From hype to reality: Switzerland has progressed into a leading global FinTech hub

The Institute of Financial Services Zug IFZ from the Lucerne University of Applied
Sciences and Arts conducted its third extensive survey of the Swiss FinTech market. The
study shows that, thanks to the ideal conditions for the FinTech sector, Switzerland has
evolved into a leading global FinTech hub, especially in the fields of Blockchain and
Cryptocurrencies.

The FinTech Study 2018, which was released today, provides an extensive overview of the
Swiss FinTech sector (see definition in box below). It shows that the FinTech industry in
Switzerland is able to benefit from excellent conditions: a global comparison of 30 different
cities places Zurich and Geneva on the second and third position, respectively, solely
outperformed by Singapore. However, «Switzerland has not yet unleashed its full potential»,
according to the director of studies Thomas Ankenbrand. He still sees room for improvement
on the technological side. The ranking mentioned above is based on 72 indicators, which reveal
the conditions of the political and legal, economic, social and technological environment.

«Crypto Valley» in Zug is not a coincidence

The excellent conditions, combined with the clustering of innovative entrepreneurs, the
proactive authorities and leading research institutes, enabled the so-called Crypto Valley to
flourish. This centre has enabled Switzerland to benefit from the global ICO boom: Swiss
FinTech companies raised 271 million Swiss Francs by this alternative form of financing in
2017 (see Figure 1). But also the traditional means of funding, venture capital, increased in
2017 to a total of 130 million Swiss Francs.

FinTech companies: growth and maturity
«The FinTech sector has experienced steady growth over the last two years», says Thomas
Ankenbrand. At the end of 2017, 220 companies were active in Switzerland, which indicates a
growth rate of 16% compared to the year before. The average size of the companies, measured
by the number of full-time employees as well as the capitalisation, has increased compared to
2016. «The industry has not only matured, it is also perceived as being more mature: the hype
has become reality», Ankenbrand points out. Swiss banks no longer recognise FinTech
companies as competition, but seek collaboration with them.

Customer acquisition as the greatest challenge
Despite the promising growth rates, Swiss FinTech companies are still confronted with some
challenges, as revealed by a sentiment questionnaire conducted by the project team. The
biggest challenge for further growth in the industry seems to be the difficulty of finding new
customers. On the contrary, access to external financing does not seem to pose a problem (see
Figure 2). This fact is also supported by the significant increase in venture capital provided.

Further growth is expected
«2017 was another successful year for the Swiss FinTech market», states Thomas Ankenbrand,
«We expect this trend to continue in 2018». This includes higher company valuations, more
jobs in the sector as well as strengthening certain FinTech products. In addition, the entire financial sector seems to benefit from this growth and the technological innovation linked
hereto.