The development of the Swiss FinTech sector has only known one direction in recent years: upwards. After the size of the sector, measured by the number of active Swiss FinTech companies, increased year after year in the past, a decline is now being recorded for the first time for the year 2021. As of the end of 2021, Switzerland was home to 384 FinTech companies, which corresponds to a decline of 21 companies compared to the previous year, or around minus five percent from a relative perspective (see Figure 1).
The number of Swiss FinTech companies shrank in 2021 for the first time. As of the end of 2021, Switzerland was home to 384 FinTech companies, a decrease of 21 companies compared to the previous year (Figure 1: Overview of the Swiss FinTech sector).
Despite this negative development at first glance, there are also positive trends regarding the companies' business models. For example, the median number of employees and the median total funding of Swiss FinTech companies increased last year. This is after these key figures stagnated or even declined in 2020. In addition, venture capital activity in the Swiss FinTech sector reached a record level in 2021, both in terms of the number of financing rounds and volume (see Figure 2).
Venture capital activity in the Swiss FinTech sector reached record levels in 2021, both in terms of number of financing rounds and volume (Figure 2: Venture capital activity in the Swiss FinTech sector).
Analytics, artificial intelligence, and big data are more than buzzwords
Over the years, more and more Swiss FinTech companies have focused on technological innovations such as analytics, artificial intelligence, or big data. This contrasts with other technologies, where the number of FinTech companies declined last year. The importance of analytics activities is likely to increase in the future, because the potential of using data in the financial sector is increasingly recognised but remains not yet fully exploited. "Traditional institutions sometimes lack the corresponding resources and competencies", says Thomas Ankenbrand, lecturer at the Lucerne University of Applied Sciences and Arts and project manager of the FinTech study. FinTech companies are therefore likely to continue to act as suppliers of corresponding services in the future.
An international strategy pays off
The tendency of FinTech companies to focus on B2B business models has continued to increase over the past year. In addition to the increased focus on business customers, such as banks or other financial service providers, Swiss FinTech companies are predominantly internationally oriented. "The low-growth Swiss home market is often too small for growth-hungry FinTech companies", the HSLU expert points out. The success of an international orientation is also reflected in the share price performance of listed FinTech companies worldwide. Since 2015, they have outperformed nationally oriented FinTech companies. This also applies to companies that focus on business customers compared to companies that (also) serve private customers (see Figure 3).
The performance of international, exchange-traded FinTech companies that focus on B2B business models has been better than those that (also) serve private clients since 2015. The indices are indexed to 100 as of January 2015 (Figure 3: Performance of listed FinTech companies by customer segments).
Sustainability becomes the new normal
The consideration of environmental, social and governance criteria in financial decisions is becoming the new normal. In the Swiss FinTech sector, relatively few companies currently have a dedicated strategic sustainability focus. Most of these companies focus on the area of investment management and target all three sustainability dimensions (ESG: environmental, social, governance).
No open finance in wealth management without broad adoption of standards
A trend towards open financial ecosystems (keyword: "Open Finance") is emerging in the Swiss financial centre. "Open finance offers good opportunities for success, especially in the area of wealth management", says Ankenbrand. According to the study authors, the reasons for this are the global market size and the Swiss market share. In addition, according to the survey conducted in the study, Swiss banks have confirmed the potential of financial ecosystems as a future business model. "However, in order to realise this potential, a broad adoption of common standards is necessary, which the banks and FinTech companies are currently struggling with, even though corresponding initiatives and scalable platforms already exist and are in operation in Switzerland," Ankenbrand says.
Will the metaverse help blockchain technology make a breakthrough?
The metaverse, which simply put, can be described as the further development of the internet into a three-dimensional virtual world, is being driven by the gaming industry as well as by BigTech and blockchain companies. Even if the motives and goals are different, a strengthening of ownership and disposal rights to data through decentralised structures is emerging. Thomas Ankenbrand: "Blockchain technology can play a central role in this. The hype about non-fungible tokens (NFTs) observed last year may have given a first foretaste of this."
What is FinTech?
FinTech is short for financial technology and describes technology-based solutions for innovative digital products, services and processes is the financial sector. FinTech solutions are designed to enhance, complement or replace existing financial services. Examples include mobile payment apps, crowdfunding platforms and robo advisors, as well as cryptocurrency exchanges.
IFZ FinTech Study 2022
The Lucerne University of Applied Sciences and Arts publishes an annual IFZ FinTech Study. This year, for the seventh time, the study provides a comprehensive overview of the Swiss FinTech sector. The research was made possible through the support of Finnova, Inventx, SIX, Swiss Bankers Prepaid Services, Swisscom and Synpulse.
You can order the study from firstname.lastname@example.org.