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

This guide explains the legal foundations, shows which data are 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 a business relationship is established or a transaction is carried out. In the context of a marketplace, this primarily concerns the sellers (sub-merchants) who receive payments via the platform.

Know Your Business (KYB) is the counterpart for legal entities. KYB refers to the review of the company structure, ownership relationships and beneficial owners. For marketplaces on which GmbHs, associations or other organisations act 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 governed by the FINMA Anti-Money Laundering Ordinance (GwV-FINMA) as well as the regulations of the self-regulatory organisations (SROs).

2. Legal foundations in Switzerland

Money Laundering Act (GwG)

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

GwV-FINMA and thresholds

The GwV-FINMA specifies the due diligence obligations under the GwG. For electronic means of payment used exclusively for cashless payment transactions, specific thresholds apply: According to Art. 11 GwV-FINMA, identification may be waived under certain conditions if no more than CHF 5'000 per calendar year and contracting party are 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: as soon as 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 comply at least with the standard of the GwV-FINMA. For a PSP that performs 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 Code of Conduct concerning 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 photo ID document (passport or identity card). Sole proprietorships entered in the commercial register are additionally identified using the commercial register excerpt.

Legal entities (GmbH, AG, association)

For legal entities such as a GmbH or AG, the following are required: company name (trade name), registered office, UID number, current commercial register excerpt (not older than 12 months), and the identity of the persons authorised to sign. In addition, the beneficial owner must be determined. Associations without a commercial register entry are identified using the articles of association and an excerpt 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 corporations such as a GmbH or AG, the beneficial owner is the person who directly or indirectly holds more than 25 percent 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, a GmbH held by a holding company – the chain must be traced to the natural person. If no natural person with more than 25 percent participation can be identified, the members of the top management body are deemed to be the beneficial owners.

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

5. Why KYC must come before the first payout

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

According to Art. 3 para. 1 GwG, identification of the contracting party must take place when the business relationship is established. For marketplaces that process via a PSP, this means concretely: before the first payout to a sub-merchant, their KYC must be completed. Funds may not flow to an unverified account.

Example: An online marketplace for handicrafts onboards a new seller. The seller can list products immediately. Only when an order comes in and a payout is due must KYC be completed. If the seller is a GmbH, this includes the commercial register excerpt and the determination of the beneficial owner. As long as KYC is pending, 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 concrete obligations:

Inactive merchants: Sellers who do not carry out transactions for a longer period (e.g. 12 months) are usually deactivated. Before reactivation, it must be checked whether the KYC data are 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 sharply increasing turnover, many chargebacks or transactions with high-risk countries – enhanced due diligence obligations under Art. 6 GwG apply. This can mean additional document requirements, a personal meeting or even blocking and reporting to MROS.

A professional PSP automates this monitoring and thus relieves the marketplace operator. Nevertheless, the platform also bears co-responsibility: Anyone who knowingly allows high-risk sellers without adequate 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 ID document directly, verification is carried out via OCR and database matching (e.g. against the Swiss Official Gazette of Commerce SHAB or sanctions lists), and approval takes minutes instead of days. For legal entities, the commercial register excerpt is retrieved automatically and the ownership structure is checked.

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

Checklist: What you should check before starting

✓      Clarify whether your payment model triggers a direct GwG subjection or whether you process via a licensed PSP.

✓      Define which legal forms (sole proprietorship, GmbH, AG, association) are allowed as sellers on your marketplace.

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

✓      Check whether your PSP supports automatic identification for Swiss ID documents and commercial register excerpts.

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

✓      Define rules for inactive merchants: after how many months without a transaction is deactivation triggered?

✓      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 KYC and onboarding for sub-merchants. Sellers go through an automated verification process directly on the platform, including ID verification, commercial register matching and determination of beneficial owners.

Payout to verified merchants is made via split payment: the platform commission goes to the marketplace operator, the remaining amount goes directly to the seller. In this way, 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.