Switzerland is losing competitiveness as a global fintech hub, overshadowed by nations including Singapore and Sweden which have been actively improving their support of fintech companies and enhancing their environments to allow for the development of the sector, findings from the latest IFZ Fintech Study by the Lucerne University of Applied Sciences and Arts’ Institute of Financial Services Zug (IFZ) reveal.

The IFZ Fintech Study 2024, released earlier this month, gives an overview of the Swiss fintech sector, outlining the developments that occurred over the prior year and sharing emerging trends arising in 2024.

Data show that Swiss fintech hubs Zurich and Geneva experienced a decline in competitiveness in 2023 as other hubs improved their performances relative to these two cities. This year’s edition of the Fintech Hub Ranking, a rating that evaluates the attractiveness of different destinations for fintech companies, reveals that Zurich stepped back from its second-place position to Stockholm, while Geneva dropped from third to fourth place.

Looking more closely at Zurich and Geneva, the data show that, as in previous years, these Swiss cities performed strongest in the political/legal dimension in 2023. Furthermore, both these cities reported a year-over-year (YoY) improvement in social environmental factors, where they achieved fourth and sixth places, respectively last year. The only deterioration for Zurich and Geneva can be found in the technological dimension, which declined

Concurrently, Sweden’s capital city of Stockholm led the ranking on social dimension, outperforming Singapore, the world leader. But more remarkable, Stockholm witnessed its biggest improvement in the economic dimension, which improved by five ranks last year.

Other locations that recorded notable advances in 2023 include New York City and Toronto, which improved in the social dimension, and Berlin, which improved in the technological dimension. All three cities rose four places in their respective dimensions.

These findings indicate that while Swiss cities are maintaining certain strengths, other cities are making greater strides in creating a favorable environment for fintech companies. As other cities invest in improving their ecosystems for fintech companies, the competition among global fintech hubs is intensifying, putting a greater pressure on Swiss cities and leading to a relative decline in their competitiveness.

In addition to the Fintech Hub Ranking, the IFZ Fintech Study 2024 also features a ranking of the actual fintech ecosystems of different countries, including their numbers of fintech companies per capita, jobs at fintech companies per capita, and the total funding of fintech companies per capita.

The analysis reveals that in 2023, Singapore led the overall ranking, followed by Estonia, Hong Kong, the UK, Luxembourg and Switzerland. This ranking is similar to those of previous years.

Looking at changes, the analysis shows that Singapore maintained its lead in funding per capita, while Estonia led in fintech companies per capita and jobs per capita in 2023. Luxembourg descended three positions in the overall ranking, a decline which is attributed to a significant drop in funding per capita.

Switzerland, ranked 6th, maintained its position in companies per capita, and saw an improvement in funding per capita. However, Switzerland lost one place on jobs per capita, suggesting a decline in the number of fintech jobs available relative to the population size in the country.

Swiss fintech trends

Despite loosing attractiveness to other fintech hubs, the IFZ Fintech Study 2024 reveals that the Swiss fintech industry developed in 2023. Last year, the sector comprised 483 fintech companies, representing a 11% YoY increase in relative terms. In addition, a first-time assessment showed that Liechtenstein was home to 22 fintech companies in late 2023, bringing the total number of fintech companies in Switzerland and Liechtenstein to 505 companies.

The analysis also reveals that the number of companies offering technologies in the categories of analytics, big data, artificial intelligence (AI), and distributed ledger technology (DLT) grew the most last year.

A YoY comparison shows that companies in DLT category saw the most positive trend with an increase of 40 companies (+30%) compared to 2022, followed by analytics/big data/AI with an additional 27 companies (+24%).

These metrics show that the Swiss fintech sector is increasingly evolving from traditional digitization towards the application of more complex methods and concepts such as AI and blockchain, the report says.

The study also reveals that sustainable fintech is on the rise. Although the sector only accounted for around 10% of all fintech companies in the Swiss and Liechtenstein fintech sector last year, their growth rate was significant, amounting to over 50% in 2023 and therefore rising substantially stronger than that of the fintech sector as a whole.

This growth is not solely driven by new incorporations but is also being driven by existing companies transitioning to sustainable fintech models, the report says. This is revealed by the fact that around half of sustainable fintech companies in operations in late 2023 were established in the prior three years, while companies with purely environmental or social objectives had more recent founding dates.

As of late 2023, Switzerland and Liechtenstein were home to a total of 49 sustainable fintech companies, with most of these ventures (22) being located in Zurich, followed by Geneva and Zug with 8 each. The majority of these companies were engaged in investment management and banking infrastructure sectors, leveraging technologies primarily in the analytics, big data and AI categories.

Featured image credit: Edited from freepik