The entry of smartphone-banking in Switzerland comes attached with a certain cheekiness – and very attractive conditions. But will they make it in their quest to turn Swiss banking upside down?
The challengers for sure aren’t lacking in self-confidence. «Neon is ready to take on the established banks,» said the fintech on Tuesday. After an extended test phase, the startup is launching its own account application. The publicity campaign that accompanies the launch is provocative enough for an industry otherwise known for its distinguished manners (see picture above).
But even disregarding the provocation, one things seems clear: smartphone-banking is firmly taking roots in Switzerland this year, having already enjoyed sweeping success in other European markets in past years.
A Fairly Limited Market
And it isn’t just Swiss competitors that are vying for the local market. Recently, it was announced that German mobile bank N26 will start up in Switzerland within two or three months. N26 is already valued at 2.7 billion euros ($3 billion), more than many Swiss regional banks.
Some 10,000 Swiss customers have signaled their interest in opening an account at N26 once it enters the market. The company today has 2.3 million users. Revolut, the U.K.-based fintech, has more than 50,000 clients signed up in Switzerland. The company is seen as the biggest challenger to the established banking industry for payment transactions.
The first Swiss smartphone bank, Zak, a product launched by Bank Cler, has 14,000 users.
Low Fees and Easy-to-Use Services
The startups have all adopted a well-tried strategy, luring clients with low fees and simple handling. With their digital setup, the smartphone banks are able to offer a low-cost environment.
As Neon says: «We have no branches and counters, don’t engage in risky business and we aren’t paying any manager bonuses. That’s why you have to pay no basic fee and it comes attached with only a few, clear conditions.»
New Customers for Established Companies
So far, the number of customers attracted by the banking apps in the comparatively small Swiss retail market are too limited to suggest that banking is in for a revolution. But some interesting trends are emerging nevertheless.
Zak managed to mobilize the younger generations. Almost two thirds of the clients that opted for its app are younger than 35 years of age. And, more importantly, nine of ten users are new clients for Cler, the mother firm. No Swiss regional bank will be able to ignore these figures.
Break Even Yet to Be Achieved
Whether smartphone banks will actually manage to get their operative business into shape is yet to be seen. They may be pretty lean in the structures but burn a lot of cash in their acquisition of customers. Based on their entry level offerings, they usually try to entice clients to sign up to their premium services. But before they achieve this vital transformation of the bank-client relationship, hardly any smartphone bank will earn money. If it is anything to go by, both Revolut and N26 are yet to break even.
And still, the activities of Zak, Neon, N26 and Revolut have set a trend in motion this year – a trend that likely will benefit the banking client. The traditional banks can hardly afford to continue charging horrendous fees for basic services and to take weeks to open an account when smartphone banks offer to do it fast and for free. The clients otherwise will show them the proverbial middle figure, as Neon put it.
