With a dense network of financial companies, a high level of innovation, political and economic stability and a large, well-educated workforce, Switzerland is an ideal place to launch a FinTech start-up. So why is there no world-renowned Swiss FinTech unicorn yet?
FinTech (financial technology) offers the global financial industry new opportunities to adapt to changing customer needs, reduce costs, save time and make their products accessible to larger parts of the world's population. The innovative use of FinTech enables financial institutions to design and offer their products and services in a customer-oriented and efficient way. Artificial Intelligence (AI) and Big Data are sub-sectors of FinTech that facilitate precise targeting and personalisation of products and services, while process automation enables real-time transactions and instant transfers of value. FinTech is transforming numerous business areas such as payments, lending, investment management, money transfer, fundraising or robo advisory. The best-known FinTech companies worldwide include Revolut, N26 and Crowdhouse.
In this blog post, we try to provide an overview of the starting situation for FinTech start-ups in Switzerland and show reasons why there is not yet a Swiss FinTech Unicorn - a start-up with a market valuation of at least one billion US dollars.
How many FinTech start-ups are there in Switzerland?
Innovation is more than just a buzzword in Switzerland: according to an index of the World Intellectual Property Organization (WIPO), Switzerland is the world leader in innovation. In 2020, our country was voted number one in innovation for the tenth time in a row. Switzerland did particularly well in the category "knowledge and technology achievements", as Swiss people have the highest ratio of European patent applications to population and over 40,000 new companies are founded in this country every year. According to the FinTech Map, there are currently a good 350 FinTech start-ups in Switzerland (as of July 2021). According to the HR consultancy Michael Page, ten percent of all FinTech companies worldwide are based in Switzerland.
There are enough potential partners and customers for FinTech Unicorns
However, great ideas alone are not enough. Entrepreneurs need to build a network in their industry to be successful. Zurich in particular, as the financial centre of Switzerland, is an ideal place to meet potential investors, corporate partners, clients, industry experts and other FinTech enthusiasts: In addition to numerous banks, Switzerland's largest city is home to Fortune Global 500 companies in areas such as financial services, insurance and technology. Several international companies and organisations have established their global, European or EMEA headquarters in Zurich.
Switzerland's largest FinTech funding round went to Bitcoin Suisse in 2020
According to the FinTech news platform "Fintech Switzerland", CHF 220 million was invested in FinTech in Switzerland in 2020. Of the 38 FinTech deals closed in 2020, only seven were larger than ten million. Bitcoin Suisse achieved the largest FinTech financing round of the year with CHF 45 million. The canton of Zug led the way in FinTech investments in 2020 with 91 million, representing 41.3 per cent of all FinTech financings in Switzerland that year. Zug was followed by Zurich with CHF 68.4 million (31 per cent) and Vaud with CHF 35.5 million (16.1 per cent).
The right professionals for FinTech start-ups can be found in Switzerland
As soon as start-ups scale, they depend on a well-educated workforce. The Swiss Federal Institute of Technology (ETH) in Zurich and École polytechnique fédérale de Lausanne (EPFL) are among the world's best universities for science, technology, engineering and mathematics, while the University of Zurich (UZH) and the University of St. Gallen (HSG) are training the next generation of finance and banking experts. First-class public schools and universities combined with our dual education system, in which many professional qualifications for the financial sector are acquired in apprenticeships, ensures a constant supply of well-trained and experienced professionals.
Economic stability attracts FinTech investors
Switzerland is also one of the most stable economies in the world and the Swiss franc one of the strongest and most stable currencies. The independence of the franc has proven crucial in turbulent times, including during the debt crisis in the eurozone, which led to an enormous flow of money from the European crisis countries to Switzerland. The stability of the franc attracts national and international investors.
Switzerland is a safe haven for innovative start-ups
While the political situation in Switzerland's neighbouring countries has changed significantly in recent years, the balance of power between the main Swiss parties remains largely stable. Corruption does not hinder business in Switzerland. The anti-corruption portal for businesses GAN states that interactions with public officials are transparent and corruption is not common. The political stability and low level of corruption make Switzerland a safe and transparent place to run a start-up.
Comparatively fewer start-ups by graduates
However, the good economic and political situation in Switzerland also leads to fewer graduates founding their own start-ups, as it is much easier in this country than in other countries to find a fairly paid job with suitable opportunities for further development after graduation. This makes the opportunity costs of founding a start-up too high for well-educated graduates and apprenticeship leavers. In an interview with the Swiss start-up platform "Startupticker", Rico Baldegger, head of the School of Management Fribourg, says Swiss people "still don't have an entrepreneurial mindset. We are miles away from countries like Israel - entrepreneurship is not seen as a career option in this country." To change this, drastic behavioural changes are necessary.
The fear of failure is great in this country
"In Switzerland, the common definition of success is graduating from university and finding a well-paid, stable job in a company. Starting your own business or joining a start-up is not usually encouraged - and starting a business that fails is seen as a black mark on your CV," also writes Swisspreneur, a non-profit association with the aim of promoting Swiss entrepreneurship. According to the Handelszeitung, there is a culture in Switzerland that "drives towards perfectionism and outlaws failure in self-employment."
Can a cultural change help to create more Swiss FinTech Unicorns?
"The global economy is changing and new technologies are transforming the types of jobs available to people. Therefore, we believe it is crucial that young Swiss people have a more open and adaptable view of their careers," say the initiators of Swisspreneur. This would be to be hoped for, since Switzerland - as described above - would have the ideal framework conditions for Swiss FinTech Unicorns with its proximity to potential clients and partners, the large number of well-educated workers as well as political and economic stability.
In addition to the factors mentioned above, the right IT infrastructure is also necessary to get a start-up off the ground. We have summarised the most important points on the topic of IT infrastructure for FinTech start-ups.
Have you founded a start-up and would like to run, test and expand your applications with our secure and stable cloud solution? We offer attractive packages for start-ups registered in Switzerland. Book a demo now or contact us to find out more!
What does the ideal IT infrastructure for scaling FinTech start-ups look like?
The demands on the IT environment can change quickly, especially in growing start-ups, depending on the order situation or team development. If a small business grows into a medium-sized company, new servers and software do not have to be purchased at every milestone. With cloud services, more computing power can be unlocked within minutes. Cloud storage space is usually billed monthly, so there is no need to make large upfront payments. Thanks to an attractive pay-as-you-go payment model, only the resources actually used are paid for with a cloud server.
Test new applications easily with a cloud server
The cloud service provider ensures that applications run stably and reliably. Access to the rented cloud resources is possible from anywhere in the world and at any time, the only requirement is an internet connection. Servers in the cloud can be configured within minutes and are provided without a setup fee. Thanks to reliable hosting, software developers can access all files from a wide range of devices and easily test new applications. The cloud is accessible around the clock, which enables flexible working hours and minimises downtime.
Creating the right IT environment for budding FinTech Unicorns
Only with the right concept can start-ups and developer teams fully exploit the potential of the cloud. Local providers like Xelon elicit the individual needs of their customers in a personal conversation. How much performance is actually needed? What security measures are required? Is the IT infrastructure to be expanded and extended in the foreseeable future? Do adjustments have to be made regularly? Are there load peaks? What about time and financial resources? These questions need to be answered when creating a customised IT concept for FinTech start-ups.
Want to drive your solution in a scalable and affordable IT infrastructure for start-ups? Book a demo now or contact us!
Here are more resources for start-ups:
The ideal working environment for digital natives
Stephanie Sigrist
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Xelon AG Poststrasse 15, 6300 Zug Switzerland
