Swiss Post Office unit reinvents as ‘radical’ challenger bank

There can hardly be a more mundane institution than the Swiss Post Office. So when its financial services arm talks about launching a “radically new” digital banking strategy, people tend to sit up and take notice.

Fresh on the heels on its somewhat cryptic “Banking & Beyond” announcement last month, PostFinance has started to give out details. The first nugget of information is that it will collaborate with digital trading platform Swissquote on this new project. Swissquote has enjoyed considerable success with digital finance in the last few years and has a banking license.

This last point is important. PostFinance also has a banking license, but it’s more a “license with strings”. Because the entity is state-owned (hence subsidised) it cannot grant loans or mortgages on its own balance sheet. It needs partners to offer these services.

This is a problem for the “bank” that has 2.7 million customers and CHF120 billion in client assets, making it a “too big to fail” financial institution in Switzerland. Without a mortgage or lending business to cushion the blow of low interest rates, PostFinance is – in its own words – “becoming a financial burden” to its parent company.

It clearly intends to reinvent itself as a digital “neo bank”, joining the ranks of Revolut, Yapeal, Neon and N26 as a sparky, modern, urbane app for the new generation of retail banking clients. Quite how it will differentiate itself is for now a closely guarded secret. PostFinance will only say that it hopes to have a range of services ready for the market in the first half of 2021.

Other traditional Swiss banks are also meeting the challenge posed by so-called “challenger banks” with new fintech services. Credit Suisse recently launched its new digital banking service CSX while it closes down bricks and mortar branches. UBS has rolled out its Key4 mortgage lending platform, which also allows third party lenders to compete for customer attention.

We will have to wait and see whether PostFinance will leverage its connection with Swissquote to offer digital trading or brokerage options to its clients.

Blockchain exchange a step nearer?

An update to my recent newsletter on the blockchain company Lykke, which had run into serious financial difficulties, forcing it to recently shed staff.

A key cornerstone of Lykke’s digital asset trading strategy (and in all likelihood key to the company’s survival) is obtaining a license to operate an exchange in Switzerland. Lykke now says that talks with the Swiss financial regulator, FINMA, are at an “advanced stage”.

This has prompted Lykke to launch a fresh CHF15 million fundraise from institutional and retail investors. FINMA and Lykke are loathe to say more on the subject, but could it be that the regulator has cleared the technical aspects of the proposed exchange, which now just needs enough regulatory capital to get its license?

The exchange proposes to tokenise securities, such as company shares, and trade them over the blockchain.