Financial Technology, or “fintech” is by definition a new and often disruptive sector which attempts to improve or replace existing financial services with faster, cheaper and more efficient solutions based on the latest technological innovations. There are many different ways that existing financial services can be improved and streamlined whether it be transferring funds from one place to another, e-money services, crowd investing in assets such as art or real estate, buying and trading in cryptocurrencies, or providing neutral, online shopping and comparison services for a loan or investment portfolios.
Switzerland: evolving from traditional banking to a hub of fintech innovation
For over two centuries, Switzerland has been famous for banking, investment and financial services. As regulatory pressures have increased in recent years, offshore banking locations such as Switzerland have been forced to “open their books” to international scrutiny. The country has thus been driven to innovate in new areas of financial services to replace the old “cash cow” of offshore banking. The result is that almost 300 fintech startups have been established in Switzerland providing new financial information, asset management, e-payment, crowdfunding, blockchain and cryptocurrency services.
Birthplace of “Crypto Valley”
The newest and most disruptive financial technology to take hold of the world is the meteoric rise of blockchain applications whose first embodiment has been the cryptocurrency Bitcoin. The number of firms now dealing in the mining, trading, storing, and investing in cryptocurrencies has exploded in Switzerland. Clustered primarily around the “Crypto Valley” region between Zug and Zurich, the number of companies participating in the crypto and blockchain sectors has soared to 750 by the end of 2018. Four so-called ‘unicorn’ start-ups are already valued over one billion dollars each; Ethereum, Bitmain, Dfinity and Cardano.
Access to a wealth of human capital
Switzerland boasts many world-class universities including the ETH in Zürich (Swiss Federal Institute of Technology) which ranks as the 6th top university in the world, and second in Europe after Oxford. Its sister university located nearby is the University of Zürich, Switzerland’s largest university with over 25,000 students. It also ranks in the top 100 universities worldwide. Albert Einstein studied at both institutions, earning a PhD from the University of Zürich in 1905 with his dissertation “A New Determination of Molecular Dimensions”.
Many other prestigious universities are scattered throughout the country producing a constant supply of highly educated graduates including École Polytechnique Fédérale de Lausanne (EPFL), University of Basel, Bern, Geneva, Lausanne, Fribourg, St. Gallen and Neuchatel. Ecosystems of startups have grown up around most of these institutions.
A haven for wealthy investors
With its low income tax on private individuals, zero tax on capital gains make Switzerland extremely attractive to the wealthy. A low inheritance tax also preserves generational wealth; in most Swiss Cantons, spouses and descendants are not charged inheritance tax. Switzerland is also extremely attractive to high-net-worth individuals and families with a penchant for investing in the local economy. Close proximity to firms they invest in means investors can keep a close eye on them, easily attend investor meetings as well as sit on the board of companies they take a large equity stake in.
Low corporate tax
For fintechs aiming to operate on a global scale, Switzerland is one of the countries with the lowest corporate tax rate. Establishing a corporate HQ in Switzerland is especially attractive when locating to cantons where tax rates are extremely low such as Appenzell Ausserrhoden, Glarus, Lucerne, Nidwalden, Obwalden, Schaffhausen, Schwyz and Zug. Zug, a quiet, pristine, lake-front town near the foot of the Alps, is the registered home to over 27,000 companies active in a wide range of enterprise including global commodity and oil trading (Beringfield, Gazprom, BASF), luxury goods (the holding company that owns luxury brands of Cartier, Piaget and Vacheron Constantin), building technology (Siemens), as well as hundreds of startups operating in the blockchain, crypto and fintech sectors.
A magnet for multinational headquarters
For its size, Switzerland hosts an impressive number of headquarters and hubs for large multinational corporations including Nestle (Global HQ in Vevey), Glencore (commodity trading and mining giant headquartered in Baar), Google (European Engineering Hub in Zürich with over 2500 employees), as well as the headquarters of pharmaceutical giants Novartis and Roche, major banks and insurance firms such as UBS, Credit-Suisse and Swiss Re to name just a few. This provides a large ecosystem of companies and their partners and suppliers in which new financial services can be trialed, deployed and improved in real-world conditions.
Breathtaking natural beauty and high quality of life
Last, but by no means least, Switzerland consistently ranks as one of the countries with the highest qualities of life in the world. In 2019, Switzerland ranked number one in destinations for expatriates to live and work, moving up from eighth in 2018, pushing Singapore down to second place. Switzerland scored highly on salaries (1st), stability (1st), education (2nd) and quality of life (2nd). 82% of expats say they experienced an improvement in quality of life after moving to Switzerland.
INITIUM: A bank for fintechs
A new breed of bank, INITIUM Group, recognises the enormous opportunities in the fintech sector in Switzerland, especially those firms who are leveraging blockchain technology to reduce the cost of payments, exchange, trading, and remittance, as well as fintechs dealing in promising cryptocurrency services.
Unlike traditional banks who often shun startups that have new, unproven business models, INITIUM will provide the services that budding fintechs need to run their business; corporate accounts, payment clearing, card issuing and acquiring and liquidity services. Advanced services include API integration into client platforms and crypto services such as conversion of crypto into fiat and fiat pay-out to their customers.
With seasoned banking CEO Daniel Spier at its helm, INITIUM is building a bank built from the ground up with the innovative technology and automation required to quickly to meet the needs of pioneering firms in the fintech sector. With a focus on innovative startups, INITIUM will offer corporate banking services with multi-jurisdictional reach with offices in Switzerland, Liechtenstein, the UK, Tel Aviv and Singapore.