Blind infatuation with digitalization, fintech and cryptocurrencies is not the answer to everything ailing Swiss finance.

From a distance, it seems like the collective consciousness of Swiss banking sees a form of business salvation in the miasma emanating from the still awkward mix of state-of-the-art technology and traditional banking.

It is understandable. Years of negative interest rates and the fear of asset inflation make technology look like a facile answer for an industry going through near-constant turmoil. But regardless of what you call it – digitalization, tokenization, digital assets, fintech, cryptocurrencies, stablecoins, or anything else – the reality is that most of the incumbents are already in place.

Little New in Payments

Digitalization of payments is essentially done. It has been over five years since the introduction of Apple and Android Pay in western economies and more than a decade since the social network/payment app Weixin (Wechat abroad) was introduced in China. And before all that, there was PayPal.

There might be incremental improvements, but it is hard to see a legacy financial institution or a start-up knocking any of the established providers off their perch.

Asset Digitalization Well Underway

The process of the digitalization of standard investments and the expanding inclusion of wholly digital assets as alternative investments is well underway. You can even make the argument that plain equities have been digital(ized) assets for quite a while.

For Swiss finance, this should be a clear-cut situation.

Because of their volatility, cryptocurrencies, and anything similar, can potentially form a portion of a segregated segment of high risk or a very high-risk client’s portfolio that has undergone appropriate suitability reviews.

It is hard to see that much potential beyond that - unless someone wanted to become a special-purpose broker-dealer and get into the digital asset custody business in a big way.

Legacy Bank Digitalization

Many banks have been digitalizing their procedures and frontlines since the early 2010s, with mixed results. As an example, HSBC has been using chatbots in a variety of guises for the better part of a decade. It has even deployed actual robots.

But none of this has appeared to have improved front-line effectiveness, cut costs or slimmed internal processes to the point that it has prevented the institute from constant rounds of restructuring, including the recent announcement that it would exit the U.S. retail business. In the same vein, nobody seems to be eating its lunch quite yet given it remains a sizeable, profitable institution.

You can probably digitalize traditional banking or create a fintech that simplifies banking processes at far lower costs. But, at some point, you will have to deal with detailed regulation in each country on a minute, manual – and very costly – level. Recent experience with Chinese fintech indicates that shortcuts are unlikely.

Crypto Versus Fiat

You can argue ad nauseam about whether cryptocurrencies will replace fiat currencies. But as China and the U.S. Securities and Exchange Commission show, the likelihood of sovereign governments gliding into a happy state of decentralized investments, undeclared payment vehicles or currencies, is non-existent – at least not for banks and securities firms authorized by the Swiss Financial Market Supervisory Authority (FINMA).

There are few governments that are ever going to tolerate a second, parallel form of anonymous cash or e-cash for long, and this is not an argument Swiss finance should be a big part of.

No Easy Answers

It is easy to get caught up in this stuff. It is different, and it is new. But a wealth manager would do better in the long-term to make sure that its house is in order, that it has full documentation, electronic or not, of client sources of wealth and funds, and adequate controls and scrutiny of its payments.

As recent Julius Baer and J. Safra Sarasin fines show, after a recent history of much worse, this still isn’t the case.