FinTech in Switzerland: Number of firms shrinks

The development of the Swiss FinTech sector has only known one direction in recent years: upwards. After the size of the sector, measured by the number of active Swiss FinTech companies, increased year after year in the past, a decline is now being recorded for the first time for the year 2021. As of the end of 2021, Switzerland was home to 384 FinTech companies, which corresponds to a decrease of 21 companies compared to the previous year, or a minus of around five percent from a relative perspective. Despite this negative development at first glance, positive trends are also apparent with regard to the companies' business models. For example, the median number of employees as well as that of total financing at Swiss FinTech companies increased last year. This is after these key figures stagnated or even declined last year. In addition, venture capital activity in the Swiss FinTech sector reached a record level in 2021, both in terms of the number of financing rounds and the volume.

Analytics, artificial intelligence and big data are more than buzzwords

Over the years, more and more Swiss FinTech companies have focused on technological innovations such as analytics, artificial intelligence or Big Data. This is in contrast to other technologies, where the number of FinTech companies declined last year. The importance of analytics activities is likely to increase in the future, partly because the potential of using data in the financial sector is increasingly recognized but not yet fully exploited. "Traditional institutions sometimes lack the corresponding resources and skills," says Thomas Ankenbrand, a lecturer at the Lucerne University of Applied Sciences and Arts and project manager of the study. FinTech companies are therefore likely to continue to act as suppliers of corresponding services in the future.

An international strategy pays off in the FinTech sector

The tendency of FinTech companies to focus on B2B business models has continued to increase over the past year. In addition to the increased focus on business customers, such as banks or other financial service providers, Swiss FinTech companies are predominantly internationally oriented. "The low-growth Swiss home market is often too small for growth-hungry FinTech companies," the HSLU expert points out. The success of an international focus is also reflected in the share price performance of listed FinTech companies worldwide. Since 2015, their performance has been better compared to nationally oriented FinTech companies. The same applies to companies that focus on business customers compared to companies that (also) serve private customers.

Sustainability becomes the new normal

The consideration of environmental, social and governance criteria in financial decisions is becoming the new normal. In the Swiss FinTech sector, relatively few companies currently have a dedicated strategic sustainability focus. Most of these companies focus on the area of asset management and target all three sustainability dimensions (ESG: Environmental, Social, Governance).

In the Swiss financial center, there is also a trend toward open financial ecosystems (keyword "Open Finance"). "Especially in the area of wealth management, open finance offers good opportunities for success," says Ankenbrand. According to the study authors, the reasons for this are the global market size and the Swiss market share. In addition, according to the survey conducted in the study, Swiss banks have confirmed the potential of financial ecosystems as a future business model. "Realizing this potential, however, requires broad adoption of common standards, which banks and FinTech companies are currently struggling with, even though corresponding initiatives and scalable platforms already exist and are in operation in Switzerland," says Ankenbrand

Will the Metaverse help blockchain technology make a breakthrough?

The metaverse, which, simply put, can be described as the further development of the Internet into a three-dimensional virtual world, is being driven by the games industry as well as by BigTech and blockchain companies. Even if the motives and goals are different, a strengthening of ownership and disposition rights to data through decentralized structures is emerging. Thomas Ankenbrand: "Blockchain technology can play a central role in this. The hype around non-fungible tokens (NFTs) observed last year could provide a first foretaste of this."

Source and further information: Lucerne University