What’s the holdup?

16.03.2017
In financial centers such as New York, London, and Singapore, local banks were important early supporters of the development of local fintech ecosystems. This has not been the case in Switzerland, where grassroots initiatives lead the way.

John Hucker | President & Co-Founder, Swiss Finance + Technology Association (Swiss FinteCH)

Banks in leading financial centers recognize the many good reasons to nurture local fintech ecosystems. They can keep a close eye on developments, access talent, and leverage local competitive advantages. A number of banks were involved in funding the Partnership for New York City, which established the FinTech Innovation Lab accelerator in 2010. Similarly, in London there are numerous examples of new accelerators (e.g. Barclays Escalator) and venture funds (e.g. HSBC and Santander). In both cities, the banks involved also considered these programs as part of their corporate social responsibility to support local communities.

This approach could also be taken in Switzerland, where the BioValley has illustrated the potential of an open innovation cluster which mixes large corporations, start-ups, investors, academia, and others. Innovation is often easier and more effective outside of larger firms. Ideas can then be reintegrated once tested, enabling them to reach their full potential.

Limited local supply

Notably, the demand for innovation from large financial services institutions in Switzerland far outweighs local supply. This is why the Swiss banking giants have looked abroad to Silicon Valley, New York, London and Singapore, to establish outposts, host start-up-challenges, setup labs, and launch venture funds. What is surprising is that they have done relatively little to foster more activity at home, especially given the capacity for Swiss innovation and the need to reinvigorate the Swiss financial center after the erosion of banking secrecy. For example, UBS opened its blockchain lab in London, despite arguments it could have been placed in Zurich.

More could be done by industry leaders to address the imbalance between demand and supply in financial technology and innovation. The two big Swiss banks and their peers have a responsibility to show leadership and ensure the longevity of the Swiss financial center. They also have the opportunity to benefit from harnessing the innovation capabilities of Switzerland, which could become a new value proposition.

Towards global markets

There are concrete steps which should be taken. First, support local incubators, where new early-stage innovations are taking shape. Another logical step would be to help solve the funding gap for early- stage ventures by supporting a joint fund to help these start-ups reach product/market fit. Finally, once proven, Swiss banks should form partnerships and make acquisitions to integrate homegrown innovations into their platforms. If successful, Switzerland will not only have the capability to supply local demand, but to become an important supplier of financial technology and innovations to global markets.