The digitization boost from the Corona crisis played right into the hands of Swiss fintechs. And yet, an industry study now points to a slump in form for which the startups have to shoulder some of the blame.

The Corona year 2020 has brought the displacement of cash and the shift of customer contact to the digital channel. But not the hoped-for breakthrough for the Swiss fintech industry: as this year's edition of the Lucerne University of Applied Sciences and Arts fintech survey reveals, the growth of new fintech business in Switzerland has never been so low since 2015.

The survey counted a total of 405 Swiss fintechs, with most of the business models based on technologies from the segments of process digitization, automation, and robotics.

Jobs Abroad

The authors also see signs of a slowdown in other areas. They point to the declining median total capitalization of the companies studied and the constant median number of employees. This, while the startups are expanding abroad: the proportion of employees who are not based in Switzerland but abroad is rising steadily. By the end of 2020, this group already accounted for more than a third of all employees at Swiss fintechs, the study notes.

The Swiss fintech job market is increasingly becoming a victim of the industry's success. Businesses tend to follow the lead of tech giants like Uber or Amazon, which are betting everything on rapid international growth to achieve scale. Profit generation is put on the back burner.

Trimmed for Fitness

In recent months, well-known Swiss fintechs have sharpened or accelerated their expansion plans. For example, the cash service Sonect is looking as far as Latin America, the impact-investing fintech Yova is expanding into Germany, and the financing platform Loanboox is now managed by a Frenchman.

Pointing in the same direction is the finding that established Swiss banks have become more efficient over time and that the effect of digitization is slowly materializing. This is due, among other things, to fintech solutions, which, according to the study's findings, are mostly aimed at the business-to-business segment, which also includes innovative solutions for established banks.

In other words, fintechs have made banks fit enough with new technologies that they can now stand up to newcomers.

Fintech Benefit

But even traditional financial institutions have had to realize that a clever app alone is no guarantee of success. For example, financial technology has allowed banks to increase volumes under management while keeping costs stable. However, this development is not reflected on the revenue side.

According to the authors of the study, this points to an experience that numerous fintechs have already had to make: efficiency gains are passed on directly to customers.