Swiss fintech scene on the verge of a ‘big decade’
![Office space with table football and pool table](https://www.swissinfo.ch/content/wp-content/uploads/sites/13/2019/09/8810589934ffe4acfa69eaf25ca5d2a9-numbrs-data.jpg?ver=658c3d49)
The number of financial technology (fintech) start-ups is rapidly growing in Switzerland, along with the amount of funding they receive from venture capitalists. Ahead of the Swiss Fintech Fair, swissinfo.ch asked two highly regarded young firms about the dynamic sector.
The digital finance platform NumbrsExternal link has raised $200 million (CHF198 million) from backers including the Investment Corporation of Dubai. This gives the company, which has yet to turn in a profit in five years of existence, a $1 billion valuation – the so-called “unicorn” status.
The Numbrs app allows people to optimise their personal finances by bringing together all their accounts onto one platform, while offering advice on how to reduce fees, control spending and how to best save money.
![Fynn Kreuz, Chief Marketing Officer of Numbrs](https://www.swissinfo.ch/content/wp-content/uploads/sites/13/2019/09/ee04345c4eba82ba2df729946d34d6fd-kreuz-data.jpg?ver=658c3d49)
Two years’ ago the firm had to cut back on staff, but numbers have recovered to around 150 at its Zurich HQ. Limitations on the number of non-EU staff it could bring to Switzerland were overcome by employing people remotely. Numbrs clearly has plans for expansion, having decked out a whole new floor at its Zurich office space in anticipation of new arrivals.
Expansion plans
Despite being headquartered in Zurich, where it focuses core operations, the main market for the Numbrs app is Germany, where it is linked to 1.7 million bank accounts containing some €11 billion of customer assets.
Numbrs also plans to expand into Britain next year, but not Switzerland. Why? The Swiss market is too small a target and Switzerland’s three official languages make it complicated to replicate the app three times over, says Chief Marketing Officer Fynn Kreuz.
However, it still makes sense for Numbrs to concentrate most of its development and support activities in Zurich. Part of the reason is that company founder, Austrian-born Martin Saidler, has been resident in Switzerland for many years. The cost of operating in Zurich is not much different from other blossoming fintech centres, such as Berlin, says Kreuz.
Switzerland’s political neutrality is also a big draw. Independence is an important calling card for Numbrs. Its revenue blueprint is to recommend financial products to customers, which will attract commissions from the financial institutions that sell them.
Swiss neutrality
“Our customers need to understand that there is no conflict of interest in recommending these products,” says Kreuz. “We will never push products based on the size of commission we receive. We are independent from the product providers. We own and control our own tech stack.”
![Philip Schoch](https://www.swissinfo.ch/content/wp-content/uploads/sites/13/2019/09/bec6169f3afdf9ae8b59adc91a5f88ed-philip-data.jpg?ver=4e4641f6)
For this reason, Switzerland’s neutrality “is hard to beat”. In addition, the company believes that Swiss independence from the European Union will shield it from some of the turbulence of the markets it operates in, including potential Brexit shocks.
“The Swiss fintech sector is in very good shape,” says Kreuz. “Technology innovation is very strong and the large number of established multinationals attracts highly-skilled workers. I can see great companies being created, particularly in the Crypto Valley blockchain sector.”
Another Swiss fintech has embarked on a different route, by starting up in its domestic market first. ApiaxExternal link is also more typical for a Swiss fintech in that it offers its services to other financial companies rather than the public.
Apiax has devised a digital solution that helps established financial players more effectively wade through the increasingly complex maze of regulatory compliance. When a bank issues a new fund it has to check the regulations and tax codes of each target country before it can launch – a tedious process that eats up time and productivity of employees.
More funding
The Apiax platform also advises wealth managers which products they can offer clients in different countries and untangles a range of other cross-border compliance issues.
“After the financial crisis, banks started laying off huge numbers of workers,” said co-founder Philip Schoch. “Staff numbers have recovered to some extent, but primarily in the area of compliance where the ratio of employee numbers has risen dramatically. This is eating away at margins.”
Founded in 2017, Apiax has already signed up seven Swiss banks, including MBaer Merchant Bank. The appeal of so-called “regtech” digital platforms is that they can automate time-consuming back office work at the click of a button.
Apiax now has its sights set on expansion into the major financial markets of Germany, London and Singapore and is in talks with several potential new clients. The company’s rapid success rate saw it named “Early Stage Start-up of the YearExternal link” at this year’s Swiss Fintech Awards night in March.
The company attracted CHF1.5 million in seed capital and is currently in the last stages of finalising a new round of financing. The fintech sector in Switzerland attracted CHF324 million in venture capital last year, compared to CHF130 million in 2017.
“We could not have established so successfully in Switzerland ten or 15 years ago,” says Schoch, referring to both the positive momentum in financing and advancements in start-up support agencies like the Swiss ICT Investor Club.
“The Swiss fintech scene is growing but we are still really at the beginning. It is going to get big in the next decade.” For Apiax this is good news. As new digital banks, such as robo-wealth managers enter the fray, they will also look for digital regulatory solutions.
Last year there were a total of 356 fintech companies in Switzerland, a growth rate of 62% compared to 2017, according to “IFZ Fintech Study 2019External link” from the Lucerne University of Applied Sciences and Arts.
Nearly half of these firms employed between five and 15 workers while another fifth had staffing levels of between 16 and 50 (both an increase from 2017).
However, a Swiss National Bank reportExternal link in August said that penetration of fintech in Switzerland has been “relatively modest”. Compared to Britain, Germany and further afield in China there are fewer consumer digital banking services on offer.
The amount of venture capital funding for young fintech firms shot up dramatically from CHF130 million in 2017 to CHF324 million last year. Another form of funding in the blockchain sector, “initial coin offerings” added another CHF386 million.
Parliament and the financial regulator have been working to create better operating conditions for digital financial start-ups. This includes the creation of a fintech-lite bank license category and concrete proposals to change financial laws to incorporate blockchain innovations.
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