Uncertain Growth For Switzerland's FinTech Sector

The median value and number of full-time employees at Swiss FinTech companies were stagnating at 12% of total financing, with the median amount falling from 21 million Swiss francs to 14 million Swiss francs, suggesting that the continued growth of the Swiss fintech sector in 2014 has stalled. If you look at the median (the value that separates the high half from the low half of the total funding) and the number of employees in 2020, there has been a significant shift.

While the Swiss fintech sector has continued to grow over the past year, a closer look suggests that certain segments are showing signs of stagnation. Other indicators indicating a slowdown in the Swiss FinTech market include a decline in the company's overall median capitalization and a stagnant median number of employees. While the growth of Swiss-based FinTech companies is still continuing, there are signs that sector growth could stall in 2020. According to the IFZ FinTech 2020 study, Swiss fintechs have begun to overtake traditional financial companies and have grown by 7% annually. The IFZ Fintech Study 2021 will examine the state of the industry and outline important developments and future trends.

As fintech companies erupt a reputation in investment management and banking infrastructure, this raises the question whether they pose a threat to long-standing banking institutions. While traditional business models must be overhauled to adapt to the digital world, there are many complex financial services that banks offer and donate fintechs. This market approach has led to the emergence of various platforms that enable secure and standardised exchange of data and services. Swiss FinTech companies operate in the same sector as the banking market, but offer different services and opportunities, and both work to each other's advantage.

The number of FinTech start-ups in Switzerland is growing as is the amount of money that they receive from venture capitalists. Among the indicators is the volume of venture capital invested in the FinTech sector, with Swiss FinTech companies themselves believing that they can raise new funds with little difficulty. FinTech companies in Switzerland benefit from lower corporate and individual tax rates, a sandbox for licensed start-ups, a high number of double taxation treaties and pragmatic authorities. At the end of 2019, Switzerland was home to 382 fintech companies, a 7.3 percent year-on-year growth rate. The sector is maturing as measured by the growth in the number of employees and the capitalization of the 382 companies in total.

The number of Swiss fintech companies with employees abroad is also increasing. By contrast, the development of the traditional financial sector shows a decline in the number of institutions and staff. At the end of last year, the number of Swiss fintech companies with overseas employees accounted for about a third of the total workforce in the sector. A look at the companies employed abroad also shows that the proportion of employees stationed abroad is steadily increasing. By the end of 2020, they accounted for more than half or a third of the total active population of the sector. Since 2018 the number of fintech companies driven by blockchain and distributed ledger technology (DLT) has significantly increased, with the most absolute growth in 2019 driven by companies with novel investment management solutions.

In addition to these three new wealthy technology companies, Switzerland has several fintech investment management and wealth management companies including Selma, a robo-adviser who acts as a personal assistant, Simplewealth, an automated investment management service and True Wealth, an online management platform. In the context of the activities of the Swiss FinTech industry, the broad distinction between FinTech and traditional financial services is becoming increasingly blurred. Swiss Fintech companies mainly comprise payment systems, investment and asset management services, stock exchanges, crowdfunding and crowdfunding platforms, insurance companies, insurance technology and distribution and information platforms in the areas of collective investment schemes and other financial instruments.

Companies and platforms in this area include Cashare, Creditgate24, Lend and Crowd4Cash which lends to individuals; Splendit, which focuses on student loans; CreditWorld, Swisspeer and Lendico, which focuses on lending to small and medium-sized enterprises (SMEs); LoanBox, a peer-to-peer (P2P) lending platform for government borrowers; and Instimatch, a P2P lending platform for institutional lenders and borrowers. There are also start-up and venture capital firms for early financing and late maturing debt and equity market firms.

In 2020, Swiss fintech developer and software solutions provider NEC Corporation was sold for 2.2 billion dollars to the NEC Corporation. At the time of the sale, Avaloq counted more than 150 banks in Europe among its clients. In early 2021, it announced a partnership with Raisin, a German fintech firm that specialises in interest-paying fixed-rate accounts. The Avaloq Group is an international fintech company that digitizes and automates the financial services industry from Crunchbase website via Twitter, Facebook and LinkedIn. The company brings trusted and efficient banking to the world with its centralized digital banking software, Avaloq Banking Suite and its international network of BPO centers by providing a great user experience.

Seba Bank was founded in 2018 and is headquartered in Zug. It is a pioneer in the financial sector that provides a seamless, secure and easy-to-use bridge between digital and traditional assets. Seba has launched a new banking service offering, after securing its bank licence at the end of 2019 and starting its preliminary process in 2018. Furthermore, Seba also has defined a protocol to use blockchain banking services to build up the core banking system and tokenise the entire bank balance sheet.

Founded in 2019, Carouge-based fintech start-up Alpian aims to create innovative new banking offerings tailored to the affluent masses. The company pioneered a digital experience that combines everyday banking services with personal wealth management offerings, bespoke investment products and easy-to-access apps. In 2021, Alpian secured 18 million USD in Series B funding (with a total of 32 million USD funding). The company's aim is to obtain a full banking licence from the Swiss Financial Market Supervisory Authority (FINMA) for the introduction and licensing of a digital wealth bank in 2022. Alpian has defined a protocol to use blockchain banking services to build up the core banking system and tokenise the entire bank balance sheet.  The company has ambitions to shape the future of the way we run banks and democratise complex financial products and services in a simple, transparent and cost-effective way.

Cited Sources

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