This is my second year at the Swiss International Finance Forum whose theme was “Excellence in times of Change”. Last year, it was “Back to growth” and you can find my takeaways in Back to growth despite the triple-witching in banking & with a AAA regulatory recipe.
I leave all the political and strictly macro themes for others to reflect on, even though there is a strong connection to capital markets and investments. I will share with you the different thinking and positioning that has occurred since last year. The stage was a runaway for financial services Executives, Academics, Central Bankers, Board members, Regulators (check the program here).
The perspectives and questions being asked, confirmed that the Swiss Finance community is awake and alert.
Cultural shifts
The old guard is paying attention and knows that the Finance sector is sitting on a Burning platform (to use the change management jargon). Ulf Berg of BLR Partners, urged the financial sector to move fast. Speed is essential. Optimizing costs is necessary but not enough. Swift change for large scale impact, is needed. He bluntly, said “forget about strategic plans” and referred to an innovation analogy of being aggressive and relentless in
as if engaging on a single dating platform with the motto
“Married but Available”.
Susanne Chishti from Fintech Circle, prompted the Swiss to start “Admiring Entrepreneurs” because “Worshipping Entrepreneurs” is one of the main factors that has contributed to London’s top ranking as a Fintech hub. Only 1% of Switzerland’s financial sector is currently, working in Fintech. London is already at 10%.
Essential Reflection questions
It was the during the first panel discussion that top executives from large incumbent players (UBS, Blackrock, Credit Suisse, SIX, Swiss Re) and the Swiss Banking association; shared with us how their mindset is changing.
Even though traditionally banks haven’t been investing heavily in the personal development of their staff, they are now challenging their own thinking on topics like:
- What is a Bank?
- Where do we add services and how can we serve the client better?
- Who is our supplier?
- Are Bankers the new horses?
If AWS is the new supplier of financial services, then is our data or software that is on the cloud in the Swiss jurisdiction? What is the regulatory interpretation on these issues
What is the new legal framework for robots and what will be the next innovation replacing the “limited liability” concept.
Are middlemen needed? Can we move fully to P2P, whether in payments or other credit services? Is there is a need for a trusted third party, even in a blockchain world?
Concerns
If the tendency is “to follow the customer” and if business will travel where the business people want to live; then, are we becoming more local-national or more international? Is Switzerland suffering from regulatory arbitrage? Switzerland maintains its stamp duty tax on transactions and its withholding tax, while the UK is offering huge tax relief (first £500k) for Fintech Investments.
Market access is needed for Switzerland. In Europe this is a big issue because of the European rules and the lack of equivalence.
Switzerland has been leading in asset management but only with regards to private money. Institutional asset management is serviced predominantly, in the Anglo-Saxon world.
Europe itself, is becoming increasingly dependent to the US in terms of data, rating agencies, settlement, security etc. At the same time, Europe is moving away from India as the main back office outsourcing center, the dependency to the US is increasing.
Europe doesn’t seem to able to finance its growth. Over 40% of European startups will be bought by US entities and this figure doesn’t include those that simply move to the US and stay independent.
These concerns are amplified by the reality that large tech firms are on a buying spree. They are buying the innovators and as Markus Brunnermeier, the Princeton scholar, pointed out the Corporate Savings rate is rising which means that this trend won’t come to a halt anytime soon.
And I will close with some of the insights that Henri Arslanian, Pwc director based in Hong Kong, shared during his opening keynote.
- It is the large tech firms leading innovation, so think TechFin.
- China is 2yrs ahead of Silicon Valley.
- India is the biggest global experiment in financial inclusion.
- Voice tech is happening faster than we anticipated.
- Facts and Figures that can’t be ignored:
- Facebook has 50 regulatory licenses in the US alone
- More than $14billion transactions are processed on a daily basis in China; this is more than double what Paypal processes in one year!
- Ant Financial has 340million users!
- Tencent has 17million users, outside China!
Keep active, be agile and nimble on the global dating platform. “Married but available” for the financial sector is the way to go in times of change.
Efi Pylarinou is a Fintech thought-leader, consultant and investor.
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