FinTech in Switzerland: growth despite headwinds
The Swiss FinTech sector continued to grow in 2023, particularly in the area of sustainable FinTech companies. However, with financing activities declining and the attractiveness of the location decreasing, there are also signs of a cooling trend. This is the conclusion of the latest FinTech study by Lucerne University of Applied Sciences and Arts.
There have never been more active companies in the Swiss FinTech sector. There were 483 companies in total at the end of 2023. That is around eleven percent more than in the previous year. Compared to 2015, the size of the sector has even tripled, as the latest FinTech study by Lucerne University of Applied Sciences and Arts (HSLU) shows. Liechtenstein was also included in the study for the first time: 22 FinTech companies are based in the Principality.
Growth was particularly strong among FinTech companies with a strategic focus on sustainability. They account for around ten percent of all Swiss FinTech companies. Their number increased by around 50 percent in 2023. "The growth of sustainable FinTech companies is stronger than that of other FinTech companies," says Prof. Dr. Thomas Ankenbrand, head of the study. Investors' interest in sustainable investment opportunities is high. According to the HSLU lecturer, the banks' obligation to ask private investors about their sustainability preferences is also encouraging this growth.
Location attractiveness: Switzerland faces more competition
According to Ankenbrand, however, there are also signs of a cooling trend: Stockholm has overtaken Zurich and Geneva in the ranking of the most attractive locations for FinTech companies, knocking them out of second and third place. Other cities such as Amsterdam have also caught up. Zurich and Geneva have therefore lost relative competitiveness. The head of the study concludes: "The rankings in third and fourth place prove that the general conditions for FinTech in Switzerland remain good." However, the evaluation carried out in the study would also show that leading international FinTech locations have come closer to Switzerland's attractiveness in the last year. Singapore continues to lead the rankings by a large margin.
Declining financing activities
Venture capital activities are another indication of a cooling trend. FinTech company financing decreased in 2023, both in terms of volume and the number of transactions. A total of CHF 457 million flowed into the Swiss FinTech sector in 68 financing rounds. In the previous year, this figure was CHF 605 million in 84 financing rounds. The financing volume has therefore fallen by around a quarter. According to the head of the study, however, it will only be possible to say in the next few years whether this decline is a structural slowdown or is driven by a temporary interest rate effect.
AI: huge potential for the FinTech sector
"Although FinTech has developed from a niche market into a significant innovation provider for traditional financial service providers, the potential for optimizing the financial value chain has not yet been exhausted," says Ankenbrand. Solutions for the seamless integration of financial services in various application areas ("embedded finance") have been implemented in isolated cases.
The HSLU lecturer sees great potential for the financial sector in the field of artificial intelligence. Dynamic adaptation to new technological developments would benefit Switzerland as a location and the local FinTech sector.
Source: www.hslu.ch
