Switzerland has the potential to become a global FinTech center

According to the Institute of Financial Services Zug (IFZ) at the Lucerne University of Applied Sciences and Arts, the general conditions for FinTech companies in Switzerland are excellent by international standards. This is also illustrated by the remarkable growth of 17 percent to 190 companies in 2016. However, there is still technological catching up to do.

A project team at IFZ examined the potential for a Swiss FinTech center in comparison to the international context. So-called hubs were created in a ranking for FinTech centers. This shows that the industry finds very good framework conditions in this country: Out of 27 cities surveyed, Zurich and Geneva are in second and third place behind first-place Singapore. Compared to Singapore, the two cities still have some catching up to do, especially in the economic and technological dimensions.

Important drivers

The ranking is based on 68 indicators that show the general conditions with regard to the political and legal, economic, social and technological environment. Among other things, political stability, the efficiency of the authorities, access to loans and venture capital, the number of science and technology graduates, and access to and use of information and communications technology were taken into account.

Zurich goes FinTech

The good framework conditions are paying off: "The Swiss FinTech scene continued to grow in 2016," says Thomas Ankenbrand, project manager of the "IFZ FinTech Study 2017". Last year, 190 companies were active in this country, as illustrated by the database specially compiled by the Lucerne University of Applied Sciences and Arts, which lists FinTech companies with business headquarters in Switzerland. Compared to 2015, this corresponds to an increase of 17 percent.

In terms of the number of domiciled companies, Zurich has strengthened its top position with now 84 (up 12) FinTech companies, followed by Zug with 29 (up 8) and Geneva with 19 (up 6). "Despite the increasing number of FinTech companies, industry associations and support programs, this growth has not yet been fully translated into new jobs or higher company valuations. So the FinTech industry in Switzerland still has a lot of growth potential," says Ankenbrand.

Orientation remains international

The Swiss market alone is too small for most FinTech business models. As a consequence, the global orientation and specialization of Swiss FinTech companies increased further last year, as the study shows. Around 60 percent of the companies pursue an international business-to-business business model. That is, they are often specialized global suppliers to established financial services companies. Incubators/accelerators and venture capitalists also operate internationally.

Therefore, it will be important for the further growth of the Swiss FinTech industry that, on the one hand, products and services can be exported globally and, on the other hand, global access to talented employees and venture capital is guaranteed. Furthermore, the regulatory environment must continue to be dynamically adapted to upcoming developments. "Otherwise, many companies will no longer work the global market from Switzerland," says Ankenbrand.

FinTech companies not banks

Finally, the project team investigated the general assumption that FinTech companies would fundamentally compete with banks. The researchers conclude that in most cases, the companies cooperate with banks or are their suppliers. In addition, the revenue models of FinTech businesses have shifted in the past year toward licensing fees and SaaS (software-as-a-service), as is common for technology-driven business models.

The typical revenue models of established financial companies have little significance for FinTech companies (interest and trading transactions) or are losing relevance (commission transactions). "The companies thus support the banks in their digitization efforts as an innovative spearhead instead of directly competing with them," says Ankenbrand. (Source: HSLU)

Further results from the "IFZ FinTech Study 2017" can be found in this Link

The entire 125-page study (in English) costs 290 Swiss francs and can be ordered at ifz@hslu.ch.