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Fintech and Swiss banks settled into a mostly constructive coexistence last year. Now, the boundaries between the two erstwhile adversaries are set to blur – if banks have the courage to open up.

The founder and Chief Executive of peer-to-peer loan platform Twino, Armands Broks, told finews.com recently that «the fintech industry is signing its own death sentence».

He was referring to one of the overarching elements of Switzerland's start-up and financial scene last year: almost every fintech or insurtech entered some type of tie-up, cooperation, or collaboration with a bank, insurer, or fellow fintech.

Mutually Dependent

Fintech vs banking is no longer a battle of an innovative and nimble David against ignorant and complacent Goliath; it has become a coexistence where each party needs the other.

Fintechs desperately need traditional banking's financial and distribution power to survive. The banks, for their part, would hardly make any inroads in digitizing their business models without the younger upstarts as partners.

Two broader trends will sweep through the banking and insurance industries in 2018: the build-up and expansion of a digital ecosystem, and open banking as a condition of that. Meanwhile, the twin trends of selection and consolidation among fintechs and insurtechs will accentuate.

1. Open Banking – No Matter What

In theory, it doesn't matter whether Switzerland agrees to the European payments directive called PSD2 or not: Swiss banks will have to open up to fintech providers sooner or later. Switzerland's industry is a far cry from practicing open banking, as PSD2 opponent the Swiss Bankers Association claims (in German). 

In fact, little-known regional lender Hypothekarbank Lenzburg is the first and thus far only bank to consistently begin applying an open banking approach. Affectionately called «Hypi,» the bank has made its core banking system accessible for fintech providers by way of an interfaced platform. In effect, Hypi puts all its data, services, and processes at the disposal of fintechs which dock onto its platform – a mutually beneficial stance, but in particular for clients.  

All Swiss banks will end up imitating the rural lender – they will have to. Open banking isn't optional; it's a requirement to keep up with the fast-paced digitization of finance and to find new client groups and sources of revenue – which banks have to seek as prices and margins for traditional banking services continue to erode.

2. Ecosystem: Towards a Platform

In the Internet age, the term «ecosystem» has made its way from science to the (digitized) corporate world. Last year, insurance firms(in German) in particular poured millions into building up their so-called ecosystems.