The Swiss bank scene is cooperating more than ever because of the fintech and crypto revolution. But it really is just a transition to another model that will clearly define who says what.

There is hardly a day in the Swiss financial scene when there isn't some kind of cooperation announcement by some bank, fintech, or wealth manager. Last week, for example, saw a number of them. Glarner Kantonalbank and structured products provider Leonteq intend to start a joint venture in the area of corporate retirement funding. Swissquote and Postfinance launched Yuh, a smartphone bank. Fintech startup Kaspar& announced it had appointed Hypothekarbank Lenzburg, a local lender, as a custodian for investment clients.

The major banks are also part of this trend. UBS even declared cooperation as a full-fledged strategy under former CEO Sergio Ermotti. In Japan, for example, it established a wealth management joint venture with Sumitomo Mitsui Trust and last year it founded (German article only) a joint investment bank with Banco do Brasil. In February, it did the same (German article only) in Argentina with Banco Patagonia. 

Know-how Pitted Against Client, Market Access

Co-operation agreements and joint ventures in the industry are by no means a new invention coming out of nowhere. In 1999, credit card provider Viseca was created jointly by Swiss banks. Real estate portal Newhome was established by the cantonal banks in 2010. The Twint payment app was Swiss banking's answer to Bigtech payment services - to name a few.

In principle, joint ventures only make sense when one of the partners has the know-how about the products or the technology while the other partner has market access, clients or relevant business licenses.

The cooperation trends in the last few years have been driven by the digitalization of the financial industry, increased regulation and rising cost pressure.

Fintechs Have Limits

Most of the young and striving fintechs have noticed by now that some new digital innovation or a cool app does not disrupt a financial industry in and of itself. By contrast, banks have the market access, the regulatory experience and the trust they have build up with clients over many years.

In Switzerland, it has been difficult for fintechs to build a client base with the necessary critical mass for venture capitalists. The result has been that the local fintech scene is dominated by technology providers, with the banks being the beneficiaries.

Cooperation Trend Just a Transition

Also, banks have become smarter after expensive mishaps. They now prefer partnerships. They buy the technology or the know-how and agree long-term service contracts with the supplier, just as they have been doing for many years with IT and outsourcing providers.

But this trend towards cooperation is a transition phase that will completely turn the financial industry inside out.

Banks are beginning to lose control over the value chain in the payments space. The credit card business is in the midst of large scale disruption and the investment business is beginning to see it as well.

Open Banks Will Be Pioneers

IT platforms are increasingly taking the place of universal banks. A first step in that direction are the open bank models such as that between Hypothekarbank Lenzburg with its Finstar platform, which allows fintechs to dock on and connect.

Banking-as-a-Service providers already run platforms that provide specific, modular banking services. The newest market leader is U.S. investment bank Goldman Sachs. Under CEO David Solomon they have built a cloud-based transaction bank that provides basic services such as cash and treasury management.

Simply Press a Button

There is no doubt that Goldman Sachs and other platform providers are adopting a Banking-as-a-Service approach that will be able to provide a wider spectrum of bank products and services in the near future. «Buyers» can build a bank from modular components or widen a product range with other standardized services.

This will be at the touch of a button and by paying an annual fee, which will make any all these cooperation agreement look highly complex – and extremely expensive.