The pandemic accelerated several trends in finance. finews.com on six shifting certainties this year.
1. Specter Takes Shape
The dreaded threat of inflation has loomed since the the financial crisis of 2008/09, but rarely manifested itself. That has changed in recent months: supply chain squeezes, labor shortages, and corona support have led inflation higher – and central bankers under pressure. Key policymakers are mapping a path out of ultra-expansionary monetary policy faster than they would have wanted.
The Swiss National Bank is insistent that inflation is a phase only. This sets the SNB as the gatekeeper of financial stability against the interests of domestically-focused banks, which could easily live with higher interest rates.
2. The End Of Cash, 2.0
It was already last year that the end of cash was near, even in a country as devoted to its bank notes as Switzerland: contactless debit or credit card payments or smartphone-enabled apps took over from cash. The trend has accelerated to include cash machines in recent months, with several banks phasing out ATMs (a current study says two of three in Switzerland are superfluous).
Meanwhile central banks including the Swiss are experimenting with digital currencies of their own, or so-called CBDCs. Observers predict that an «official» digital currency will be launched sooner rather than later. The implications of an e-franc for Swiss finance aren't yet entirely clear.
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3. Fear Of Crypto Vs FOMO
Central bank experimentation with e-currencies can be interpreted as a response to the threat of cryptocurrencies like bitcoin, which of course were conceived as a response to fiat money. The surges in value of cryptocurrencies in recent months comes against the backdrop of digital assets cementing their spot in finance. This will be accompanied by a regulatory framework, in all likelihood as soon as 2022.
This would be welcomed by traditional finance. The risks of money laundering which banks feared by entertaining bitcoin and other cryptocurrencies has given way to fear of missing out on the crypto boom – and clients' trust.
4. MD – An Endangered Species
Working from home, video conferences, and mask requirements are the most tangible changes due to the pandemic, but others are more subtle. Remote working has weakened the nature of hierarchical financial services firms, while companies have found that new working methods render some management layers superfluous.
In Switzerland, market leader UBS has 9,000 employees working «agile»: the bank eliminated a super-league of managing directors. Meanwhile other firms have attacked the managing director level itself: Deutsche Bank unit DWS did it away with it altogether this year. Financial services careers are losing a fixture.
5. Washed Out, Redux
Switzerland's abandoning of iron-clad secrecy and undeclared funds ushered in a painful, costly era of withdrawals and fines. The countless money laundering scandals proved that Swiss banks also held considerable risks in emerging markets.
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This should function as a warning for the next big thing in Swiss finance: sustainability. Money management with environmental, social, and governance considerations surged by nearly one-third this year, to hit a total volume of $1.3 billion.
At the same time, Swiss finance faced accusations of «greenwashing» investments which aren't genuinely sustainable. The domestic industry was this year put on a tight timeline to regulate itself or have rules imposed on it.
6. Mortages – From Core To Commodity
Swiss housing prices kept climbing, fueled by ultra-cheap home equity loans. At the same time, the mortgage business is no longer core to retail banks – and new players like insurers and pension funds are entering the market. The industry's truly disruptive players are third-party providers, to which traditional finance has responded with projects of their own like UBS' Key4, Postfinance's Valuu, and Raiffeisen's Liiva.
