FinTech Innovation Aims to Replace Secrecy in Swiss Banking

Like many other countries in the world, Switzerland has numerous startups attempting to make a splash in their economy. The success rate for these companies is similar around the world as only 10 percent of them succeed. Forbes wrote an article in January of 2015 stating that there were two main reasons why they failed. The first stated that many entrepreneurs get distracted by irrelevant tasks and the second is that they create a product that is not needed. It’s a simple fact that if you produce a product people don’t want, it won’t sell.

A recent report released by EY and Swiss Finance and Technology Association entitled Swiss FinTech Report 2016: The role of Switzerland as a FinTech hub suggests Swiss startups should focus on creating an environment for experienced entrepreneurs who are involved in the finance industry.

As Switzerland looks to compete with other financial hubs, like London or New York, there are drawbacks to their startup economy. Finding an investor for funding startups is low compared to other cities. Two years ago there was a rise in investments, but the majority of it went to companies that focused on life sciences, not fintech. In fact, fintech startups gained around CHF86 million — less than a fifth of the amount of money invested into startups. By having a founder or core member of the company who is 55 years or older, investments in the company are less risky.

Yet, the country faces major setbacks as the strict banking secrecy laws they are famous for are abolished.The authors of the report addressed this in their report stating, “Banking secrecy, probably one of the main factors that have made the Swiss financial services industry what it is today and a major element of the Swiss value proposition as a financial center, has been significantly eroded in recent years. This development has not only directly impacted efforts to generate new business, the underlying regulatory requirements have also tied up the industry’s resources in recent years and the fallout has tarnished Switzerland’s reputation as a financial center.”

The fintech startups of Switzerland are in a unique position to address the change needed. If they are able to create a unique and innovate solution to this problem, the odds of their startups to succeed is greater. By replacing secrecy with innovation, these ideas and products will help to sustain Switzerland’s position as a leading country in global financial services.