Fintech companies are penetrating nearly every financial services segment, driving both innovation and disruption. Subsegment focus areas of fintech include digital payments (paytech), fully-digital insurance (insurtech), banking (banktech), wealth management services (wealthtech), and the creation of marketplaces for selling financial products.
Unsurprisingly, in Switzerland, wealthtech is the most crowded segment. With 60 ventures, the sector is twice as large as the Swiss blockchain and cryptocurrency space with 30 companies, and is 3 times the size of the payments sector which counts about 20 companies, according to Swisscom’s monthly Swiss Fintech Startup Map.
The thriving Swiss wealthtech scene has been driven by Switzerland’s historical position as a leading wealth management center. According to Deloitte Wealth Management Centre Ranking 2015, Switzerland managed a total of US$2 trillion in assets at the end of 2014, ahead of the UK with US$1.7 trillion, the US with US$1.4 trillion and Panama and the Caribbean with US$0.9 trillion.
Incumbents driving innovation
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Swiss banks and wealth management firms have been at the forefront of the wealthtech revolution, quickly understanding the importance of leveraging cutting edge technologies including AI and machine learning to better serve customers.
While a few financial institutions have opted to build in-house wealthtech solutions, a large proportion of wealth managers and banks have chosen to partner with wealthtech companies. Such partnerships include for instance digital wealth management provider True Wealth with Basellandschaftliche Kantonalbank, personal financial management platform Contovista with Raiffeisen Bank, and Descartes Finance with Deutsche Asset Management. Descartes Finance itself has built its entire platform on the additiv DFS platform.
Glarner Kantonalbank’s Investomat service was also developed on the additiv platform. In 2017, the bank unveiled plans to develop a new loan advisory solution in partnership with Swiss banking software provider Finnova.
Rise of the hybrid advisor
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While the use of automated digital wealth managers are on the rise, with US$19 billion in asset managed through digital platforms in 2014 in the US, and an estimated 10% of managed assets worldwide to be managed through these by 2020, according to Business Insider, most people still value the expertise of a human investment advisor. For this reason, hybrid advisors, which combine the best of both human and machines are promising. In a hybrid model, customers have access to digital tools that facilitate self-investing, but also can tap into human advice on a periodic basis, or as necessary.
Wealth management platforms such as Evolute Group from Switzerland provides clients with the best of both worlds. The company offers an integrated platform for independent wealth managers and banks that covers the entire wealth management. Its wealth management core features include innovative modules such as portfolio construction and hybrid advisory functionality.
Evolute Group was born from a merger between regtech startup SwissComply and fintech startup Evolute. It aims to crack the wealthtech market with specialized knowledge through its regulatory and compliance arm.
Evolute’s advise for the Swiss Asset Managers and Banks: The focus have to shift more to THE clients. The Swiss Wealth Manager 2020 will look different. He should focus on less tasks, offers the right reporting tools, show the client individual products and have to be all the time compliant. This sounds easy but is (will be) a big challenge. Partnering our outsourcing to Wealthtech Startups can help Swiss Asset Managers to focus more on their clients.
Cryptocurrencies: a diversification tool
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In the past years, Switzerland’s cryptocurrency and blockchain sector has been on the rise, driven by a broader desire by the government to make Switzerland an international blockchain hub.
The establishment of the Crypto Valley Association in Zug in 2017 cemented this ambition. But for many insiders, Switzerland should focus on becoming a wealthtech hotspot and eventually build up a specialty for crypto-token asset management, rather then becoming a pure cryptocurrency hub. Already, several startups have launched in recent months in Switzerland to provide such services.
An example is Swissborg, a crypto wealth management startup based in Lausanne. Swissborg raised CHF 50 million in an initial coin offering (ICO) earlier this year to fund the development of its suite of services which will include a computer dashboard, a cryptocurrency exchange and a robo-advisor platform for investment in cryptocurrencies.
Another notable venture is CryptoRealEstate, the company behind SwissRealCoin. CryptoRealEstate uses blockchain technology to facilitate investment in real estate by tokenizing properties.
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