When it comes to greening Switzerland’s finance sector, a wave of technology start-ups have been rising to the challenge, but with little involvement so far from the country’s mainstream fintech sector, according to a new report by Foraus.
The Swiss think tank carried out a study of the country’s sustainable digital finance and identified 26 fintechs focused on developing solutions that tackle social and environmental issues.
This represents around seven per cent of the overall fintech sector, a similar fraction to that found in countries such as Germany and Spain, foraus said, and suggests that Switzerland’s sustainable fintech scene, though small, remains competitive relative to its European neighbours.
But there also seems to be a clear division between the companies dedicated to sustainability-focused offerings and other mainstream fintechs, said Nadir França, sustainable digital finance fellow at foraus and lead author of the report.
“We clearly see a very specialised pool of companies on one hand and the mainstream fintech companies on the other. We were in fact expecting to find more mainstream companies with sustainable products and services, which is interesting – it's an open question for me as well.”
Encouraging mainstream fintechs to include sustainability-related solutions among their more traditional products and services would speed up the adoption of sustainable digital finance in Switzerland, the report says in its findings.
A nascent sector. As sustainable finance gains ground, a new cohort technology firms have been emerging to provide digital financial services focused on helping the sector deliver on social and environmental goals and to “green” investment decision making.
Switzerland’s sustainable fintech landscape is still in its infancy and is made up mainly of start-ups or early stage companies. However, foraus said the country could be considered a long-runner in the field with some actors like SAM and Covalence, both focused on sustainability data, founded as early as two decades ago.
Most of them – Carbon Delta, Celsius Pro or Reprisk, for example – are specialised in investment management and are using artificial intelligence, big data or analytics to help uncover environmental, social and governance (ESG) risks for investors or insurers. These make up 16 or the 26 companies identified in the survey.
But the banking sector, one of Switzerland’s biggest markets alongside investment management, remains underexplored. In fact, the researchers only identified one, challenger bank Neon, which recently launched a credit account combining payments with automatic CO2 offsetting.
“What was a surprise for us was the low number of companies working with banking and infrastructure products. By contrast, when it comes to mainstream fintechs, banking infrastructure is the second most explored business area,” França said.
“What we recommend in our work is that there are missed opportunities and this collaboration between fintechs and banks could be better explored,” she added.
Among the other fields explored by green fintech companies are payments & transaction services, which account for six of the 26 companies identified. Bitlumens, for example, has developed a blockchain-based payments system to help provide people in rural areas access to renewable energy.
Another three specialise in deposit & lending with solutions mainly focused on sourcing donations and humanitarian aid through automated solutions and blockchain systems, as in the case of fintechs Raisenow and Aidonic.
The bigger picture. Switzerland has been ramping up its efforts to become a global hub for sustainable finance and green fintech innovation is seen as key to this. In 2016 it collaborated with the United Nations Environment Programme to publish a series of studies looking at the implications of finance technologies on sustainable development and the Swiss fintech sector in particular.
In November last year, a group of start-ups and experts in digital and sustainable financial services led by Switzerland’s State Secretariat for International Finance (SIF) launched the Green Fintech Network aimed at improving conditions in the sector, followed by the launch of an action plan last month.
However, foraus’ authors argue that while sustainability, digital and financial strategies “are already fairly well connected in policy strategies, the links remain “rather loose” and lack concrete action.
“Despite these important recent developments, the specific plan to accelerate moving mainstream fintechs into sustainability or the creation of direct incentives for fintechs to deliver solutions for sustainable finance still remains unclear,” the authors say.
Among their recommendations:
Integrate policies and strategies. Establish an inter-agency mandate, for example, to promote greater alignment of Swiss policies and strategies in the areas of finance, digitalization, and sustainability.
Foster collaborations. Advance collaborations between Swiss financial institutions and fintech companies with the aim of developing innovative sustainable products and services. These could be done by creating a platform under the auspices of the Swiss Bankers’ Association, with Singapore’s API exchange as a model.
Provide guidance and advice. Establish a working group in Switzerland with the mandate of identifying specific demands and helping FinTech companies regarding sustainability topics.
Supporting international exchanges. Support collaborations of Swiss sustainable FinTech companies and financial regulators with international players.
“The report recognises the developments in the country in sustainable digital finance, for example, the launch of the Green Fintech Network and the Green Fintech Action Plan,” França said. “But we still need to explore the nexus of digitalisation, finance, and sustainability policies. We still see that they are not integrated, for example, with [Switzerland’s] sustainable development agenda.”
“By integrating these policy agenda you create the ideal framework conditions and pave the way for new companies in the field but also for the mainstream fintech to enter the sector.”