“The key is combining trustworthiness with modern technology”
Swiss banks must continually reinvent themselves in order to compete with multinational Big Tech firms, digital banks and fintechs. Richard Hess, Head of Digital Finance at the Swiss Bankers Association (SBA), explains why the digital transformation is a core strategic focus for the Association and how it promotes exchange between banks, fintechs and authorities with a view to actively shaping the future of the Swiss financial centre.
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Mr Hess, neobanks are currently battling it out with traditional banks to win over Swiss customers. Why do established banks often find it difficult to be perceived as innovative?
Based on my experience at the SBA, that isn’t how I see it. Many of our members, i.e. “traditional” banks, are in fact highly innovative. They are investing heavily in the digital transformation, working together with fintechs or developing their own digital platforms. However, banks often have to meet stringent regulatory requirements, and these can result in complex structures that have an impact on their speed of innovation. Combating money laundering, monitoring operational risks and ensuring transparency and data protection for their customers are good examples. Mastering this balancing act between innovation and compliance is a challenge, but it’s also a core competence of banks.
So Swiss banks are not losing out to foreign rivals in terms of innovation?
Not at all. The Swiss financial centre and its banks enjoy an excellent reputation globally, especially with regard to their high standards of security and data protection and their innovative power.
The challenge lies in making these innovations more visible and combining the benefits of their years of experience and trustworthiness with modern technology. That is the key to staying competitive in this hard-fought marketplace.
What is the SBA doing to improve the frameworks for digital innovation in the Swiss financial centre and promote the banks’ innovative power?
The Association is working on a range of measures here. Our focus is on the known key technologies and their impact on the banking industry: artificial intelligence and data processing, open finance and digital identity, and digital currencies and assets.
We regularly bring leading experts from banks, technology firms and regulatory and supervisory authorities together via our various platforms to discuss the impact of digital technologies on the banking sector, identify opportunities and risks as early as possible, counteract uncertainty in the industry, and support technological change wherever it is feasible and beneficial.
Figure 1: Key technologies in the banking industry
How exactly are you doing this?
Our studies, reports and position papers constitute a vital knowledge base that helps our members to prepare for the future.
For example, we recently co-published the Institute of Financial Services Zug’s “Digital Wallets” study, which shows how wallets are becoming central platforms for digital interaction. Banks need to think about the role they want to play in the future wallet ecosystem.
Another example is the report on Quantum Computing in Banking we published in conjunction with QuantumBasel at the start of November. While the technology and its commercial use in the financial sector are still in their infancy, the report makes it clear that political and business leaders alike should be addressing certain aspects today. On top of this, we are – perhaps unsurprisingly – working on a guide to generative AI in the banking industry.
Talking about the digital transformation is one thing. Is it not true that digital innovation is often all about implementation?
That’s right, and that’s precisely our ambition. With our members’ help, we’re endeavouring to bridge the gap between knowledge, capability and execution – within the limits of the law, of course.
We initiate and coordinate joint projects not only to drive the digital transformation forward, but also to enhance the banking industry’s resilience. One example here is the SBA’s retail multibanking initiative. Among other things, this is strategically supporting the Federal Council’s open finance targets. Another is the ongoing proof of concept study to gauge the feasibility and potential benefits of a deposit token for Swiss payment transactions. Yet another is the joint effort to combat fraud and stop ever more sophisticated criminals in their tracks. Banks need to work together in a targeted manner here, and we’re supporting them in that respect.
One last question: you spend a lot of time with the Swiss digital finance community. Who or what has impressed you most of late?
How bold some Swiss banks are when it comes to integrating technologies like blockchain or AI into their business models. The industry is prepared to take calculated risks in order to ensure its long-term success, and that’s impressive.
As regards individuals, there are many remarkable people behind Swiss fintech start-ups. With their passion and determination, they are driving innovation by identifying gaps in the market and developing effective solutions.
Our Digital Finance Day at the start of November was a highlight in this respect. The quality and depth of the discussions convinced me yet again that Switzerland boasts a wealth of know-how for tackling the challenges posed by new technologies in the financial sector head-on. That makes my work for the Association in the interests of an innovative banking industry all the more rewarding.