Switzerland’s Fintech Sector Continues to Grow but Certain Segments have been Stalling: Report

Although the Swiss Fintech sector continued to grow last year, a closer examination suggests that certain segments showed signs of stalling or becoming a bit stagnant. It’s one of the main findings of this year’s Fintech research study by the Lucerne University of Applied Sciences and Arts.

Switzerland’s Fintech industry has grown into one of the leading providers of digital tech solutions for the nation’s finance sector. At the end of last year, there were 405 local Fintech firms operating in Switzerland – which is 23 more than the previous year, or an increase of 6% when compared to 2019.

Most of these Fintechs provide solutions for investment management and supporting banking infrastructure. Their business models mainly focus on technology development in the fields of automation, process digitization, and robotics.

Although there’s been steady growth in the Swiss Fintech space, there were also signs last year of the industry beginning to stall.

Thomas Ankenbrand, Head of Program and lecturer for Banking and Finance at the Lucerne University of Applied Sciences and Arts, revealed that “the growth rate has been at its lowest since 2015.”

Other signs that suggest the industry is slowing down include the decreasing median of the Fintech firms’ total market capitalization and the relatively stagnant median number of workers employed at these companies. The number of Swiss Fintech firms’ employees now working abroad is also increasing steadily.

By the end of last year, this group of workers (based overseas) represented over a third of the total workforce belonging to Swiss Fintech firms.

The Fintech hub ranking in the Lucerne UASA study confirms that, on a global level, the conditions for Fintechs are still fairly attractive or favorable in Switzerland.

But when “compared to other leading Fintech ecosystems, the conditions have deteriorated slightly in the past few years,” Ankenbrand claims. Analysis also indicates that the overall quality of the environment has a positive correlation with the growth and size of the Fintech ecosystem.

Ankenbrand argues that “working towards maintaining these conditions is not only important for the Fintech sector, but for the Swiss finance industry as a whole.”

A major portion of the total business volume, whether it’s monetary transactions, lending or investments, continues to be managed or handled by incumbents with just a few well-established Fintech challengers.

Swiss banks have also become a lot more efficient by embracing digitization. Traditional banks in the country are also developing their own Fintech solutions, according to the study.

The study also reveals that modern Fintech solutions are focusing mainly on the B2B market, which includes new products offered by traditional banks. Traditional financial institutions in Switzerland have also increased their assets under management while keeping the costs relatively low.

Thomas Ankerbrand pointed out that “this development is however not mirrored on the earnings side.”

In addition to the existing business models, overall technological progress, changing consumer requirements and new regulatory guidelines, Open Banking has become a major Fintech trend in the country as well.

A survey that included feedback from the Heads of IT working at Swiss banks reveals that there’s considerable developments related to Open Banking to better serve the B2C segment.

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