The Swiss fintech industry continued to mature and consolidate in 2020, a trend showcased by increased later-stage rounds and the first fintech exits, according to the IFZ Fintech Study 2020.
Last year, Series B capital dominated the venture capital environment in the Swiss fintech industry, recording a volume growth rate of 115% compared with 2018. The first market exits also appeared in 2019, highlighting gradual market consolidation.
As of December 2020, Switzerland was home to 376 fintech companies, according to Swisscom’s Fintech Startup Map.
This year, the Swiss fintech industry saw several developments take place, with notable advances being made on the regulatory front, by the government itself, as well as by incumbents, which continued to pursue their fintech ambitions.
Crypto Valley and Swiss blockchain industry continue to grow
Despite challenging circumstances because of COVID-19, H1 2020 was marked by further growth and funding in Crypto Valley (Switzerland and Liechtenstein) across all areas including protocols, financial services, and other applications.
As of August 2020, Crypto Valley was home to 919 active blockchain firms employing over 4,700 people. In the first half of the year, 31 companies disappeared or moved, whereas 51 new companies joined the sector, according to the CV VC Top 50 Report H1/2020.
This year, financial services continued to push ahead with a broader adoption of cryptocurrencies and distributed ledger technology (DLT) infrastructure. An increasing number of established firms are now considering blockchain technology, digital assets, and cryptocurrencies as essential to their activities.
2020 also saw the Bank for International Settlements’ Innovation Hub (BISIH) Swiss Centre, the Swiss National Bank (SNB) and the financial infrastructure operator SIX successfully completing a joint proof-of-concept experiment that integrates tokenized digital assets and central bank digital currency (CBDC).
Project Helvetia was the first wholesale CBDC experiment by the SNB and complements the planned launch of SIX Digital Exchange (SDX). SDX, Swiss’s highly anticipated blockchain-based trading platform, is expected to launch in Q1 2021.
SIX announces new institutional digital asset offering in partnership with Custodigit
SIX announced in December 2020 that it will be launching a new digital asset offering for banks and institutional clients in partnership with Custodigit.
The Institutional Digital Asset Gateway will provide services including trading, smart order routing and settlement, as well as secure asset storage though Custodigit. Custodigit is an institutional-grade cryptocurrency custody firm founded by Swisscom and Sygnum in 2018 which SIX has invested in.
SIX said the companies plan to launch the first services in the first quarter of 2021, with other capabilities to be added throughout the year.
Swiss banks make fintech moves
This year, Swiss incumbent banks continued to pursue their fintech ambitions.
UBS launched a US$200 million fintech venture fund, targeting investments of between US$10 million and US$20 million in dozens of companies. UBS plans to hold the stakes for at least five years, a person familiar with the matter told Fortune.
UBS Next primarily pursues direct investments into early stage fintechs and other relevant tech companies, but also considers strategic collaborations. UBS Next is funded exclusively by UBS and is managed by a dedicated tech venture investment team.
Meanwhile, Credit Suisse launched a new digital banking offering, targeting digitally savvy clients. The move makes Credit Suisse the first major bank to roll out a comprehensive digital package in Switzerland, with a fully digital wealth management service, and integrated bancassurance solutions provided in collaboration with AXA.
Switzerland awards first fintech banking license
2020 saw the granting of the first fintech banking license to Yapeal. The new digital bank plans to challenge the traditional retail banking sector with personalized accounts tailored to individual clients, including an online investment service, digital payments and savings accounts.
Fintech licenses were launched in Switzerland at the start of 2019, but it took well over a year for the first one to be awarded.
New laws and guidelines on blockchain, sustainable finance
2020 also saw several developments on the regulatory front.
In September, the second chamber of the parliament adopted an amending act to improve Switzerland’s framework conditions for blockchain/DLT companies.
The so-called Blockchain Act, which will presumably enter into force in early 2021, will update the banking, corporate and financial infrastructure laws to accommodate blockchain companies. Main topics include electronic registration of rights, regulation on crypto-based assets in the event of bankruptcy, and the creation of a new authorization category for DLT trading facilities or exchange platforms.
In addition to that, guidelines on sustainability in the financial sector were adopted this year by the Federal Council. The Swiss government is currently reviewing various aspects and potential initiatives going forward, and the Swiss Financial Market Supervisory Authority (FINMA) is working on a proposal on how to include climate risk reporting into the overall disclosure requirements of banks and insurance companies.
Swiss government launches Green Fintech Network
Further demonstrating Switzerland’s commitment towards sustainable finance, the State Secretariat for International Finance (SIF), alongside industry players, including green fintech companies, universities, and consulting and law firms, launched in November the Green Fintech Network.
The aim of the platform is to ensure close cooperation between SIF and key specialists from the Swiss green fintech ecosystem, and improve market conditions for green fintech companies to thrive.
Japan’s NEC acquires Avaloq for US$2.2 billion
Japanese tech giant NEC acquired Swiss banking software provider Avaloq for CHF 2.05 billion, its biggest acquisition to date.
NEC is understood to have beat rival bids from the likes of Apax Partners, Motive Partners and Nordic Capital. Founded in 1985, Avaloq provides cloud computing to banks and wealth managers by offering business processes as a service and software-as-a-service (SaaS) products. It has more than 150 clients in 30 countries.
F10 expands to Spain
F10, SIX’s fintech startup accelerator and incubator, expanded to Spain, announcing in November that it will open offices in Madrid, Barcelona, Bilbao und Valencia.
F10 operates acceleration and incubation programs in Switzerland and Singapore, helping startups in connecting with entrepreneurs, experts, mentors, and investors for early stage venture and late stage venture investing. The first incubation program will be launched in Spain in March 2021.
F10’s expansion to Spain follows SIX’s acquisition of Spanish Stock Exchange Bolsas y Mercados Españoles (BME).
