This summer, Switzerland saw significant progress in its fintech sector, including the launch of instant payments, progress in exploring central bank digital currencies (CBDCs), and regulatory updates.
In this article, we provide an overview of these recent advances, focusing on fintech innovations, regulatory changes and evolving market dynamics, such as the growth of sustainable fintech and current financing challenges.
Launch of instant payments in Switzerland
On August 20, 2024, Switzerland officially spear instant payments, marking a significant step forward in the modernization of the country’s financial sector.
Around sixty financial institutions are now able to receive and process instant payments, covering more than 95% of retail payment traffic in Switzerland. In the coming months, other banks will announce similar services, the Swiss National Bank (SNB) said, and all financial institutions in the country are expected to join by the end of 2026.
Instant payments allow individuals and businesses to make account-to-account transactions with immediate execution and final settlement within seconds. This payment method has been available in Europe since 2017 and in the United States since 2023.
Swiss central bank advances CBDC experiment
At the beginning of June, the SNB became the world’s first central bank to conduct a monetary policy operation in a real production environment using distributed ledger technology (DLT). Specifically, the central bank successfully issued SNB digital vouchers on the SIX Digital Exchange (SDX) with a token-based issuance volume of CHF 64 million and a duration of one week.
This initiative is part of the Helvetia Project, a joint experience of the Bank for International Settlements, SIX and the SNB. Given the success of the pilot project, the central bank said it would extend the project for at least two more years and expand its scope. It hopes to see increased participation from other financial institutions and aims to make wholesale CBDCs available for a wider range of financial transactions.
FINMA publishes guidance on stablecoins
The Federal Financial Market Supervisory Authority (FINMA) published on July 26, new guidelines on the issuance of stablecoins. This guidance focuses on financial markets laws that apply to projects seeking to issue stablecoins, including anti-money laundering (AML) regulations and minimum default collateral requirements.
FINMA has set technologically neutral minimum requirements for default guarantees, which also apply to stablecoins. In the event of the bankruptcy of a stablecoin issuer, each customer must have an individual claim against the Swiss bank providing the guarantee against default. Customers must be informed of this guarantee, which must cover the full amount of all public deposits, including any accrued interest. The guidelines also stipulate that depositors must be able to assert their security quickly and without unnecessary complications.
Furthermore, the FINMA guidance highlights that stablecoins may fall under the AML Act due to their common use as a means of payment and their classification as deposits under banking law. Thus, issuers are subject to a number of obligations, including verifying the identity of stablecoin holders as customers and determining the identity of beneficial owners.
Open finance: no government measures required at this time
During a meeting on June 19, 2024, the Federal Department of Finance (FDF) updated the Federal Council on the latest developments in open finance in Switzerland, saying that the sector’s progress has been sufficient, eliminating the immediate need for government intervention and regulatory measures.
The DFF highlighted the multi-bank initiative launched by a memorandum of understanding signed by 40 banks in May 2023. This development, focused on opening access to private account data, savings accounts and current accounts , demonstrates the banking sector’s strong desire for open finance, even if the Federal Council’s goals for open finance, such as establishing common standards, opening interfaces and scalability, are not yet fully implemented. reached, indicated the DFF.
Unlike the European Union or the United Kingdom, in Switzerland there is no legal obligation for financial institutions to make financial data available to third-party providers at the request of their customers. Rather, the Federal Council expects the private sector to adopt, in collaboration with interested stakeholders, the principles of financial openness and to advance the standardization and opening of interfaces itself.
Swiss fintech funding remains depressed
The 2024 half-year update of the Swiss Venture Capital Report, published on July 16 revealed that investor interest in Swiss fintech startups declined in the first half of 2024. During the period, fintech startups in the country raised only 79.2 million francs, down 58.5% on a year (over one year) compared to the 191 million francs in the first half of 2023. The number of financing rounds also saw a sharp decrease, going from 30 in the first half of 2023 to only 13 in the first half of 2024, a drop by 56.7%.
In contrast, investment levels in vertical and biotech startups, as well as energy and cleantech, improved significantly, reaching CHF 405.3 million (compared to CHF 282.8 million in the first half of 2023). and CHF 160 million (compared to CHF 137 million in the first half of 2023) in the first half of 2024, respectively.
The slowdown in Swiss fintech funding aligns with global trends. CB Insights Q2’24 State of Fintech Report, released on July 16, shows that global fintech funding totaled US$16.4 billion in the first half of 2024. This represents a 32% year-over-year decline from US$24.1 billion in the first half of 2023. .
Switzerland ranks 2nd in the 2024 European FinTech Index
Despite persistent financing difficulties, Switzerland remains one of the main global fintech hubs, ranking as the second most attractive location in Europe for fintech players in the European Fintech Index 2024.
Switzerland is ahead of the Netherlands, Estonia and the United Kingdom, thanks to its favorable business environment and the attractiveness of its local market for fintech players. However, it only ranks 8th in Europe for “financial technology attractiveness”, behind jurisdictions like Estonia and Luxembourg.
Previous studies have highlighted the difficulties fintech companies face in the Swiss market, including funding challenges and limited international recognition. Additionally, with a population of only nine million, the local market is too small for startups to thrive, forcing young Swiss tech companies to seek international expansion early in their development.
Access to well-trained workers is another major challenge. A study carried out in 2024 by UBS, Credit Suisse and the Swiss ICT Investor Club revealed that 46% of founders surveyed struggle to fill open positions with suitable candidates. Labor market challenges are more pronounced for startups in the growth and expansion stages, with 55% struggling to recruit qualified employees, compared to 39% for startups in the pre-seed and priming.
Switzerland sees a booming sustainable fintech industry
E.foresight, a Swiss banking think tank run by telecommunications provider Swisscom, released its Swiss Sustainable Fintech Map, highlighting fintech companies in Switzerland that are integrating sustainability into their core business models, operations and products.
The map shows that Switzerland currently has 49 companies that fall into the sustainable fintech category, representing 12% of the overall fintech ecosystem.
The figure implies that the sustainable Swiss fintech sector grew by 53% between 2023 and 2024, growing much faster than the fintech sector as a whole (16%) during the period. data of the IFZ Fintech 2024 study by the Institute of Financial Services at the Lucerne University of Applied Sciences (IFZ) in Zug.
Moneyland.ch is acquired
SMG Group Swiss marketplace acquired in July, 100% of Moneyland.ch, a popular comparison platform in Switzerland. The acquisition aims to strengthen the finance and insurance division of the SMG Swiss Marketplace group and enable it to benefit from valuable comparison services for consumers.
Founded in 2013, Moneyland.ch is a financial comparison service. The platform provides users with tools and information to compare a wide range of financial products and services, such as bank accounts, credit cards, loans, insurance policies, investments and telecommunications plans.
SMG Swiss Marketplace Group operates a network of online marketplaces. Its portfolio covers four business areas, namely real estate, automotive, general markets and finance and insurance, and includes several well-known online platforms such as AutoScout24, FinanceScout24, Homegate and Tutti.
Moneyland.ch will continue to operate independently and maintain its mission of providing financial product comparisons, calculators and unbiased information to Swiss consumers. The Moneyland.ch brand, platform and team will remain unchanged and founder Benjamin Manz will continue to act as chief executive, the company said.
Featured image credit: edited from free pik