IFZ FinTech Study 2023 shows growth of the FinTech sector

Person who wrote the post admin Mar 10, 2023
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Crowd4Cash has been part of the IFZ FinTech Study 2023 for years and is taking the opportunity to give you a first-hand overview of the study. We would like to thank Prof. Dr. Thomas Ankenbrand and Denis Bieri for preparing and publishing this exciting industry-specific study of the FinTech sector.

Since 2016, the demand for innovative alternatives to traditional financial services has been on the rise, and last year alone the number of FinTech companies in Switzerland increased by 14%. This is a welcome development following a 6% reduction in the number of active FinTech companies in 2021. Switzerland had 437 FinTech companies at the end of the year. The largest absolute growth was recorded in the area of investment management. The deposit and lending segment also grew, but only a few new companies were added. As part of this segment, we believe this is also due to the high maturity of the existing companies. As one of the pioneers, Crowd4Cash has already been on the market for more than 6 years and has been able to achieve an unassailable lead in IT and product development. This head start naturally raises the corresponding entry hurdles for new market entrants.

FinTech has changed the way financial services are offered and used. In recent years, FinTech companies have developed and offered innovative, technology-based solutions for the traditional financial services industry and have become important providers for the Swiss financial sector.  The study aims to assess the state and development of the Swiss FinTech sector and examines trends in the sector and in the specific business models of domestic FinTech companies.

Fintech is defined as follows:
FinTech refers to technology-based solutions for innovative products, services and processes in the financial industry that improve or complement existing offerings.... FinTech companies are therefore companies whose main activities, core competencies and/or strategic focus lie in the development of such solutions. In most cases, the fintech companies do not map the entire traditional financial process, but only optimise or rethink individual parts of it.

 

As a fintech platform, Crowd4cash.ch specialises in brokering online loans between investors and borrowers. In doing so, the company relies on innovative technologies and processes to ensure fast and uncomplicated processing. Crowd4Cash has rethought financing and opened up many new business models in the field of lending through numerous new products (rental financing, Point of Sales (PoS) instalments, Loan as Service, etc.). This directly plays to the advantage of a fintech: thanks to the digital processes, products are possible that cannot be handled profitably by traditional financial companies. At the same time, Crowd4Cash is probably the only company in the world that enables crowd investors to invest in PoS and rental financing. Crowd4cash.ch not only complements existing offers in the financial sector, but also sets new standards through innovative technologies and customer-oriented solutions.

Switzerland escaped the global downward trend in the FinTech sector last year. While financing activities declined worldwide, Switzerland was able to record a more stable development. In 2022, a total of 84 financing rounds were counted by Swiss FinTech companies. The total volume of these financings was CHF 605 million. Compared to the previous year, the number of financing rounds decreased slightly, but the amounts invested increased by 36 percent. While the total amount financed has increased, the average amount per company has decreased slightly (from 3MCHF to 2MCHF). However, the average number has remained stable at around 20 FTEs. Although Switzerland has managed to escape the global downward trend, FinTech companies in this country have also perceived access to funding as more difficult, as a survey of the sector shows.

For investors, Swiss FinTech companies continue to be an attractive investment opportunity. Despite the challenges in the financing sector, many companies in Switzerland have proven that they are able to succeed even in difficult times.
In 2022, many Swiss financial services providers have increased their IT resources in order to digitise their business. In the process, the costs for employees, which could be allocated to the IT area, were increased on average from 16% to 25% of the total costs for employees (labour costs). In terms of general and administrative costs, the increase in IT-related costs is on average 46% of total costs compared to 37% in 2021. The Crowd4Cash platform has been completely rebuilt and is, according to independent feedback, one of the best on the market. Based on our acquired know-how, we take the liberty of expressing an opinion here. We believe that many traditional banks still have a long way to go before the complete digitalisation of IT is implemented. In most cases, there are numerous interfaces to legacy systems, which make a conversion of the core system difficult. As a company that has already taken this step since the beginning, this development is very positive, especially since we see great potential in the cooperation between FinTechs and traditional providers. However, the cooperation often fails due to the complexity of the integration into the existing systems. In our view, this is detrimental to the entire financial centre, as cooperation with FinTechs usually generates significant added value for all parties.
A trend towards sustainability is emerging in the FinTech market: by the end of 2022, 7.3 percent of Swiss FinTech companies will already be focusing on sustainable products and services. These companies focus on solutions to support data and analytical insights for sustainability assessments in the financial sector, as well as green FinTech companies that focus on mitigating climate change and its effects. However, according to a survey of the sector, sustainability is not a problem for most Swiss FinTech companies and is perceived as the new normal.

Conclusion:
The FinTech sector in Switzerland continues to grow. Crowd4cash.ch is an example of an innovative FinTech company that is making a major contribution to the digitalisation of the lending business in Switzerland through its diverse product range. Although financing is a challenge for FinTech companies, Swiss FinTech companies continue to be attractive investment opportunities for investors. Overall, the study shows that the Swiss FinTech sector has a promising future. We are pleased to be a part of this thriving FinTech community.

(You can find the full study here: https://hub.hslu.ch/retailbanking/download/ifz-fintech-study/)