Swiss fintech sector returns to the growth path

After a difficult year with a declining number of companies and stagnating employee levels in 2021, growth prevailed again in 2022. However, the companies are already facing tougher fundraising conditions.Insights into the dynamic financial technology market are provided by the results of this year's FinTech study by the Lucerne University of Applied Sciences and Arts.

The Lucerne University of Applied Sciences and Arts publishes an annual IFZ FinTech Study. This year, for the eighth time, the study provides a comprehensive overview of the Swiss FinTech sector. This article focuses on important changes and important trends. The complete study can be downloaded from the website of HSLU.

Rising numbers

After a decline of around five percent in 2021, the development of the Swiss FinTech sector returned to its usual direction. At the end of 2022, the sector counted a total of 437 companies, which corresponds to an increase of 14 percent compared to the previous year (see Figure 1). The growth was caused mainly by a total of 75 companies which were founded prior to 2022 and which have not been included the database before. In addition14 companies were included which have been founded in 2022.

Blockchain is back

Of the 14 company foundations in 2022, eleven are assigned to the category Distributed Ledger Technology, two to the category Process Digitisation / Automatisation / Robotics, and one to the category Analytics / Big Data / Artificial Intelligence. The recently founded FinTech companies, therefore, seem to be focusing in particular on technologies related to blockchain again, which already experienced a boom, especially in 2017 and 2018.

It, therefore, comes as no surprise that ten of the 14 newly founded companies are based in the canton of Zug, a global hot spot for blockchain technology. The other four companies were registered in the cantons of Jura, Obwalden, Thurgau, and Zurich (1 each).

Trend towards sustainability

As of the end of 2022, 32 Swiss-based FinTech companies that are sustainable and meet the eligibility criteria were identified. Overall, last year’s study reported 4.4 percent of the total sample as sustainable FinTech companies, while this year’s study already reports a share of 7.3 percent. The sustainability focus of the 32 FinTech companies in the sample as of 2022 can be divided into ten green FinTech companies, three social FinTech companies, eight social-green FinTech companies, and eleven FinTech companies, which provide sustainability supporting activities.

Back to moderate growth

The median number of FTEs employed has generally increased over the years but stagnated in 2022 at 20. For the next year, however, most of the existing companies expect an increase in the number of employees. Of the 111 Swiss FinTech companies that made an estimate on the development of the workforce for 2023 (on a scale of strongly negative, negative, unchanged, positive, strongly positive), 22 percent expect strong growth, 68 percent moderate growth, and only ten percent zero growth.

Fundraising more complicated

As part of the survey for the study, all Swiss FinTech companies were asked about the urgency of nine different challenges. The two challenges related to finding customers (6.9) and the availability of skilled staff or experienced managers (6.5) are perceived as comparatively particularly strong. Access to financing follows in the seventh position with an average value of 4.9. However the year-on-year comparison shows that fundraising has gotten more challenging for the companies. Access to financing has increased the most (+17%) in urgency (+17%).

Best environment in Singapore, followed by Zurich and Geneva

Since the first FinTech hub ranking in 2017, Singapore has had the best conditions for FinTech companies (see Figure 2). This lead was further extended in 2022. The two Swiss cities of Zurich and Geneva, together with Stockholm, form the first chasing group, but with a striking distance to the leader from Southeast Asia. Moreover, there is a direct correlation between the framework conditions in a location and the size of its local FinTech sector — even if this is corrected for country-specific effects. Venture capital and joint venture activities correlate most strongly with the size of a FinTech sector, which indicates that the environment for investment and cooperation plays an important role in FinTech formation.

(Stefan Kyora)