FinTech in Switzerland: back on track for growth
After a decline in 2021, the Swiss FinTech sector grew again in 2022. Insights into the dynamic financial technology market are provided by the results of this year's FinTech study by the Lucerne University of Applied Sciences and Arts.
After a decline of around five percent in 2021, the development of the Swiss FinTech sector returned to its usual direction. At the end of 2022, the sector counted a total of 437 companies, which corresponds to an increase of 14 percent compared to the previous year (see Figure 1). The greatest growth was recorded in the product areas of investment management and banking infrastructure — not surprisingly, this is also where most FinTech companies are found overall. A trend towards sustainability can also be observed in the FinTech market. By the end of 2022, 7.3 percent of all Swiss FinTech companies were strategically focusing on sustainable products and services. The focus of these companies is on solutions to support data and analytical insights for sustainability assessments in the financial sector, followed by so-called green FinTech companies, most of which are geared towards combating climate change.
Figure 1: Overview of the Swiss FinTech sector (click to view in full size)
Best environment in Singapore, followed by Zurich and Geneva
Since the first FinTech hub ranking in 2017, Singapore has had the best conditions for FinTech companies (see Figure 2). This lead was further extended in 2022. The two Swiss cities of Zurich and Geneva, together with Stockholm, form the first chasing group, but with a striking distance to the leader from Southeast Asia. Moreover, there is a direct correlation between the framework conditions in a location and the size of its local FinTech sector — even if this is corrected for country-specific effects. Venture capital and joint venture activities correlate most strongly with the size of a FinTech sector, which indicates that the environment for investment and cooperation plays an important role in FinTech formation.
Figure 2: FinTech hub ranking (click to view in full size)
Switzerland escapes the global downward trend
While financing activities in the FinTech sector declined worldwide last year and the amounts of venture capital, token sales, acquisitions, and IPOs decreased, Switzerland shows a comparatively more positive and stable development. In 2022, a total of 84 financing rounds were counted by Swiss FinTech companies. This corresponds to a total volume of CHF 605 million (see Figure 3). In a year-on-year comparison, this means that although the number of financing rounds decreased slightly in 2022, the sums invested increased by 36 percent. However, the study also shows the challenges: "Although Switzerland was able to largely escape the global downward trend, access to funding for Swiss FinTech companies also became perceived as more difficult on average", says study leader Thomas Ankenbrand.
Figure 3: Venture capital activity in the Swiss Fintech Sector (click to view in full size)
Swiss banks are becoming more digital
In 2022, many Swiss banks also increased their IT resources, as a survey conducted as part of the study shows. These resources are increasingly being invested in the transformation of the banking business, for example, the digitalisation of business processes, and less in the pure maintenance of a day-to-day business. These developments point to increasing innovation. With regard to data science at Swiss banks, it is apparent that the corresponding team sizes and the tools, providers and programming languages used vary. The most common use case is currently fraud detection.
Open Finance: an evolution rather than a revolution
In connection with Open Finance — the exchange of data between the bank and trusted third-party providers — there have been various developments in Switzerland. These include support initiatives and new platform solutions. "The Swiss financial infrastructure is already very well developed", says Ankenbrand. "For Open Finance solution providers, it is, therefore, crucial to develop products that integrate well with the existing infrastructure".
What is FinTech?
FinTech is short for financial technology and describes technology-based solutions for innovative digital products, services, and processes in 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 exchanges for crypto assets.
IFZ FinTech Study 2023
The Lucerne University of Applied Sciences and Arts publishes an annual IFZ FinTech Study. This year, for the eighth time, the study provides a comprehensive overview of the Swiss FinTech sector. The research was made possible through the support of e.foresight, Finnova, SIX, and Swiss Bankers Prepaid Services. You can order the study from firstname.lastname@example.org.