Switzerland, where the finance sector contributes over 10% to the national GDP, has been the mecca for managing the world’s wealth for generations. Although the country's innovation potential gained it the top spot on the 2015 Global Innovation Index, an annual ranking produced by Cornell University, INSEAD and the World Intellectual Property Organisation, this doesn't seem to have converted into a large number of successful financial technology startups. In fact very few have successfully internationalised out of Switzerland. In a longterm attempt to turn the tide, Switzerland’s banks have taken on a variety of strategies to pour support into the homegrown fintech startups.

While the Swiss fintech scene is growing steadily, most startups are still very small and early stage. According to the digital banking division of Swisscom, the country’s largest telecoms and IT solutions provider, there are currently 160 fintech startups in the country, from mobile payment to cryptocurrency to data management to crowdfunding. While they estimate this number has grown 30% over the past 30 years, Knip, a Zurich-based digital insurance manager, is the only one of that has over 30 employees—“it’s a good example for the Swiss fintech industry,” says Johannes Hoehener, head of digital banking initiatives at Swisscom.

“What is unique about the Swiss fintech startup ecosystem is that they have easy access to big players and enjoy a great academic background of technical talent, such as ETH and EPFL [Swiss Federal Institute of Technology in Zurich and Lausanne, respectively],” says Hoehener. “Switzerland is strong in seed money. There are a lot of wealthy people who are looking to make seed investments. The big problem here is the next stage of funding—series A, series B, and etc. We don’t have the venture ecosystem so it’s critical that Swiss startups have a strategy to expand globally.”

For this, some of Switzerland’s biggest banks have stepped in. UBS’s investments into mobile and digital banking have relied on a number of local startup partners. “As the largest bank in Switzerland, we feel responsible for the community that we are in,” says Andreas Kubli, head of multichannel and digitisation in UBS Switzerland. For their small business customers, UBS offers part of their e-payment solution, bexio, a cloud-based accounting software. For bexio, Kubli hopes that this partnership model will become a “blueprint” to replicate in other countries.

Credit Suisse, an active promoter of fintech startup hubs and incubators around the world, takes a more thematic and mentor-like role, evaluating fintech startups in Switzerland by themes such as artificial intelligence, crowdfunding and robotics, and providing mentorship from their staff. “We have focus groups of educated senior leaders who work in those themes and control that experimentation—and those are business and IT people,” says Marco Abele, head of digital banking at Credit Suisse.

“We offer different services to the community. Sometimes we mentor companies, so we pick them up as a mentee. We find out that for a lot of startups this is very beneficial because they don’t know the inside of a bank. Sometimes they’re quite naïve—they see the outside but not the inside,” he says. “It’s a mix of patterns. We use it [the product], we offer services and we connect them with our ultra-high-net-worth individuals.” 

For the big banks undergoing a digital transformation to meet shifting demographics and new consumer demands worldwide, the benefits of working with startups lie in talent and inspiration. “For any bank, the struggle for talent is real,” says Abele. Partnering with fintech startups help Credit Suisse do this because “in this community, you get a lot of inspirations,” leading to opportunities such as crowdsourcing potential solutions to technical challenges.

Swisscom estimates that 82% of Swiss consumers own a smartphone, providing a rich testing bed for many consumer-focussed fintech services and allowing new products to scale rapidly and with little risk. However, as easy as it is, reaching the consumer market in Switzerland can only go so far. “You have to go international. The Swiss market is too small,” says Hoehener. And this could be an opportunity for B2B startups if they position themselves to tap into the Swiss banks’ strengths in private banking and wealth management, which, unlike B2C models, are high-touch services for the select few.  

“Because the infrastructure of [the wealth management] model has been ingrained for so long, [banks] are struggling with taking that model and digitising it profitably,” says Jacqueline Matthews, founder and CEO of InvestmentPOD, a US-based B2B multi-strategy digital wealth management platform startup. “But I think the reaction has been very positive. At first, it was like, what are these roboadvisors—does this mean that they are taking away our whole existence, our whole business model and everything? And now I think they are realising that no, I think they are freeing up our time, giving equal or better product in a more cost effective and easier to manage way while also providing a digital distribution arm.”

While the spirit of collaboration is strong in Switzerland, even late-stage Swiss startups, finance focused or otherwise, have historically struggled with international growth, lacking a real incentive to think beyond its borders. “It’s all about niche in Switzerland,” says Dennis Just, CEO and founder of Knip. “When you start up a company [in Switzerland] and you raise Series A, you’ll always find someone to buy it for a decent price, whether it be banks, insurances, the publishing houses or whatever… [Banks] can be a nice source of initial cash and capital but they have expectations that are attached with capital. I think if you really want to change something, you will not work with a big player.” 

But banks have some time to figure out how to best grow the startup scene in Switzerland. “We are committed here,” says Abele. “Hopefully after 5 years, we will see an abundance of startups and we want to bring international startups to Switzerland. In the end, we want to be almost like a clearinghouse to these startups.”

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