Two Swiss megabanks, UBS and Credit Suisse, along with Switzerland's leading ICT provider, Swisscom, retirement and financial solutions providers, Swiss Life, and global consultancy firm, Ernst & Young (EY), have all joined forces to launch a FinTech accelerator program for early stage FinTech startups.
The announcement was made by the five companies last week during the worlds largest computer expo, CeBIT, in Hanover, Germany. The partner companies aim “to put Switzerland on the map as one of the world's leading locations for establishing a FinTech start-up.”
The initiative is supported by the two local FinTech associations, Swiss Finance Startups and the Swiss Finance and Technology Association. The first round will be located in Zurich, and runs from July through September.
“It is mainly focused on Wealth Management, Digital Identity and Block Chain (e.g. distributed ledger and smart contracts), for which Switzerland offers location advantages.”
- Credit Suisse
The FinTech program is part of the Kickstart Accelerator, an initiative from the Kick Foundation in cooperation with DigitalZurich2025. Their aim is promoting Switzerland as one of the leading locations for digital companies.
Launched at the Investor Summit in January, Kickstart is one of five initiatives in the Kick Foundation’s ‘Kick’ program, and was established in 2015 by a consortium of private and public partners.
DigitalZurich2025, led by Ringier CEO Marc Walder, is a cross-industry association founded by 20 renowned organizations under the patronage of ‘economiesuisse,’ in the Canton and City of Zurich. Their aim is to make Zurich a leading digital innovation hub in Europe.
“Kickstart is the most ambitious Swiss startup program to date. Never before has Switzerland or Europe had a multi-corporate and equity-free accelerator program welcoming founders from around the world.”
As an equity-free accelerator program, all of the companies in Kickstart Accelerator receive funding without giving up shares. Accelerator programs ask for stakes in the companies they support.
The London-based Startupbootcamp FinTech Accelerator asks for 6% equity. Mentorship-driven startup accelerator Techstars “wants to be viewed as a co-founder,” but without controlling interests such as a board seat. Start-ups are told “You will still run the show,” according to Techstar's website.
The Kickstart Accelerator will run three other focus programs simultaneously, in the fields of Food, Smart & Connected Machines, and Future & Emerging Technologies.
Teams who get picked to for the accelerator will live and work in Zurich, complete with a convenient workplace in town, and some cash for living expenses. They’ll also receive mentoring from several experts and experienced entrepreneurs, as they are introduced to investors.
The startups that make it through the three-month program successfully become Founding Members of Kickstart. Despite holding on to all of their equity, the founders will receive up to 25,000 Swiss francs in seed funding, a monthly stipend, more mentoring, a shared office space, and connections to relevant industry partners.
According to Accuity's Banking Almanac, published in January, UBS is the largest bank in Switzerland and Credit Suisse is the second largest, with total assets of approximately US$1.068 trillion and US$910 billion respectively. Globally, they rank 24th and 29th, with the Industrial and Commercial Bank of China taking the number one spot with US$3.32 trillion in assets.
Not only is UBS the largest bank in Switzerland, it also won the 2015 Euromoney prize for the best bank globally, for the fourth year running.
Both banks are members of the R3 CEV consortium. This month, R3 announced that the company completed a trial of five cloud-based blockchain technologies with it’s 40 bank strong membership, UBS and Credit Suisse among them.
UBS has also been busy exploring blockchain technologies on its own. Back in April 2015, UBS created an innovation lab at London’s Canary Wharf Group technology accelerator space, Level 39, to focus on blockchain technology, Smart Contracts, and their potential for new applications. In September, the bank announced its “settlement coin” prototype.
Meanwhile, Credit Suisse's Fintech investment fund has been considering blockchain companies as potential investments, Alan Freudenstein and Greg Grimaldi, co-heads of Credit Suisse's Fintech investment fund, told Financial News.
Joining the two mega banks is Swisscom, the largest telecommunications provider in Switzerland. In 2015, the company generated net revenue of approximately CHF 11.68 billion (US$11.97 billion). The company estimated its market share at 59% during the same year.
No stranger to accelerator programs, in May 2015 Swisscom partnered with Venturelab to hold the third round of the StartUp Challenge, where Zug blockchain startup Monetas was chosen as one of the five winners.
The Swiss independent regulatory authority for the telecommunications market, the Federal Communications Commission (ComCom), states that Swisscom held the largest market share in mobile, prepaid and postpaid markets in Switzerland as of March 2015.
The recent partnership is Swiss Life Group’s first foray into the world of blockchains. The group is one of Europe’s leading life and pensions and financial solutions providers, and the largest life insurance company in Switzerland. This 157-year-old company is based in Zurich and had approximately 183 Billion CHF (~US$187 billion) under management, as of the end of 2014.
It is also London-based Ernst & Young’s (EY) first major blockchain project. EY is one of the "Big Four" audit firms, and was the third largest professional services firm in the world by aggregated revenue in 2014, after PriceWaterhouseCoopers (PwC) and Deloitte.
PwC has already entered the blockchain space with a dedicated team in their Belfast office. They focus on commercializing blockchain solutions, and partnered with Blockstream to bring blockchain technology and services to their clients. Deloitte is also very active in the space, having introduced Rubix last year. KPMG is also invested in the space, a group of the UK's largest asset managers announced a secret blockchain project with them in February.
“This new technology [blockchain] has the potential to transform the speed of corporate reporting. Blockchain will theoretically allow transactions to be recorded and logged in real time, helping to provide greater transparency and trust in a company’s financial accounts. It could allow a company to publish their ‘annual’ results on an almost daily basis.”
- Hywel Ball, Ernst & Young UK head of assurance
Switzerland is no stranger to FinTech accelerators. Fusion is a full-year FinTech accelerator based in Geneva that focuses on Swiss companies only. They’re a relatively new program, but recently announced a partnership with Swiss megabank BNP Paribas.
The more established Startupbootcamp, an international accelerator program that holds competitions all around the world, has a regular FinTech startup accelerator in Zurich. Credit Suisse was their major banking partner, for the event last May, and at the time they encouraged “crypto-currencies” to apply to their competition.
Why Switzerland? It is among the most important banking and finance capitals of the world. Not only is the Bank for International Settlements (BIS) located there, know as the ‘the central bank’s central bank,’ but the Swiss culture and people are uniquely suited for life among the industry of money.
For instance, they are, for the most part, a cash-based society that shuns credit card use. BIS reports that Switzerland has the greatest value of banknotes and coins in circulation per person, while at the same time, credit and debit card use are amongst the lowest.
The World Economic Forum consistently ranks Switzerland as the number one country on its global competitiveness rankings of 140 countries.
“The Global Competitiveness Report assesses the competitiveness landscape of 140 economies, providing insight into the drivers of their productivity and prosperity. The Report series remains the most comprehensive assessment of national competitiveness worldwide.”
- World Economic Forum
In June of last year, bitcoin also became exempt from Switzerland’s Value Added Tax (VAT). The CEO of Bitcoin Suisse AG, Niklas Nikolajsen, commented, “This is excellent news for Bitcoin in Switzerland as it provides the legal certainty we need to professionally operate our business.”
According to the Councilman of the State of Zurich, Ruedi Noser: “Zurich has countless established, high-level organizations that are interested in assisting young startups both financially and via mentorships.” He continued, “This is a really exciting opportunity for international startups to experience all of the incredible expertise that Zurich has to offer.”
Just a few miles south of Zurich is the small lake town of Zug, which has atracted more than 15 digital currency focused companies. Home to Xapo, Monetas, Shapeshift and Ethereum, Cryptovalley Zug is one of the foremost bitcoin industry startup capitals in the world.
“In recent years young entrepreneurs and programmers have set out to make Zug a leader in the field of digital finance – cryptocurrencies, to be more precise. New trading markets, new encryption technologies or new digital currencies are being developed. The room for possibilities is huge – Bitcoins are only one option out of many.”
- Greater Zurich Area AG