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The Financial Sector under the Spell of Digitalization

Start-ups unrelated to the sector are increasingly attacking banks and benefiting from digitalization and the growing knowledge of clients. At the FinTech 2015 conference in Zurich, bankers met their young competitors. 

A bank is a bank is a bank. That was true once. Today, start-ups from New York, Silicon Valley, and Tel Aviv offer financial services without being banks. They are faster, simpler, and sexier. Transferring money via cell phone, mutually granting loans or raising the money for a company via Facebook friends, making the same investments as a successful investor via the Follow function instead of having long consultations. This only requires digital devices such as smartphones and tablets along with the necessary software, instead of large headquarters in expensive city-center real estate in metropolises.

Banks under Pressure

Small wonder, says David Rowan, head of the technology magazine Wired, at FinTech 2015 in Zurich: "The clients don't need the bank anymore." Some impressive numbers prove he's right. Worldwide, investors invested over 12 billion dollars in up-and-coming fintech start-ups in 2014; a year before, it was barely 4 billion dollars. This is stated in a study published this spring, The Future of Fintech and Banking, from the consultancy Accenture. Most of the money goes to technology enterprises in the US; however, the growth rates are higher in Europe. London in particular is considered a center of fintech. The sector there currently employs 44,000 individuals, more than in Silicon Valley.

One thing is clear: Fintech is not simply a hobby for tech geeks. Just as iTunes revolutionized the music industry, Netflix the movie and TV industry, and Amazon the book trade, start-ups are changing the traditional banking industry. At the conference in Zurich, for instance, Andreas Kern presented his platform Wikifolio. It enables traders to publish their strategies. Investor-friendly interested parties have the option of immediately buying suitable strategies, thus benefiting from the knowledge of experienced traders and making the same profits. Kern calls this form of investing social trading. "There are over 180,000 comments from traders on the Wikifolio detail pages," he says enthusiastically.

Total Information

As a further example, in Zurich Mark Henkel presented the Munich company paymill. The company provides SMEs with a simple and fast payment service that they can integrate into their webpages. But that's not all: paymill itself also grants short-term loans to traders. More and more similar fintech companies are entering the market. Credit Suisse BoD Chairman Urs Rohner stressed the importance of digitalization in the banking sector. "My children are unlikely to enter a bank for ordinary business transactions," he said, describing the future of the wealth management business.

Digitalization plays a significant role in making services more innovative. In comparison to other industries, the banking world got a late start in the development in this area, he said self-critically. For Marco Abele, Head of Digital Private Banking at Credit Suisse, client behavior has drastically changed within a very short time due to the development of the smartphone. Today, clients are better informed than ever. Thanks to state-of-the-art technology, transparency enables meaningful comparisons in a very short space of time.

For Rohner, however, it is clear that the digitalization of the banking business is at an early stage. According to him, it has yet to be seen which approaches will prevail. "We are convinced that our integrated model with Private and Investment Banking, along with digital services, will be successful," he notes. Marco Abele is also convinced that digital power combined with the human touch is the key to success in the banking business.

From Competitors to Partners

To find out what exactly client needs are and how to meet them, Credit Suisse is exploring several options, according to Urs Rohner. It is looking at innovative companies that have nothing to do with banking, and also looking at exciting fintech companies offering banking services in an entirely new form. This can also lead to an unpleasant competitor suddenly becoming a new partner.

How seriously the big bank is taking digital banking can currently be seen in the launch of a new platform in Asia. The asset management clients there are on average 20 years younger than in Switzerland for instance, and are accordingly more in tune with technology. Clients have access to account data, market information, and expert insights 24 hours a day, seven days a week. Moreover, they receive trading and analytics tools with which they can monitor their portfolio's performance at all times and trade across all asset classes. In addition, the new digital platform interface makes interaction between clients, bank advisors, and other employees not only easier, but also intuitive like that of digital companies Uber and Netflix.

New "Private Banking Switzerland" App

Credit Suisse has now launched the same digital banking experience in Switzerland, with the introduction of the new app for iPad, iPhone, and Android tablets and smartphones in early April. It was developed, like the platform in Asia, in close collaboration with clients. It provides a full overview of accounts, safekeeping accounts, portfolios, and payments and securities transactions on the start page, which can be structured according to personal preferences. In addition to e-bills and documents along with a useful payment assistant, the app also offers – like the platform in Asia – complex but intuitive tools for portfolio analysis and trading with all financial products. This enables clients to manage their finances with just a few clicks, anywhere and anytime.

FinTech 2015 – Innovation in Finance

At the financial and economic forum "FinTech 2015 – Innovation in Finance" on April 8, decision-makers and visionaries from the worlds of finance, ICT, internet, and start-ups met to reflect on the revolutionary potential and the disruptive power of digitalization in the financial sector. Credit Suisse supported the event as an exclusive Premium Partner and presented the new app "Private Banking Switzerland" at a booth.