The Swiss fintech sector does not expect to benefit from UK Brexit woes but does think it will soon be an international player due to its own particular qualities.
Switzerland has a history of strong banking tradition but has lacked much in the way of entrepreneurial activity for much of its recent history, according to Christina Kehl, co-founder and managing director of Swiss Finance Startups (SFS), a fintech association.
Progress has been rapid with the number of fintech startups going from around 25 to 200 over the last two years. However, it is still a very minor part of the overall financial makeup of the country.
“ Universities are starting to look into fintech and banks as well as carriers are starting to look and partner up. It helps that it’s such a small country as distances are short and you most likely know a person that can help you get in touch with whoever is in charge,” she adds.
This progress has largely been built around financial areas that have traditionally been a strength for Switzerland – for example, stability, wealth management and security. “It’s about niches not about fintech in general now,” Kehl says. “It’s such a broad topic with a huge range so you need to discuss niches and specifics.”
But those same niches and specific strengths of traditional Swiss banking are also some of the reasons why the country’s entrepreneurial fintech sector lags behind. After all, if you can come out and get a secure, well paying job in a major financial institution with a history measured in centuries, why would you want to take on the risk and heartburn of an entrepreneurial career?
Similarly, banks could continue to make money out of legacy systems so had very little reason to change the way they did business – making it difficult for the few who chose to take an entrepreneurial path to have much of an impact. Meanwhile the small size of Switzerland meant any startup would have trouble scaling – needing to quickly go international once it had fulfilled its potential in the country.
“Switzerland has always been strong in innovation and research – look at their strong patenting – but entrepreneurship is not necessarily in their DNA,” Kehl says. “So it’s not been so common in Switzerland but that’s now changing. There are founder’s fairs where people get exposure to the coolness of startups and the benefits like being your own boss.”
Security and safety remain a big barrier but at least the full cream is not being recruited straight out of university any more, she adds.
Now fintech startups in the country would like to see a quicker more responsive regulator to take the industry forward. “Switzerland doesn’t have a controller/enabler regulator and that prevents companies from looking at new opportunities and sectors where they can do new business like the UK or U.S. It means we’re always a few steps behind leaders like Singapore or London,” Kehl says.
If it can overcome being a step behind – whether through an improved regulator or through entrepreneurial spirit on its own – Kehl expects a few areas to take the lead. In particular crypto currencies fit into the Swiss wealth management and security mindset. It’s one of the reasons why the country has already formed its own 'Cryptovalley' and it is something that has the potential to really take off, she explains.
