Recent proposed changes to regulations show that Switzerland intends to compete more fiercely in the fintech space.

Swiss technology firms that work with wealth managers are already well-established players in their field and another reason to suggest that the Alpine state is more robust than some sceptics think as the era of bank secrecy winds down. Consider Avaloq, ERI Bancaire, Temenos and Appway, to name just four businesses.

With rival financial centres such as Singapore and London making a noise about fintech, Switzerland has, to date, not always, however, been such a friendly environment because of bank and related regulations restricting certain activities. That is now changing.

Last week the Swiss government announced it was calling for an “easing” of rules to boost fintech, a reduction in barriers to entry and a creation of a more certain legal environment for businesses operating this space. The Federal Department of Finance is drawing up a consultation about this proposal, a statement from the government said last week. One of the key ideas is to create a new type of fintech licence from FINMA, the country’s main financial watchdog.

Policymakers are keen on idea of creating innovation centres so that new ideas can be tried out, later developed into commercial applications. Around the world, there has been a trend of jurisdictions such as Singapore, Hong Kong and the UK seeking to foster so-called “innovation labs”, for example. 

The Swiss government said its proposals have three elements. Firstly, to set a deadline of 60 days for the holding of money in settlement accounts, an idea aimed particularly at crowdfunding platforms. Such a move would not be be restricted to fintech companies.

The second element is an innovation area, enabling an organisation to accept public funds up to a total value of SFr1 million. These activities do not have to be authorised and are not monitored by FINMA. However, the acceptance of such money must be disclosed.

The third element is a new fintech licence granted by FINMA. For institutions which are restricted to the deposit-taking business (acceptance of public funds) and thus do not operate in the lending business with maturity transformation, less stringent regulatory requirements should apply than those for classical banks. 

Public funds accepted by providers with a fintech licence cannot breach the upper limit of SFr100 million. So long as protection of the individual client is guaranteed by special conditions, FINMA can authorise a higher threshold. For institutions with the new licence, the minimum capital should amount to 5 per cent of the accepted public funds, but no less than SFr300,000.

As the Swiss government puts it, the “creation of a fintech licence is also pioneering by international standards”.

As with all regulatory proposals, there is no complete certainty that they will be unaffected as the process unfolds, but it looks clear from this vantage point that Switzerland realises it cannot afford not to be at the forefront of fintech development. Home to some of the world’s oldest banks, it also, it would appear, wants to be the birthplace of some of the newest financial players.