Swiss Banking: External and Internal Dangers

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Pressure on Swiss banking from structural change and the need to move into the digital age is mounting. Managers see the dangers to their business emanating from rivals outside the industry, but most are unable to tackle the change necessary within their organizations.

Swiss banks finally seem to wake up to the fact that there business is under threat from the outside. A majority of 56 percent of financial services institutes surveyed by consultant EY for its latest banking indicator responded that they take the threat seriously.

Bank don't see fintech start-ups, robo-adviser providers or blockchain technology as threatening their business, but rather large technology and telecommunications firms.

The reasons are clear: tech, IT and telecom companies have the financial muscle to clear the substantial hurdles to enter the highly regulated financial services industry. Furthermore, they already have the necessary know-how and infrastructure to turn data and information into a profitable business.

Digital Strategies

The consultants at EY are advising banks to make better use of the client interface by becoming more innovative. To do so, they will have to upgrade their digital strategies, but also enhance the reception of customers and services provided at bank branches.

Only a third of the banks represented by the 120 managers (UBS and CS not included) surveyed by EY have a digital strategy and only 27 percent expect that technology will fundamentally change banking.

Acquisitions in the Pipeline

EY concluded that many banks still didn't assess correctly the value of the digitization for the financial services industry, and many banks maybe lacked ideas and initiatives to implement innovative programs at the core of their business.

However, for banks to survive the current evolution, it wasn't enough to satisfy regulatory demands and to take measures to increase their efficiency.

Among the surveyed bank managers, a majority of 86 percent expect the structural development of Switzerland's financial services industry to accelerate. Since 2010, some 60 institutes have already disappeared with 200 branches eliminated. Dozens of banks won't survive the structural change, EY said in the report. The consultants hence predict a number of takeovers for the coming two years.

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