For over a century now, Switzerland has functioned as Europe’s financial heart. Long famed for its banking elite and status as a globally renowned tax haven, it is home to some of the most powerful monetary institutions in the world.
Among these are not only banks and investment firms, but cryptocurrency and blockchain startups too. Drawn by the nation’s banking prowess, low taxes, elite universities, and the Swiss brand itself, many of the most successful have settled in this small European country, sitting side by side with an array of august neighbors and well-known names.
These businesses have benefited, and continue benefit from ideal conditions, with Switzerland rapidly evolving into a major global fintech hub, especially for those companies belonging to the blockchain and cryptocurrency sectors.
A leading fintech hub
According to a study conducted by The Institute of Financial Services in 2018, the Swiss fintech sector is the benefactor of exceedingly excellent conditions. An ideal place to set up shop for those who sell and buy cryptocurrency such as bitcoin, ethereum, dash, or ripple, which has become a popular move as of late for veteran investors and curious newbies alike, or who have developed blockchain-based products or technologies, it is home to two of the top three fintech cities, with only Singapore outperforming it.
This is due to a number of political, legal, economic, and social conditions, foremost among them high political stability, a low level of corruption, and – key here – moderate corporate tax rates. What these factors combine to create is a country in which entrepreneurs are all too willing to set up shop.
This has led to the development of a so-called ‘crypto valley’ – essentially, the Silicon Valley of crypto coin-related fintech. This is all centered around Zug, a tiny tax haven with a population of just 30,000, which was home to more than half of the country’s distributed ledger technology fintech companies by the close of 2017.
This is a trend that looks set to continue, with the area’s growing reputation attracting new fintech companies by the day. Drawn by the success of those already settled there, as well as the favorable regulatory environment, these businesses have allowed Switzerland to benefit from an influx of initial coin offerings (ICOs), with fintech companies raising almost $270 million via this unique form of financing in 2017.
Not only this, but these businesses have also pumped more traditional forms of capital into the economy, raising roughly $129 million in venture capital in the same year. This has led to a mutually beneficial relationship between the two, with fintech companies pumping money into the Swiss economy and Switzerland continuing to offer them highly favorable business conditions in return.
Further growth expected
While Switzerland has already cemented its role as a thriving fintech hub, this trend is only set to continue, with it looking likely that it may soon be able to vie with Singapore for the top spot. This is due to the steady growth that has been seen in the sector since 2015.
Five years ago, there were 162 companies active within the industry – a figure that had risen to 190 by 2016. A similar increase was again seen in 2017, when the total reached 220, and has been noted every year since.
It’s not only the number of resident companies that has grown, but their size and capitalization too. As a result, we can safely state that the sector is not only growing but maturing in Switzerland, with existing businesses becoming better established and more successful over time – a notable testament to the favorable conditions within the country.
Another important change that has occurred during this period is the way that Swiss banks view fintech enterprises; no longer as competition, but as businesses to be partnered with and as a means of improving their own offerings. This has acted to strengthen the position of companies belonging to both sectors, while also enhancing their profitability and the overall quality of their products.
In addition, access to external financing has proven healthy, a reality that’s sure to lure ever more enterprises. We can see this exemplified by the notable growth in ICO volume and venture capital provided, making Switzerland a particularly promising location for fintech startups and companies with their sights set on expansion.
All of these trends are expected to continue on as we progress further into 2020 – a prospect supported by the ideal conditions within the country. This can only be enhanced by collaboration with established banks, and with so much to play for, it seems unlikely that we will see any reversal in attitudes towards or regulations pertaining to fintech companies moving forward.
The outcome of these ongoing trends is difficult to predict but, if there’s one thing that can be said with some degree of certainty, it’s that the sector is thriving and looks set to continue on its upward trajectory long into the future.