Payment innovations, embedded finance and digital assets are amongst the fast-rising trends to watch out for in the Swiss fintech space. These trends are emerging on the back of deeper ecosystem collaborations and a shift towards “individualization” and hyper-personalization of financial services, Cornelia Stengel, the co-director of Swiss Fintech Innovations (SFTI), told Fintech News Switzerland.
Cornelia Stengel
Embedded finance refers to the use of banking-as-a-service and API-driven banking and payment services to integrate financial services within other environments and ecosystems.
It translates to solutions such as embedded payments in ride-sharing apps, embedded lending, where a customer is able to apply for and get a loan right at the point of purchase, and embedded insurance, where coverage is bundled within the purchase of a product.
Around the world, companies of all types and from all industries are launching embedded financial services to serve business and consumer segments: Amazon, Apple, Facebook and Google are examples that utilize embedded payments for their digital wallet offering; Uber leverages the Visa and Mastercard payment networks to pay drivers automatically at the end of each ride; and Klarna offers buy now, pay later (BNPL) options during the checkout process.
This booming sector is reflected in investment trends. CB Insights’ latest Q2 2021 State of Fintech report noted a spike in investor interest in embedded insurance, citing deals like Extend’s US$310 million Series C funding round, Boost’s US$20 million Series B, and Element’s US$19.5 million Series C.
US-based Extend provides merchants with the capabilities to add warranty coverage to their e-commerce products; New York-based Boost helps companies build end-to-end insurance products to offer to their customers; and Element is a German digital risk carrier that offers property and casualty insurance through partners.
Embedded finance is part of the broader open finance movement, the extension of open banking data-sharing principles, Stengel said, which enables third party providers to access customers’ data across a broader range of financial sectors and products, including savings and investments, and seeks to focus on individuals’ total financial lives.
Though open financial ecosystems have not yet been established on a broad scale in the Swiss financial landscape, several market-driven initiatives are underway to set the foundations and achieve harmonized standards.
In July, SFTI’s Common API working group published its latest whitepaper covering API security. The paper addresses corresponding legal and regulatory issues and the different aspects of API security. It also shares examples of solutions already in use internationally.
The Common API working group includes banks such as Credit Suisse, UBS, Raiffeisen, ZKB, BCV, Hypothekarbank Lenzburg, Lombard Odier, Valiant, and St. Galler Kantonalbank as well as insurers like AXA and Swisslife that are all are working together on a uniform interface standard for industry-specific use cases.
Digital money and digital assets are other trends set to make a significant impact in the financial industry, Stengel said, with innovation coming from both corporates and central banks.
In Switzerland, although the central bank has said that it has no plans to introduce a digital Swiss franc, it is nevertheless studying and piloting digital currency projects in partnership with the Bank for International Settlements (BIS) and the French central bank.
These developments come on the back of new legislation on distributed ledger technology (DLT). The DLT blanket act, which recently came into full force in Switzerland this month, aims to improve the conditions for blockchain and DLT companies in Switzerland and seeks to make the country an international pioneer in modern regulation of innovative financial market technologies.
“We have the great privilege in Switzerland of having innovation-friendly framework conditions – a top starting position,” Stengel praised. “Switzerland must continue to work actively on this.”
Stengel, a lawyer for financial market and data protection law, is an active and well-respected member of the Swiss fintech community. In addition to her work at SFTI, Stengel is also a member of expert groups of the Federal Administration, especially regarding DLT legislation, a permanent guest of the Expert Commission on Digitalisation of the Swiss Bankers Association (SBA) and a member of the working groups on financial market law, data protection/policy of economiesuisse.
This year, Stengel took the Fintech Influencer title at the 2021 Swiss Fintech Awards, and was recognized for her contribution to the Swiss fintech landscape.
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