The Singapore Fintech Festival is currently discussing the hot new trends for the fintech business in 2021. UBS Chief Executive stayed in Switzerland, but he can be trusted to know where things are heading.
Ralph Hamers – Mister Fintech among the banking CEOs – has been in charge of Switzerland’s largest bank, UBS, for about a month. He didn’t fly out to attend the Singapore Fintech Festival in person.
Instead, he took part at an event hosted by Switzerland Global Enterprise, which on Monday had launched the information platform finance.swiss at an event billed as World Fintech Festival in Switzerland.
He used his time to present an overview of the big trends in fintech in the coming year.
1. Neobanking: Source of a New Business Model?
As a CEO of a traditional bank, Hamers maintains the view that neobanks such as Revolut, Monzo, or N26 have no business model to speak of. Neobanks may be digital and mobile, but their sole characteristic from a business point of view is growth. But that’s hardly a business model to speak of.
Hamers believes that the so-called Freemium-Model, which entails a basic free-of-charge service, won’t suffice to run a successful business. To be true, neobanks have so far defined themselves by the number of clients won as well as the number of financing rounds completed. But one day, investors will want to get a return on their investment. Hamers says time will tell how the new banks will manage to earn money.
2. Robo-Adviser: Whereto Henceforth?
Robo advisory seems doomed in Switzerland. They only work in connection with personal advice from a bank in a kind-of hybrid model. Hamers believes that robo advisers and algorithms have proven their ability to deliver good results. But only few people actually want to entrust their money to a robot. Therefore, the raison-d’être of robo advisers gets lost – namely the leveraging and the ensuing benefit of scale.
To get clients to trust the robot advisory system, advisers have started offering personal consultancy services. The problem of how to scale the business remains though, Hamers says. He believes that efforts will be made to address the problem in 2021.
3. Tokenisation: Huge Potential?
UBS CEO Hamers pronounced himself a great supporter of tokenization and digitization of assets. He may have been obliged to say so given that the event was hosted by SIX CEO Jos Dijsselhof and Chairman Thomas Wellauer at the Convention Point. The digital exchange SDX aims to become the first regulated exchange for tokens and digital assets.
Tokenization is a fintech trend with huge potential, Hamers said. UBS has been working on such projects for some two years. He believes that there is work to be done still to free the full potential of tokenization.
4. Green Fintech: Two Trends Merged
Green fintech – a no-brainer according to Hamers: fintech and sustainable investing are trends and combining the two is simply perfect. In Switzerland, green fintech is a trendsetter and has become a founding principle for the financial market strategy. In November, the government launched the green fintech network that brings to one table business, associations, risk capital, universities, consultancies, and law firms.
One great example of what green fintech is able to is the application provided by Yova, where clients can engage in impact investing. Zurich-based Globalance Bank helps clients understand the ins and outs of green investing by displaying the emissions and energy use of a portfolio.
5. Open Banking: Perfecting a Symbiotic Existence?
Not a new trend, but one that might prove disruptive, according to Hamers: open banking. If banks don’t open their business to a third party, they risk disintermediation, the destruction of supply chains. If banks however choose to open their business, they can retain client access, even if the best offering for a specific service no longer is its own one. UBS is moving toward open banking, as was shown by its announcement on Monday that it will cooperate with finance platform Financescout24.
Open banking is creating a win-win situation, says Hamers: fintech that lacks the resources to build their own customer base, receive access to an established market. And the banks get access to technology and digital services they couldn’t develop themselves.
6. E-Identity: Key Behind It All
The e-identity is a hotly disputed political issue, and not a trend. On March 7, 2021, Swiss voters will decide on the legal framework for a state-approved electronic identity. The contentious issue is the separation of powers between state and economy. Only the approval of a signature will remain a state prerogative, while private firms can launch an e-ID.
Hamers understands the issue of data protection and demanded an international framework agreement on the protection of personal data when still at ING. But he equally firm in his belief that no digital economy can survive without an e-identity. It is the key to success behind any fintech trend, he said in Zurich.
He may have read up on the fine print of Swiss direct democracy because if the electronic identity fails, many a fintech trend will founder. It would tend to take another two to three years before Switzerland will count on an E-ID. And that’s a long time in the digital economy.
