FinTech:
A revolution
is underway

Let's go!

FinTech: the
revolution
is underway

Tracker of unnecessary costs, as unfaithful as he is individualistic, the 2025 client will be hands-on, used to organizing his financial life himself, with the Internet as ally. How are banks adjusting to this new set of behaviors? Take an interactive tour of the era of the augmented banker…

FinTech:
the revolution
is underway

Tracker of unnecessary costs, as unfaithful as he is individualistic, the 2025 client will be hands-on, used to organizing his financial life himself, with the Internet as ally.
How are banks adjusting to this new set of behaviors?
Take an interactive tour of the era of the augmented banker…

Have you found the trick in the video ? Bravo.

Does the anachronistic image of the banker raise your comfort level? Normal.

Olivier Collombin
Olivier Collombin, founder of E-merging

This squeaky-clean life doesn't appeal to you? Us neither.

But technology is there, available, at our disposal, to help us live a better life, work efficiently, and transfer repetitive/boring tasks to the machine so we can all concentrate on creativity.

We invite you for an overview of local initiatives in the promising Fintech universe. Some are in their infancy, others are already well-established. Get interested in those projects, buy their services, or even invest in them. One of them may be the flagship of the cleaned up finance industry.

Olivier Collombin
Olivier Collombin, CEO of E-merging

Swiss fintech
finally awakens

In 2015, the financial technology sector finally woke up in Switzerland with the creation of a host of start-ups. Here are some of the high points…

The past year has been a turning point for financial services in Switzerland. With banking secrecy dead and gone, the industry - even the most conservative elements - now see innovation as its future.

Andreas Dietrich
Andreas Dietrich

While the London fintech scene is particularly active, Switzerland is not far behind. Professor at the Zug Institute for Financial Studies, Andreas Dietrich estimates that over 100 fintech startups have been created in Switzerland over the past two years. Considering that 200 tech start-ups are born in Switzerland each year, the development in fintech is extraordinary. “Finding funding for start-ups in ​​fintech is less difficult than for other sectors, given the number of players here, such as Swisscom, the Six Group, Polytech Ventures, Orange Growth Capital and the banks,” says Andreas Dietrich. And Marc Bernegger, partner of venture capital firm Orange Growth Capital, adds, “Don’t forget that there are more asset managers in Geneva than in all of Germany. Many of these fintech start-ups have been created by top people from the traditional banking sector working with IT developers and engineers.”

Marc Bernegger
Marc Bernegger

Although Switzerland has few fintech startups in peer-to-peer (P2P) lending, it already has some major players in capital funding in such areas as crowdfunding, financial services for SMEs, data security, insurance, etc. “The size of the Swiss market makes it difficult for start-ups in the B2C (Business to Consumer) field to emerge. Most of those who are successful are in B2B (Business to Business),” says Andreas Dietrich.

In Switzerland, the fintech start-up is not seen as a substitute for the banks, as in California, but as a support during digital transition. For the strength of the Swiss banking brand remains incredibly powerful in spite of recent fluctuations. This bodes well for the future.

However, all of these startups note one remaining obstacle: the regulator. In London, technology solutions, including banking regulations, are discussed in collaboration with the Financial Services Authority. In Switzerland, FINMA remains reactive rather than proactive.

Overview of Swiss fintech scene

WealthArc

2013 - Zurich

The creation of a banker and a computer scientist (Sebastian Manthei and Krzysztof Gogol), WealthArc has developed a cloud-based solution for independent asset managers, including cybersecurity solutions and algorithm-based portfolio management advice (robo-advisors). WeathArc was selected by Microsoft to be part of its support program for start-ups.

InvestGlass

2014 - Geneva

After relocating to Switzerland from Florida for UBP, Alexandre Gaillard created InvestGlass in March 2014. InvestGlass has developed a mobile and web-based financial information platform for asset managers. This robo-advisor, sold under white label for such clients as SYZ Group, collates information to provide customized advice for clients.

Quantesys

2009 - Martigny

Founded by Nader Erfani, Quantesys has developed an application for advice on stock market investments based on behavioral finance theory. Through its artificial intelligence software, this tool is primarily designed to identify inflection points in a market or title, thereby distinguishing the important, underlying trends from the background noise generated by irrational reaction.

Wealthport

2014 - Schlieren

Wealthport uses machine-learning algorithms to curate enormous amounts of data for its asset management clients. Its software normalizes the range for internal and external financial big data to extract trends and characteristics in a form relevant to investment.

eWise

2000 - Nyon

Launched in the US by Alexander Grinberg, this fintech start-up moved to Switzerland last year. The eWise app aggregates an individual’s bank accounts, as well as airline miles, insurance, etc., and provides a tool for personal money management. Through this interface, the client has a clear idea of his expenses and better control over his personal budget and savings goals.

Investiere

2010 - Baar

Investiere is a crowdfunding platform for co-investing amounts (starting at 10,000 francs) in start-ups it has itself selected. So far, Investiere has helped fund 34 Swiss startups, for an amount close to 14 million francs.

eCollect

2014 - Zug

eCollect is a recovery agency for outstanding claims, specializing in e-commerce sites. Using such platforms as Skype, WhatsApp and Facebook, eCollect locates and reconnects with delinquent payers for a recovery success rate of 25-50%, according to its founder, Robert Grünwald.

Advanon

2015 - Zurich

Advanon has created a platform that prefinances the invoices of SME’s in need of short-term liquidity. In doing so, Advanon has also created a new asset class for investors – short-term loans to SME’s, guaranteed by the SME’s invoices. Advanon targets the market of 378,000 SMEs in the Germany-Austria-Switzerland region.

Hiboutik

2012 - Lausanne

This start-up has developed free software for cash register payments, for any computer or tablet, especially attractive to small chain stores. Its solution is available in 40 countries, including 30,000 customers in Spain. Hiboutik’s revenue is based on a “freemium” model with paid options, such as sales statistics analysis.

CashSentinel

2012 - Yverdon

Launched by Sylvain Bertolus in partnership with Swissquote and Autoscout24, CashSentinel’s application allows the purchase of a used car with the transfer of funds guaranteed by mobile phone. Contacting the bank for an account statement or travelling around with large sums of cash are things of the past.

Tawipay

2013 - Lausanne

François Briod has developed a comparison platform of fees charged for sending money abroad through Western Union-type services. Worldwide, migrants send home nearly $600 billion annually – often, paying prohibitively expensive transfer fees to do so. Tawipay has been selected by the International Organization for Migration in a public-private partnership to bring greater transparency to these transfer fees.

Knip

2013 - Zurich

Founded by Dennis Just and Christina Kehl, Knip manages online over 18,000 insurance policies (a volume of nearly 18 million francs). Knip’s mobile app gathers all of the client’s relevant information (contracts, monthly payments, guarantees, expiration dates...) and makes the data accessible – anonymously - to 95% of Swiss insurance companies so that they can better individualize their offer. In addition, Knip has its own independent advisors.

Overview of
Swiss fintech
scene

5 main
categories

17%

Professional investment

17%

Personal finance

14%

Payments

13%

Banking infrastructure

10%

Virtual money

Professional investment

Personal finance

Payments

Banking infrastructure

Virtual money

Business

Consumer

Business & Consumer

165

The key figure

The number of Swiss Fintech companies* with a currently active legal identity.

*Survey by Alp ICT from 1/1/15

Breakdown

5 main
cantons

Zurich, 46%
Geneva and Vaud, 30%

Bern
Zug
Others
Vaud
Geneva
Zurich

Key
markets

58% are active in
the Business market

Consumer
Business & Consumer
Business

Breakdown by canton

29% of fintech companies
are in Personal finance

Personal finance
Professional investment
Payments
Virtual money
Banking infrastructure

Zurich

73% target
the Business market

Personal finance
Professional investment
Payments
Virtual money
Banking infrastructure

Geneva & Vaud

Source: ALP ICT

Switzerland and Europe

Financial
centers

Rank Financial centers
1 London
2 Zurich
3 Geneva
4 Frankfurt
5 Luxembourg
6 Vienna
7 Monaco
8 Munich
9 Stockholm
10 Oslo

Source: Global Financial Centres Index (GFCI) 15

Financial
sector/GDP

Rank Country Share
1 Switzerland 10.5%
2 Ireland 8.5%
3 Netherlands 7.8%
4 United Kingdom 6.8%
5 Portugal 5.1%
6 Italy 5%
7 Austria 4.6%
8 France 4.4%
9 Germany 3.6%
10 Spain 3.5%

Source: OECD

Investment
in fintech

Rank Country Amount ($M)
1 United Kingdom 950.00
2 Germany 331.24
3 Netherlands 262.95
4 France 238.36
5 Sweden 203.59
6 Spain 56.43
... ... ...
14 Greece 13.50
15 Cyprus 10.00
16 Switzerland 8.13

Source: Dow Jones VentureSource 2014

The banker of the future

Asset managers are gradually being replaced by computerized Robo-Advisors. These computer systems already manage USD14 billion worldwide.

For a long time, the Geneva Stock Exchange was in the basement of Confederation Centre. Around its trading floor known as the “corbeille”, a dozen or so brokers wearing ties sat at their desks, shirtsleeves rolled up, phone in one hand, pen and pad in the other. These brokers were the so-called “criers” who, contrary to what one might expect, did not pass the day yelling at each other. No, they were there to buy and sell shares. For this was THE market, a place full of testosterone.

Then, in the summer of 1996, the electronic Swiss stock exchange was launched. From now on, the trader facing you would have a vaguely luminous, square head and communicate through a keyboard.

Next, came the Internet and online brokers trading at the speed of light… and Gordon Gekko disappeared from the face of the planet.

And, now, a new phenomenon has arrived: the Robo-Advisors. Simply put, these computers may very well replace the good old asset manager.

Before...

The e-merging platform lets you discover how the financial professions are evolving. With a smile.

  • Customer relations, hierarchy, meetings... Nothing is the same when you become an independent asset manager.

  • In the era of digitalization, things have become a bit more complicated for the IT Solution provider.

  • Inside the bank, the life of an asset manager used to be a lot easier...

72

trillion USD

are managed worldwide.
Robo-Advisors manage only USD14 billion, that is, 0.02%...

So, how do they work?

Depending on the services offered, the Robo-Advisor usually begins with a questionnaire, some 40 questions designed to reveal who you are, what you want to do with your money, how big of a hurry you’re in, how much you’re willing to lose... The goal: to determine what kind of person you are and what you will buy.

Based on this information, the Robo-Advisor offers a portfolio. You calculate the estimated yield (assuming that all goes as planned) and your risk in case the market drops. Accept the proposal and it goes into action with two clicks of your mouse. Management fees are (in general) paltry, as are transaction costs. If, along the way, you want to increase your risk or, on the contrary, decrease it, two more mouse clicks and that, too, is done.

“One of my friends told me, ‘When I go to see my banker, he offers me a coffee, and talks to me about what he read in the newspapers - newspapers I’ve also read. When I go on my Robo-Advisor, it makes me proposals related to my needs and does not offer me coffee. In the end, the difference is the coffee and, sometimes, considering the management fees charged by my bank, that capsule of George Clooney’s looks pretty expensive.”

Who are they?

Overall, Robo-Advisors fall into two categories.

First, there are the Robo-Advisors who take care of everything, who provide a range of diverse strategies that, when combined, create a portfolio to meet the client’s needs. Wealthfront, Betterment (USA), Nutmeg (UK) or Marie Quantier (France) all fall into this category. In Switzerland, Swissquote offers something similar. These Robo-Advisors are B2C (business to consumer).

The second category offers systems that provide strategy but, in addition, give access to a platform dedicated to the client’s asset management company, allowing independent managers to manage their clients’ accounts either using the algorithms supplied or by creating their own strategies. The Emotomy platform in the United States is this type of Robo-Advisor, as is, in Switzerland, InvestGlass. InvestGlass also offers an integrated compliance service.

A question remains about the business model of these new bankers of tomorrow. When you have USD3 billion under management, but are taking "only" a 0.2% fee (as does the US company, Wealthfront), the return is not hyper-profitable. Meanwhile, the cost of acquiring clients is still quite high.

Of course, it is difficult to imagine that this technology will ever completely replace the banker. Nevertheless, in the longterm, Robo-Advisors are sure to have a place in the world of asset-management.

What will the customer of the future want?

With a smartphone virtually grafted onto their hands, the younger generation is forcing banking to rethink itself. For young people demand the best in mobile services. The following is a composite sketch of these customers, their needs and some existing services suggested by the e-merging platform.

Online trading

Young users have access to a wealth of information online and are learning the art of trading themselves. Although most of them do not yet have substantial resources to invest, these ultra-informed clients are quickly becoming professional. In the wake of the lambda users (anonymous person who only uses a site once) of social networks, traders modeled on the TripAdvisor generation now trust performance and demand transparency in operations.

Private data

Private individuals are able to take control of their private financial data, to manage and share them. From now on, clients will want banks to offer appropriate management of compliance. The team at Money-ID has set itself the goal of creating the prototype of a unique certificate of financial conformity. This label, for individuals, will certify the ownership of assets, the legality of their origin and their tax compliance, all based on the international mapping of relevant regulations. Each holder of the fully digital “Money Certificate” will be the sole owner of its content, able to use it, in whole or in part, depending on the requirements of any given claimant.

Payments

The most connected clients will prefer mobile transfer services integrated into applications they use on a daily basis. François Briod, CEO of comparison platform Tawipay: “If I’m talking to my parents on Skype, I want to be able to send them some money immediately, during the conversation. Or, for example, at a restaurant, we should be able to divide the bill in one click.”

Steps

Digital natives want less contact with their banker but of higher quality. For example, if they need to change an address, they want things simple. François Briod, CEO of comparison platform Tawipay: “Just take a picture of my identity documents and my electric bill, which has my new address, and transmit it via a mobile service of the bank. Or, let’s talk on Skype.”

Services

In the age of digital everything, today’s young clients are looking for simple and intuitive financial services, available anytime, anywhere. They have made mobile banking a necessity. In 2016, over 100 million people in the US will use applications like Numbrs that concentrates all of the user’s financial operations, from payment in a store to stock market information. Whether buying a car or planning a trip, this generation is avid for applications like Simple that sugarcoat saving with a layer of fun.

Control of spending

These new customers want to control their spending from one end to the other. Through the Internet, they find solutions for managing their portfolio that are perfectly calibrated to their risk profile. With the primary objective: avoid high bank charges. Arnaud Salomon, founder of eWallex.com platform: “Young investors no longer think traditional banking is the alpha and omega for managing their investments. For example, they will leave 100,000 francs in the bank and then diversify into gold, real estate or bitcoin. This has a reassuring side.”

Crowdfunding

The sharing economy is also part of the DNA of this client base who selects crowdfunding platforms and peer-to-peer lending for financing or finds resources through online communities. From now on, these users will prefer to invest in companies with an humanitarian side, or become shareholders of a company that actively promotes sustainable development.

Mobility

From anywhere, at anytime, with any devices that's the way generation Y want to be served and want to work. For all largely dematerialized economic activities, like banking, the time has come to take a good look at the benefits of teleworking. To do so, you need a progressive implementation plan that takes into account the technical dimension, of course, but also trains management and HR (who may fear losing control of employees) and, finally, helps employees organize themselves at home. It is for this purpose that WorkCocoon is developing a turnkey “kit” for teleworking.

Social network

At work, personalized social networks will soon allow each parties of the company (clients, employees, service providers …) to interact. Indeed, corporate management will be done through a 360° management and communication tool. In the near future, creating one’s own corporate social network will probably be one of the most unifying projects possible for a company seeking to leverage what is, today, a fragmented and dispersed ecosystem. This is what the founding team of Community Factory in Geneva, developers of the financial network E-merging.com, intends to show with its offer of customized social networks.

Wealth management

You have saved up or you got your inheritance or you tapped your “second pillar” or you sold your business or you just won the lottery. Now, you are looking for a financial advisor to help you manage your assets. Or maybe you already have one, but he’s too expensive or not getting results. At no charge or obligation, taking 5 minutes of your time, Monfric.ch can help you quickly identify a carefully-selected expert within its network.

Online trading

Private Data

Payments

Steps

Services

Control of spending

Crowdfunding

Mobility

Wealth Management

The bitcoin, a revolutionary currency?

Ever since it was created in 2009, the bitcoin has captured our imagination. But how does this electronic currency actually function? What is its future? And will it put an end to the banking system as we know it?

True, its share price is extremely volatile, its technology is still crude, and the bitcoin market has already gone through several scandals. Nevertheless, in just six years of existence, the bitcoin has already collected hundreds of thousands of disciples around the world.

How does it work?

In 2009, a certain Satoshi Nakamoto launched a cryptocurrency called bitcoin. Although we still do not know who is behind this pseudonym, the electronic money has continued to grow, praised by some, despised by others. On November 23, 2015, 14,874,550 bitcoins were in circulation, that is, over four billion Swiss francs (4,930,562,576 CHF) in the currency on that day.

How to set up an account

Whether computer, tablet or smartphone, a virtual “wallet” is needed for sending and receiving bitcoins. To get one, go to your favorite application site (App Store, F-Droid, Google Play, etc.) and download a bitcoin wallet that generates an address. To fund your account, you can create bitcoins (see “mining”) and/or buy them on an online currency exchange or from an ATM. No central authority oversees transactions between individuals. Once confirmed, these transactions are visible, irreversible and stored in the public ledger/database, the “block chain”.

Private and public keys

Once your wallet is set up, an address is automatically generated containing a public and a private key. These keys allow you to exchange bitcoins. Metaphorically, the public key is a locked box into which passersby can slip money. The private key is the only way to open the box and get to the bitcoins inside, so it must be kept secret. If you break your smartphone that hosts your wallet, your bitcoins are lost forever.

Advantages and disadvantages

Bitcoin bases its marketing on the offer of additional payment for clients and the personal fascination with money and technology... There are many reasons why merchants accept bitcoins.

The Rise and Fall

Throughout 2013, the price of the bitcoin soared, hitting 1,242 USD on November 29. Gold traded at the same value on that day.
Several reasons explain this surge:

In August, the US Senate called for a committee on virtual currencies.

On 20 August, Germany officially recognized the bitcoin as a private currency.

On 2 October, the FBI announced the closure of the black market website, Silk Road, where drugs had been traded using bitcoins.

In mid-October, Baidu, the Chinese version of Google, announced that it would accept bitcoins for some of its services.

On November 12, in a letter to the Senate Committee, the Fed (US Central Bank) recognized the potential of electronic money.

On November 18, the Senate Committee formally recognized the currency, sending the price of bitcoins soaring.

On 5 December, the Chinese central bank banned transactions in bitcoins by Chinese banks. The price of the bitcoin fell below 900 dollars.

In mid-December, just as the bitcoin’s price began to rise again, China announced restrictions.

On February 7, users of the MT.Gox bitcoin exchange, the largest in the world, were unable to access their electronic money because of a “computer bug”. Nearly 750,000 bitcoins – worth about $350 million at the time - disappeared.

Can one get rich with the bitcoin?

Although speculation in the currency is particularly dangerous, some companies have thrown themselves into the entire bitcoin value chain. The number of businesses accepting bitcoins is growing fast, although not all of them actually use the currency. For example, Microsoft, Expedia and Dell have all approved payment in bitcoins, but convert the currency immediately into dollars via Coinbase (a bitcoin wallet and exchange company) and Bitpay (a global bitcoin service provider). The banking world is no exception. In September 2015, nine major banks formed an alliance to exploit bitcoin technology.

Electronic money: a revolution for the traditional banking system?

In addition to being an electronic currency, Bitcoin (with a capital B) is also a decentralized payment system whose algorithms check transactions carried out worldwide. It is this technology that seems to have a promising future in Switzerland and worldwide.

Mining

The Bitcoin system is based on the block chain, a ledger of decentralized accounts that operates by consensus. Shared by its users, the block chain records all transactions made, thanks to “miners” who verify the authenticity of the payer and ensure that he holds the funds pledged. Individuals who volunteer their computers to perform this work (“mining”) are paid in bitcoins. As the technology has advanced, along with growing competition between miners, the sums earned by mining have grown smaller, while the cost of ever more powerful computers has increased. Now companies, instead of individuals, do this work. It should also be noted that, for mathematical reasons, “only” 21 million bitcoins are expected to go into circulation. The end of the creation process is projected at around 2030.

What is the future of the bitcoin?

In June 2014 the Swiss Federal Council issued a report on virtual currencies in which it states that the purchase and sale of bitcoins on a professional basis are subject to regulations on money laundering and that trading in bitcoins requires a banking license.

Under the supervision of Dino Auciello, deputy chief editor of Bilan

Authors
Fabrice Delaye
Margaux Reguin
Dino Auciello
Matthieu Hoffstetter
Olivier Collombin (e-merging.com)
Mélanie Berkovits (e-merging.com)
Thomas Veillet (investir.ch)
Yohann Perreon (ALP ICT)

Graphism
Charlène Martin
Pierre Broquet
Mauro Fellmann

Pictures editor
David Huc

Edition
Inès Girod

Translation
Sarah Meyer de Stadelhofen

Integration/
development

Geoffrey Raposo

Contact
Myret Zaki, chief editor of Bilan
Rédaction Bilan
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1204 Genève
bilan@bilan.ch
Tél. +41 22 322 36 36

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