For better or worse, Brexit has happened. In a short time, the United Kingdom can be expected to leave the single market and strike out on its own. However, with the potential for swathes of financial and FinTech firms to flee the island, Lucas D. Jankowiak of Securion Pay ways up the potential pitfalls and opportunities for Switzerland.
The aftermath of Brexit – the decision by the UK public to bid farewell to the single market, among other things – has seen media outlets and economic pundits work themselves into a frenzy over one question: what happens next?
For many, the most obvious outcome is that London will lose its status as the finance capital of Europe. Many have supposed that London’s long-coveted position would be subsumed by one of Europe’s other great capitals, such as Paris, or Berlin, as financial institutions in Britain lose their European Union ‘passport’, a benefit that allows them to operate across the whole continent.
US investment banks in particular will feel the need to leave Britain for a capital city within the eurozone. And, if the banks flee, it stands to reason that disruptive startups – FinTech or otherwise – will flee with them. After all, what’s the point of being a disruptive force if you have nothing to disrupt?
While Switzerland itself is not in the European Union, FinTech firms that move away from London should strongly consider moving to a city that has a better relationship with Europe than its British counterpart.
Why Switzerland Offers Startups a Good Deal
Overall Switzerland offers startups – particularly FinTech startups – a good deal for a number of reasons. First and foremost, Switzerland has, for the last six years, been hailed as the world’s most innovative country by a joint study from Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO).
According to researchers, Switzerland consistently blazes a trail in its use of cutting edge technology; it’s leading number of per-capita patent applications, and elite university courses that groom new talent. This is, in part, also attributed to Switzerland’s high immigration rate, meaning that talented FinTech founders can find themselves welcomed into a nurturing community should they make the jump to the so-called Silicon Alps.
As well as being more welcoming for startups than other locations in Europe, Switzerland also boasts one thing crucial to company growth and prosperity: talent. As well as having good universities and talented graduates, Switzerland is also celebrated as having a talented bunch of computer programmers. According to HackerRank, a platform that ranks engineers based on their coding skills, Switzerland is the fourth best country in the world for finding talented developers. Given its size – and that China and Russia lead the table – this is no small feat.
Lastly, there is one other thing – both unquantifiable and undeniable – that Switzerland particularly offers to FinTech startups: pedigree. Switzerland as a country is famous for, among other things, banks and financial services. Basing a FinTech startup in Switzerland can only serve as positive re-enforcement to clients that founders are serious about their FInTech aims. Similarly, with international banks from across Europe and the US based in Switzerland, there is a huge supply of potential clients for FinTech businesses to pitch their trade to.
Obviously, Switzerland is not without its flaws. The cost of living in Switzerland is notoriously high when compared to other European nations, which has a knock on effect in terms of salaries and remuneration. This means that other cities, such as Berlin, offer a more attractive proposition for the startups – and their employees – that are bootstrapping or running on a particularly tight budget.
Similarly, due to favorable tax arrangements, Switzerland is a big favorite among large multinationals, such as Google, that leverage the country’s European location but independence from the EU in order to trade. This means that small startups often find themselves competing with huge multinational banks, firms and businesses when it comes to finding talent. Of course, this is not an impossibility – there are plenty of people who would prefer to work on a new project. It just means that startups have to be more competitive when it comes to acquiring employees.
But we should not get ahead of ourselves just yet. While UK Prime Minister Theresa May has promised a so-called hard Brexit – arguably increasing the chances that big banks will leave – it is still early days. It is not yet clear exactly how Brexit will affect the tech scene in London, and more widely. The important thing is that startups recognize they have a friend in Switzerland. Similarly, Switzerland must seize this chance, too.