This summer, Switzerland has witnessed significant strides in its fintech sector, including the launch of instant payments, progress in the exploration of central bank digital currencies (CBDCs), and regulatory updates.

In this article, we provide an overview of these recent advancements, focusing on fintech innovations, regulatory changes, and evolving market dynamics, such as the growth of sustainable fintech and current funding challenges.

Instant payments launches in Switzerland

On August 20, 2024, Switzerland officially launched instant payments, marking a significant development in the modernization of the country’s financial sector.

Around 60 financial institutions are now able to receive and process instant payments, covering more than 95% of Swiss retail payment transactions. In the coming months, more banks will announce similar services, the Swiss National Bank (SNB) said, with all financial institutions in the country expected to be on board by the end of 2026.

Instant payments allow private individuals and companies to perform account-to-account transactions with immediate execution and final settlement in seconds. This payment method has been available in Europe since 2017 and in the US since 2023.

Swiss central bank advances CBDC experiment

At the beginning of June, the SNB became the world’s first central bank to carry out a monetary policy operation in a live production environment using distributed ledger technology (DLT). Specifically, the central bank successfully issued digital SNB Bills on the SIX Digital Exchange (SDX) with a token-based issuance volume of CHF 64 million and a term of one week.

The initiative was part of Project Helvetia, a joint experiment between the Bank for International Settlements, SIX and the SNB. Given the success of the pilot, the central bank said it will extend the project for at least two more years and to expand its scope. It hopes to see increased participation from additional financial institutions and aims to make wholesale CBDC available for a broader range of financial transactions.

FINMA publishes guidance on stablecoins

The Swiss Financial Market Supervisory Authority (FINMA) published on July 26 new guidance on the issuance of stablecoins. This guidance emphasizes the financial market laws that apply to projects aiming to issue stablecoins, including anti-money laundering (AML) regulations and minimum requirements for default guarantees.

FINMA has established technology-neutral minimum requirements for default guarantees, which also apply to stablecoins. In the event of a stablecoin issuer’s bankruptcy, each customer must have an individual claim against the Swiss bank providing the default guarantee. Customers must be informed about this guarantee, which must cover the total amount of all public deposits, including any accrued interest. The guidance also stipulates that depositors must be able to claim their guarantee quickly and without unnecessary complications.

Additionally, FINMA’s guidance underscores that stablecoins can fall under the AML Act due to their common use as a means of payment and their classification as deposits under banking law. Thus, issuers are subject to a number of obligations, including verifying the identity of stablecoin holders as customers and determining the identity of the beneficial owners.

Open finance: no government measures required at present

During a meeting on June 19, 2024, the Federal Department of Finance (FDF) updated the Federal Council on the latest developments in open finance in Switzerland, stating that the industry’s progress has been sufficient, eliminating the immediate need for government intervention and regulatory measures.

The FDF highlighted the multibanking initiative launched by means of a memorandum of understanding signed by 40 banks in May 2023. This development, which focuses on opening up access to data from private accounts, savings accounts and current accounts, demonstrates the banking sector’s strong commitment to open finance, even though the Federal Council’s goals for open finance such as establishing common standards, opening interfaces and achieving scalability, have not yet been fully realized, the FDF said.

Unlike in the European Union or the UK, there is no legal obligation in Switzerland for financial institutions to make financial data available to third-party providers at their clients’ request. Instead, the Federal Council expects the private sector, together with interested stakeholders, to adopt open finance principles and push ahead with the standardization and opening of interfaces on their own.

Swiss fintech funding remains depressed

The Swiss Venture Capital Report’s half-year update for 2024, published on July 16, reveals that investor interest in Swiss fintech startups waned in H1 2024. During the period, fintech startups in the country raised a mere CHF 79.2 million, down 58.5% year-on-year (YoY) from CHF 191 million in H1 2023. The number of financing rounds also saw a sharp decrease, falling from 30 in H1 2023 to just 13 in H1 2024, a decline of 56.7%.

In contrast, investment levels in startups in the verticals and biotech, and energy and cleantech improved significantly, reaching CHF 405.3 million (versus CHF 282.8 million in H1 2023) and CHF 160 million (versus CHF 137 million in H1 2023) in H1 2024, respectively.

The downturn in Swiss fintech funding aligns with global patterns. CB Insights’ State of Fintech Q2’24 Report, released on July 16, shows that global fintech funding totaled US$16.4 billion in H1 2024. This marks a 32% YoY decline from US$24.1 billion in H1 2023.

Switzerland ranks 2nd in 2024 European Fintech Index

Despite ongoing funding challenges, Switzerland remains a leading global fintech hub, ranking as the second most attractive location in Europe for fintech stakeholders in the 2024 European Fintech Index.

Switzerland outpaces the Netherlands, Estonia, and the UK, thanks to its conducive business environment and the appeal of its local market to fintech players. However, it ranks just 8th in Europe for “fintech attractiveness,” behind jurisdictions like Estonia and Luxembourg.

Previous research studies have highlighted the difficulties fintech companies face in the Swiss market, including funding challenges and limited international recognition. Moreover, with a population of just nine million, the local market is too small for startups to thrive, compelling young Swiss tech ventures to seek international expansion early in their development.

Access to well-educated workers is another key challenge. A 2024 study by UBS, Credit Suisse, and the Swiss ICT Investor Club reveals that 46% of the founders polled are finding it hard to fill vacancies with suitable candidates. Labor market challenges are more pronounced for startups in the growth and expansion phase, with 55% of struggling to recruit qualified employees, compared to 39% for startups in the pre-seed and seed stages.

Switzerland sees booming sustainable fintech industry

E.foresight, a Swiss banking think tank operated by telecommunications provider Swisscom, has released its Swiss Sustainable Fintech Map, highlighting the fintech companies in Switzerland that incorporate sustainability into their core business models, operations, and products.

The map shows that Switzerland is currently home to 49 companies that fall under the sustainable fintech category, providing the segment a share of 12% of the overall fintech ecosystem.

The figure implies that the Swiss sustainable fintech sector rose by 53% between 2023 and 2024, growing at a much faster pace than the fintech sector as a whole (16%) during the period, data from the 2024 IFZ Fintech Study by the Lucerne University of Applied Sciences and Arts’ Institute of Financial Services Zug (IFZ) show.

Moneyland.ch gets acquired

SMG Swiss Marketplace Group acquired in July a 100% of Moneyland.ch, a popular comparison platform in Switzerland. The acquisition aims to strengthen SMG Swiss Marketplace Group’s finance and insurance division and allow it to gain valuable comparison services for consumers.

Founded in 2013, Moneyland.ch is a financial comparison service. The platform provides users with tools and information to compare a wide range of financial products and services, such as bank accounts, credit cards, loans, insurance policies, investments, and telecommunications plans.

SMG Swiss Marketplace Group operates a network of online marketplaces. Its portfolio spans four business areas, namely real estate, automotive, general marketplaces and finance and insurance, and includes several well-known online platforms such as AutoScout24, FinanceScout24, Homegate, and Tutti.

Moneyland.ch will continue to operate independently and maintain its mission of providing unbiased financial product comparisons, calculators, and information to consumers in Switzerland. The Moneyland.ch brand, platform and team will remain unchanged, and founder Benjamin Manz will continue to act as managing director, the company said.

Featured image credit: edited from freepik