Credit Suisse has released a report on the Swiss financial center in which it points out the key trends and technologies that are changing banking.

The report, entitled ‘Swiss Financial Center 2016,’ addresses the ongoing changes occurring in the financial service industry worldwide.

The Internet is changing the behavior of bank clients. Meanwhile innovative startups are coming up with new business models and cutting-edge technologies to change the way we manage our money.

During the past two years, interest in fintech has increased massively, becoming a dominant buzzword in the financial industry.

“Digitalization in the financial sector will change banking,” the report says. Notably, digital transfers and payments transactions provide an attractive alternative to cash payments as they can be generated via smartphone apps.

In retail banking, online processing of banking activities is providing greater convenience and flexibility to clients.

Personal financial management (PFM) applications give clients an overview of their personal assets, current income and spending. They generate analysis and recommendations for personal budgeting.

Trading and advisory platforms enable users to access stock exchange trading. These platforms also analyze client portfolios using algorithms and generate automated investment recommendations. Robo-advisors are also used in private banking, complementing the work of client advisors.

Robo-advisors are increasing in popularity in the private banking segment, and their advantages are clear: they are low-cost, can be used in a multitude of areas, have access to huge databases and are on call 24 hours a day.

In credit operations and capital markets, new products are enabling users to avoid financial intermediaries. On these platforms investors and borrowers come into direct contact with one another. These platforms are for instance crowdfunding and peer-to-peer lendings platforms.

Virtual currencies are an alternative means of payment to national currencies. Bitcoin for instance enables users to make payments directly to one another, without using the services of a bank or other middleman.

Digital support, also known as regtech, promotes the implementation of regulations and helps ensure that risk analysis of unstructured data, scenario analysis and monitoring activities are organized more efficiently.

“The new technologies in the financial arena will lead to a rationalization of processes in the banking sector in the years ahead and due to the strengthening of the client’s position are set to alter the client/bank relationship on a lasting basis,” the report says.

Another technology that plays a significant role within fintech is blockchain technology, which the report claims has “the potential to fundamentally change the financial industry.”

It details:

“Blockchain gained recognition above all thanks to the cryptocurrency Bitcoin. However, its area of use is not just confined to digital currencies.

 

“Indeed in principle the technology can be applied to a very wide range of areas: For example, the US Nasdaq stock exchange has introduced a trading platform based on blockchain.

 

“It is conceivable that blockchain technology will replace clearing houses in securities trading. But in the art and diamond trade too, blockchain has the potential to make forgeries and the sale of stolen goods more difficult.”

The report points out the conditions for the successful integration of digitalization into the business world. First, there must be a state-of-the-art communications infrastructure that meets current requirements. Then, the growing importance of the MINT (mathematics, IT, natural sciences and technology) subject must be addressed in order to ensure that businesses located in Switzerland can recruit the specialist personnel they need. Finally, overall regulatory conditions must be adapted to the new requirements.

It further advises on the formation of clusters of various different economic sectors, citing the example of Silicon Valley.

“Switzerland is well placed with economic centers that are located in close proximity to one another such as Zurich (financial services, industry), Basel (pharmaceuticals, chemicals) and Geneva (financial services, commodities),” the report notes.

For Switzerland to keep its position as a world leading financial center, there much be a number of actions to be undertaken by the public sector and the private sector. It suggests regular reviews and modification of existing overall regulatory conditions to facilitate new business models, as well as the creation of a recognized “Digital Switzerland” umbrella brand to improve external perceptions. Other ideas include launching sector initiative to encourage digitalization, adapting existing business models and services to the digital reality, as well as networking with other sectors to achieve scale effects.

Featured image by everything possible, via Shutterstock.com.