If a jurisdiction is not promoting fintech then something is amiss. As regulators try and encourage the sector, seen as central to future growth, Switzerland is no exception.

Earlier in November, the Swiss government (see editorial comment here) proposed to liberalise its financial regulations to make life easier for entrepreneurs creating fintech ventures, mindful that if it does not get its act together rival jurisdictions will grab a share of the business. One of the organisations involved in pushing for change is Swiss Finance Startups. This news service recently quizzed SFS about the prospect of a new, hopefully more supportive regulatory climate for fintech in the Alpine state.

Of all the main proposals from the Swiss government, which do you see as being the most important for fintech development? 
Switzerland’s growing fintech sector has been matched by regulation proposals that will no longer hamper innovation and development. 

The “regulatory sandbox” is especially important for the innovation and development of the fintech sector. Businesses and entrepreneurs need the freedom to think outside the box and build an idea without being thwarted by regulation at the first hurdle. An area free from FINMA [the Swiss financial regulator] authorisation allows entrepreneurs this opportunity. 

The fintech licence makes the market increasingly accessible for fintech start-ups. The requirements for a standard banking licence were out of reach for many companies and too often forced them out of business. Additionally, the extended 60-day limit for holding money in settlement accounts is vital for business models such as crowdfunding. With the proposed framework these business models have new freedoms and do not run the risk of repeatedly failing the existing requirements. 

What sort of regulations were holding the sector back before?
Stringent regulatory requirements were holding fintech back. Although the financial sector requires more permissions and licences than any other industry, and for good reason, it is still necessary to encourage creativity. To remain innovative Switzerland needs the freedom to test new business models without restrictive regulation. For example, the extended 60-day limit will give crowdfunding platforms a marketplace within Switzerland that will encourage fintech growth as well as boosting the development of start-ups. 

Have you any sense of the potential size of the fintech sector in Switzerland?
In less than three years SFS has grown from four members in 2014 to nearly 100 members and 60 partners - with more joining every week. This growth reflects the speed of development in the Swiss fintech sector. Overall there are almost 170 start-ups in Switzerland with fintech business models. While other fintech hubs were running international campaigns to attract start-ups for years, Switzerland was more subdued.

The new fintech regulation runs alongside an official commitment to fintech and start-ups that can be considered a paradigm shift in the financial sector of the country. The canton of Zug is developing a vibrant blockchain scene; the so-called ‘Crypto Valley’ is situated outside of the more traditional finance area of Canton Zurich. We predict a huge rise in the development and growth of the sector in the near future, as entrepreneurs and businesses utilise the new regulation.

How necessary was it to have these regulations changed? How much of a competitive threat was coming from rival hubs such as the UK, Singapore and others?
Singapore and London among other rival hubs have always been a step ahead. Switzerland’s economic success has put the country in a position where the need for change came later than for others. Furthermore, start-ups have been crowded out by bigger companies, which stifled development. It took time and hard work to make fintech and start-ups heard. But we are getting there. Due to its small size, Switzerland, just like a start-up, has the potential to move very fast when necessary.

In what way do you think fintech in Switzerland can play a part in helping the country's traditional banking system move on from the era of banking secrecy?
Fintech is the catalyst of change for our banking system, leading the industry’s transition into the digital era. Looking ahead, we imagine Switzerland will occupy top positions in specific clusters such as asset/wealth management, blockchain/crypto, security and insurance.

What potential do you see in terms of job creation? 
In the era of digitisation we are seeing a significant shift in the set of skills required by financial services businesses. Traditional banking jobs have come under pressure as firms look to cut costs and become more efficient, whereas fintech presents job opportunities with rapid salary growth rates. This high-wage sector is perfect for Switzerland as a high-wage country as it is not as competitive on the global market in sectors such as manufacturing.

Please describe your organisation.
The Swiss economy relies to a large extent on the finance sector. Fintech is the future of the finance sector in this digital era, therefore it is also the future of Switzerland!  Similarly we consider start-ups to be the drivers of fintech innovation and therefore want to create a start-up friendly environment in Switzerland to boost the overall fintech ecosystem.

While we always play on team "start-up" we also believe in collaboration and bringing together all stakeholders - corporations, banks, investors, politics, and regulators. As an organisation we also host industry events, connect potential partners, lobby for the interests of start-ups, and remain active in public affairs and public relations.