Switzerland has everything it takes to advance to the leading finTech nations. First-class financial institutions such as UBS or CS, leading banking software manufacturers such as Avaloq or Finnova and research departments of ICT heavyweights such as Google and IBM call Switzerland their home.
In addition, the Swiss Federal Institutes of Technology in Zurich and Lausanne are among the leading international universities for technology and engineering. The high quality of life in Switzerland is well known. Even globally leading fintech personalities think highly of Switzerland as a fintech location. So said Susanne Chishti, CEO and founder of London’s fintech Circles, one of the world’s oldest fintech networks:
“Switzerland has everything to play a leading role.”
Currently, Asian cities such as Singapore or Hong Kong are at the forefront followed by London and New York. After all, we see a clear upward trend for Switzerland. Until recently, not a single Swiss city appeared on any fintech map.
Finma and Fintech?
There are many reasons for the weak performance of Switzerland in fintech rankings. One of them certainly is the relatively comprehensive regulatory framework in Switzerland in the field of online banking. Another reason may be the Financial Market Authority (FINMA). FINMA has no special fintech strategy because the current legislation, adopted by parliament, contains no specific provisions. In this respect, the City of London is proactive. The Financial Market Authority in London collaborates with the startups and has developed a special program for counseling fintech startups.
As much as we are flattered by good rankings, it can’t be the goal to achieve top results in relevant rankings as quickly as possible. We rather must ask ourselves in what area we really can compete and on what strengths we can build upon. Because fintech is not equal fintech. Fintech is multifaceted and includes everything from banking infrastructure and payment solutions to lending platforms and digital currencies. CB Insights, a tech company in New York, has tried to outline the various fintech sectors in a way that is similar to Chemistry’s periodic table (see figure below).
Currently, only one company headquartered in Switzerland is represented in the fintech periodic table: the company XAPO in the sector digital currency. XAPO offers secure storage of the digital currency Bitcoin. They moved its headquarters mid-2015 from the Silicon Valley to Zug. XAPO seems satisfied with the move to the Greater Zurich Area.
Cryptovalley Zug Fintech in Switzerland
The company lists 10 reasons for Switzerland in a recent blog post. According to XAPO, privacy is one of the major reasons for Switzerland. For more information see xapo.com/resources/switzerland. In addition to XAPO, numerous other providers of digital currency solutions have found their way to Switzerland and the Greater Zurich Area. The canton of Zug is already being considered a global center for crypto currencies and received the name Crypto Valley. In the Crypto Valley new storage solutions, new encryption technologies or new digital currencies are being developed. The possibilities are virtually unlimited – Bitcoins are just one option among a wide variety of options.
A major driver of the development of the Crypto Valley is the company Monetas. The young company is committed to a decentralized, global system for financial and legal transactions – without intermediaries, with vanishingly low transaction fees, to use with your smartphone, and faster than traditional banking transactions. Another company that promotes the development of the Crypto Valley is Ethereum. The company goes even one step further than Monetas and wants not only to decentralize financial transactions, but also cloud storage solutions.
The reasons for the success of the Crypto-movement in the Greater Zurich Area can be found in well-known location advantages such as the long-standing tradition of privacy, the stable direct democracy and a supportive environment in IT. In addition, companies in the region started to form a cluster and offer a unique expertise in cryptographic or security issues. And: Crypto currencies are treated as a foreign currency in Switzerland. This means that no new laws are needed and the tax environment is highly competitive.
Numerous Crypto events in the Greater Zurich Area show how lively the Crypto scene is. For example, the first-ever Crypto Finance Conference took place on September 23rd in Zurich (http://www.finance20.ch). With over 250 participants the event was sold out and brought together renowned speakers. Besides this conference, various other events and meetups are currently being held in the region.
It is not to be expected that Switzerland will be among the leading finTech nations anytime soon. Switzerland will be positioned in the midfield across all fintech disciplines. However, in a few fintech niches, such as the Crypto-niche, companies in the Greater Zurich Area might contribute to a strong growth. Similar to other successful Swiss industries, Swiss fintech will be successful as a niche player.
Marc P. Bernegger is a serial web entrepreneur and fintech investor from Switzerland.
He co-founded and exited two internet companies (usgang.ch, amiando) and since 2010 he is active as an investor focusing on fintech / finance 2.0.