Self-disruption key to Swiss fintech success

Are Swiss banks making the most of fintech's possibilities? Keystone

Swiss banks and insurers need to drop their dependence on tradition and adopt a disruptive mindset if the country is to challenge the world’s leading financial technology (fintech) players. That’s the view of John Hucker, President of the Swiss Finance and Technology AssociationExternal link.

Significant strides have been made in recent years to establish a strong global hub for blockchain and cryptocurrency start-ups. And a constellation of fintech start-ups have emerged in Switzerland.

But Switzerland will lag behind the likes of London, Singapore and New York until the traditional wealth management and insurance industries embrace radical change from within, Hucker argues.

“For generations, Switzerland relied on banking secrecy to flourish. Now it has gone, the financial sector is seeking a new path,” Hucker told swissinfo.ch. “We are challenging the status quo, because there is no culture of risk taking.”

“In Singapore, the big banks are actively pushing the whole fintech story. There is a real opportuniry to unlock disruptive talent within the traditional financial industry here in Switzerland. There are bright ideas within Swiss banks, but they are just not being handled effectively.”

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Wealth management potential

These comments are being echoed by others in Switzerland. Guillaume Dubray, Managing Partner at the venture capitalist firm Polytech Ecosystem VenturesExternal link, decries the dearth of world beating wealth management fintech firms coming out of Switzerland. 

Polytech is based at Lausanne’s Federal Institute of Technology, with another permanent office in Silicon Valley, and specialises in allocating seed capital to a range of technology start-ups, including fintech and blockchain companies.

Speaking at a recent Swiss fintech event, Dubray acknowledged that there are some successful examples of companies providing digital wealth management services to established banks. But he is concerned that the few Swiss wealth management fintech disruptors that offer services directly to clients have yet to make an impact on the world stage.

While Switzerland has seen the arrival of robo-advisory start-ups such as TrueWealth, they lack the global clout of the likes of Britain’s Nutmeg and Revolut, according to Dubray.

“The wealth management side of fintech has been a failure in Switzerland so far,” he said. “The enormous wealth management know-how here should have been translated into Switzerland being ‘the’ hub for wealth fintech.”

Top five goal

Swiss financial institutions are hardly ignoring the fintech revolution. UBS and Credit Suisse are part of a consortium of banks working on a blockchain payments system called Utility Settlement Coin. The Swiss stock exchange and several insurers are also looking into applications for blockchain technology.

In addition, Swiss Finance Minister Ueli Maurer and Economics Minister Johann Schneider-Ammann recently announced the creation of a new Swiss fintech taskforce. This will complement regulatory changes that have already been made to give fintech start-ups more elbow room.

But despite this, Hucker believes the established financial sector is merely jumping on the back of a conveyor belt rather than leading from the front. London, New York, Silicon Valley, Singapore and Israel are currently leading the global fintech pack, he says. And unless Switzerland ups its game, it will be left picking at the crumbs rather than claiming the spoils of first-mover advantage.

“It is our goal in 2018 to see Switzerland occupy a top five position as a global fintech hub for wealth, insurance, and social finance sectors,” he said.

Becoming a top five global fintech hub is about more than just prestige or bragging rights, according to Nicolas Burrer, Managing Director at digitalswitzerlandExternal link – a cross-industry association that set up in Switzerland last year with a manifesto to shape the digital transformation of Switzerland.

Burrer points out that digitisation could create more new jobs than old posts lost, but only if Swiss financial companies get their strategies right. “If we don’t succeed in becoming a top five fintech hub, we could lose many financial sector jobs in Switzerland to the digital revolution,” he warned.