Swiss fintech sector: Key insights for 2022

Introduction

The Swiss fintech industry experienced a remarkable resurgence in 2022, bouncing back from a market slump the previous year. According to the Lucerne University of Applied Sciences and Arts’ Institute of Financial Services Zug (IFZ) fintech study 2023, the number of companies operating in the sector increased, investments grew, and traditional banks intensified their digitalisation efforts. This annual study provides valuable market insights into the current state and advancements of the Swiss fintech sector, along with predictions for the years ahead.

The key insights from the IFZ fintech study 2023 are:

Growth and expansion in the Swiss fintech sector

• The Swiss fintech industry experienced a 14% YoY growth in 2022 with 437 active companies at the end of the year.
• Investment management and banking infrastructure sectors spearheaded growth, adding 21 (14% YoY) and 20 (16.4% YoY) companies respectively.
• There was a surge in the adoption of Distributed Ledger Technology (DLT), which led to the entry of more than 20 new companies (19.5% YoY) into the market.

Strong fintech funding activity

• Swiss fintech companies secured a record CHF 605 million in 2022, representing a significant 36% YoY increase.
• Early-stage startups and seed rounds accounted for CHF 120 million through 45 deals.
• SEBA Bank secured a notable mega-round of CHF 100 million during its CHF 110 million Series C funding round in Q1 2022.
• Despite a perceived difficulty in securing financing compared to the previous year, funding activity in Switzerland remained strong in comparison to other marketplaces.

Digitalisation efforts within Swiss banks

• There was a notable increase in investments in IT-related resources in 2022.
• 52% of Swiss banks invested most of their IT costs in “change-the-bank” activities, while the remaining 48% prioritised “run-the-bank” operations.
• Innovation within the banking sector has become increasingly important.

Rise of sustainable fintech

• By the end of 2022, 7.3% of Swiss fintech companies (32 in total) focused on developing sustainable products, services, and processes.
• This figure represents a significant increase from the previous year when sustainable fintech companies accounted for only 4.4% of the total industry.
• As sustainable fintech continues to evolve, new business models and opportunities are expected to emerge.

Decline in crypto trading

• In 2022, there was a substantial decrease in the total market capitalisation of the global cryptocurrency market.
• Total monthly trading volumes of indirect investment products, including exchange-traded products and open-end funds, decreased significantly in Switzerland.
• Direct investments in crypto through centralised exchanges also witnessed a considerable decline in 2022.

Open finance limitations

• Open finance in Switzerland is seen as an evolutionary process rather than a revolution.
• While open finance platforms have emerged in Switzerland, they are limited by the country’s well-developed financial infrastructure, resulting in slower development compared to their counterparts abroad.
• To succeed, Swiss platforms need to align with and build upon the existing infrastructure and software solutions, focusing on integration and extension of functionality.

Key challenges faced by Swiss fintechs

• Access to financing and finding customers had become more problematic in 2022, while Covid-19 impact had logically decreased.
• In absolute terms, finding customers and skilled staff or managers remain particularly challenging.
• Costs, expansion to international markets, competition, and regulation perceived as less urgent but still worrisome.
• Challenge perception and prioritisation varied across product areas and technology categories.

Conclusions

2022, a year of resurgence, sustainability and digitalisation.

The IFZ fintech Study 2023 stresses impressive growth in 2022 and the overall potential of the Swiss fintech industry. It also highlights the sector’s resilience in rebounding from the previous year’s market slump and emphasises the crucial role of sustainability and innovation. With an increasing focus on digital transformation and sustainable practices, the Swiss fintech industry is poised for continued growth and the emergence of new opportunities in the coming years.