24th July 2017
-News, IAM, Gestion de fonds
Erika Mesmer, Client Relationship Manager
Virtual money, robo-advice, blockchain, big data – all terms which we regularly see in the news and which very soon will be part of our daily life. The city of Zug for example announced this month that it will introduce a digital identity for its citizens based on the blockchain technology.
Under the umbrella FinTech are gathered all financial activities, which take advantage of new technologies. Let’s take a closer look at some of them:
Blockchain: This technology, characterised by its openness, is a decentralised database which compiles information in a chain of blocks. As data subsequently cannot be modified it is considered as very safe. The most well-known application of this technology is the cryptographic money Bitcoin. Next to virtual money, this technology is also used as official registrar, for example for identity (see Zug) or for properties.
Big data: Collection and analysis of important volumes of data. The aim can for example be to analyse client transactions and based on statistical methods establish forecasts on possible future wishes and behaviour of a client. It can be used to segment customers and personalise products and services.
Robo-advice: Another highly controversial application of FinTech is automated investment decisions and portfolio management. One example are platforms where potential investors can input information, such as establish a risk profile. Algorithms will then calculate possible investments. But who wants to trust a robot to decide about his own wealth?!
Crowdfunding: alternative financing form consisting in finding many people, to help financing a specific project. Often organised online, the financing can be done through donations, support, lending or even investing, in which case investors are participating in a company and to its earnings.
Payment services: new payment technologies, such as contactless payment, payment via smartphone and internet are a significant part of FinTech.
These are a few examples of new applications which are impacting our lives. As many of these applications also involve accepting money from clients/people, these activities are subject to banking laws and regulation. In order to keep the Swiss financial market competitive, changes to the law, with regards to FinTech, are being implemented, with the aim to reduce regulatory requirements while strengthening legal security.
Worthwhile to highlight is the fact that Switzerland has decided not to set rules by business models, as innovation is so quick that legislation would always be a step behind new ideas. Switzerland, unlike other financial markets, has decided to take an approach based on type of activity, defining different levels of control. All actors, traditional businesses and new FinTech, are subject to the same rules.
The next legal change, where this approach is clearly visible, is the change to the banking ordinance, effective on 1st August 2017. Rules for acceptance of funds will be modified, allowing new/small businesses to accept funds up to one million Swiss francs, without any authorisation.
And what impact does FinTech have on IAM? No, we are not aiming to replace our analysts by algorithms and we remain true to our fundamental conviction that the human still takes the best investment decisions. However we closely follow the development of these new technologies as they will have significant impact on existing companies and generate interesting new investment possibilities.