive merchants: Sellers who do not carry out any transactions over a longer period of time (e.g. 12 months) are usually deactivated. Before reactivation, it must be checked whether the KYC data is still up to date. In the event of material changes (new owner, new registered office), renewed identification is required.

High-risk merchants: If a merchant shows unusual patterns – for example, rapidly increasing turnover, many chargebacks or transactions with high-risk countries – enhanced due diligence applies under Art. 6 GwG. This can mean additional document requirements, a personal meeting or even blocking and reporting to MROS.

A professional PSP handles this monitoring automatically and thereby relieves the marketplace operator. Nevertheless, the platform also bears shared responsibility: anyone who knowingly allows high-risk sellers without appropriate controls cannot hide behind the PSP.

7. How automated onboarding increases conversion

Manual KYC onboarding – i.e. collecting documents by email, manual review by a compliance team and feedback to the seller – takes several days on average. For a marketplace that depends on rapid seller growth, this is a conversion killer.

Automated solutions combine several advantages: the seller uploads their identity document directly, the check is carried out using OCR and database matching (e.g. against the Swiss Official Gazette of Commerce, SHAB, or sanctions lists), and approval is granted in minutes instead of days. For legal entities, the extract from the commercial register is retrieved automatically and the ownership structure is checked.

Concrete effect: Platforms that switch from manual to automated KYC onboarding report a reduction in drop-off rates of 30 to 50 per cent. The reason is simple: the fewer the steps and the shorter the waiting time, the higher the likelihood that a seller completes the process.

Checklist: What you should check before you start

✓      Clarify whether your payment model triggers a direct obligation under the GwG or whether you process payments via a licensed PSP.

✓      Define which legal forms (sole proprietorship, LLC, Ltd, association) are permitted as sellers on your marketplace.

✓      Make sure that the KYC process is completed before the first payout – not afterwards.

✓      Check whether your PSP supports automatic identification for Swiss identity documents and extracts from the commercial register.

✓      Clarify how beneficial owners are handled: from which ownership threshold is a check carried out (standard: 25%)?

✓      Define rules for inactive merchants: after how many months without a transaction is the account deactivated?

✓      Set monitoring criteria for high-risk merchants (e.g. chargeback rate, turnover spikes, country risk).

✓      Ensure that all KYC documents are retained for at least 10 years in accordance with Art. 7 GwG.

✓      Check whether your PSP supports Swiss payment methods (TWINT, PostFinance, QR-bill) for sub-merchants.

✓      Document the entire onboarding process in writing as part of your internal compliance documentation.

How Payrexx supports you with merchant onboarding

As a Swiss PSP, Payrexx offers a marketplace payment solution that fully handles the KYC and onboarding of sub-merchants. Sellers go through an automated verification process directly in the platform, including identity document checks, commercial register matching and determination of beneficial owners.

Payouts to verified merchants are made via split payment: the platform commission goes to the marketplace operator, the remaining amount directly to the seller. This means the platform never touches customer funds at any point. Payrexx supports all common Swiss payment methods – TWINT, PostFinance, credit cards and QR-bill – and can be integrated into existing systems via API.

Payrexx is your sales partner for Swiss marketplaces.