FinTech in Switzerland: Growth Despite Headwinds

Never before have there been more active companies in the Swiss FinTech sector, totalling 483 at the end of 2023. This represents an increase of around eleven percent compared to the previous year. Compared to 2015, the size of the sector has even tripled, as indicated by the latest FinTech study from the Lucerne University of Applied Sciences and Arts (HSLU) (see Figure 1). For the first time, the study also considered Liechtenstein and the 22 FinTech companies based in the principality.

^{Figure 1: Overview of the Swiss and Liechtenstein FinTech sector (click for high res. English version)
The number of FinTech companies in Switzerland increased again in 2023. Compared to the previous year, the growth was around eleven percent. The number of FinTech companies with a strategic focus on sustainability has grown particularly strongly. They constitute about one-tenth of all FinTech companies in Switzerland.}

The growth was particularly significant among FinTech companies focusing strategically on sustainability, constituting about ten percent of all Swiss FinTech companies. Their number increased by around 50 percent in 2023. "The growth of 'Sustainable FinTech' companies is stronger than that of other FinTech companies," says study director Prof. Dr Thomas Ankenbrand. The interest of investors in sustainable investment opportunities is high. The obligation of banks to inquire about sustainability preferences from private investors further favours this growth, according to the HSLU lecturer.

Location Attractiveness: Switzerland Faces More Competition

According to Ankenbrand, there are also cooling trends: Stockholm has surpassed Zurich and Geneva in the ranking of the most attractive locations for FinTech companies, displacing them from second and third places. Other cities like Amsterdam have also caught up (see Figure 2). Therefore, Zurich and Geneva have relatively lost competitiveness. The study director comments, "The rankings in third and fourth place indicate that the conditions for FinTech in Switzerland continue to be favourable." However, the analysis in the study also shows that leading international FinTech locations closed in on the attractiveness of Switzerland last year. Singapore continues to lead the ranking by a large margin.

^{Figure 2: FinTech hub ranking (click for high res. English version)
With Zurich and Geneva, Switzerland remains an attractive location for FinTech companies but is facing increasing competition. Stockholm has displaced Zurich and Geneva from the second and third positions, and cities like Amsterdam have caught up.}

Declining Financing Activities

Another indicator of a cooling trend is the venture capital activities. Financing for FinTech companies decreased in 2023, both in volume and the number of transactions. A total of 457 million Swiss Francs flowed into the Swiss FinTech sector in 68 financing rounds. In comparison, the previous year saw 605 million Swiss Francs in 84 financing rounds (see Figure 3). Therefore, the financing volume has decreased by about a quarter. According to the study director, it can only be determined in the next few years whether this decline is a structural slowdown or driven by a temporary interest rate effect.

^{Figure 3: Venture capital activity in the Swiss FinTech sector (click for high res. English version)
There were fewer financing rounds and a lower investment volume in 2023. Although the FinTech sector grew in 2023, there is a cooling trend in financing activities. Whether this decline represents a structural slowdown or is driven by a temporary interest rate effect will become apparent in the coming years.}

AI: Great Potential for the FinTech Sector

"Although FinTech has evolved from a niche market to a significant innovation provider for traditional financial service providers, the potential for optimising the financial value chain has not been fully exploited," says Ankenbrand. Solutions for the seamless integration of financial services into various application areas (embedded finance) have been implemented sporadically.

The HSLU lecturer sees great potential for the financial sector in the field of artificial intelligence. A dynamic adaptation to new technological developments would bring advantages to Switzerland as a location and the local FinTech sector.