Who will survive the FinTech evolution?
The Lucerne University of Applied Sciences and Arts has conducted a comprehensive survey of the Swiss FinTech market for the fourth time. The study shows that the local FinTech sector has once again grown strongly and continues to gain in importance. It also explores the question of how traditional banks are dealing with the digital evolution.
According to the study published by the Lucerne University of Applied Sciences and Arts at the end of February, this year again confirms that the FinTech sector in Switzerland enjoys good framework conditions. In the global FinTech hub ranking, the cities of Zurich and Geneva remain in second and third place.
FinTech is important for Switzerland
The FinTech sector grew strongly in 2018. At the end of the year, Switzerland had 356 FinTech companies, representing a year-on-year growth rate of 62 percent. As shown by the increasing number of employees and the capitalization of the companies, the sector has also become more mature and stable. In contrast, the development in the traditional financial sector is contrasting, where the number of institutions and employees is declining.
FinTech evolution: Fin is local, tech is global
Further, the 2019 FinTech Study shows that global innovation is driving FinTech companies. A certain pattern can be identified in the FinTech business areas: The tech-driven FinTech companies, namely in the areas of Distributed Ledger Technology (e.g. Blockchain) and Analytics, are mainly internationally oriented. In contrast, the finance-driven companies, for example in the areas of Deposit & Lending or Payment, are increasingly focused on the domestic market. This pattern can be seen not only among the local FinTech companies, but also among the international ones.
Innovation should solve a problem
The goals of technological innovation in the financial industry should be higher volumes, lower costs and/or lower risks for the company, and higher benefits and/or lower costs for customers. Well thought-out business models and sensible implementation are far more important than the use of extraordinary technologies. The financial industry needs solutions that are comprehensible and accurate for customers and companies. This is where opportunities arise for Switzerland as a center of innovation.
From hype to disillusionment to reality
The results of last year's study indicated the FinTech sector's journey from hype to reality. A further maturation of the sector and the larger venture capital transactions confirm the development. The cryptocurrency market, on the other hand, suffered a strong correction.
Traditional banks must position themselves or they will become irrelevant
The authors of the study do not expect banks to be displaced by FinTech companies. Rather, the new technologies will partially replace some of the services and processes of traditional banks. The winners of technological innovation will be companies that have the right teams and the right culture to implement new technologies faster and more consistently.
Source: Lucerne University
