The Swiss crowdfunding market has reached a record high volume of CHF 374.5 million in 2017, almost three times more than in the previous year. This has been revealed by the latest Crowdfunding Monitoring report issued by the Lucerne University of Applied Sciences and Arts. The financing of SMEs and investments in real estate are key drivers of the strong growth. The authors of the report are expecting a further marked increase to about CHF 1 billion this year. Compared to the more advanced markets in the United Kingdom and the United States, Switzerland is two to three years behind, but catching up rapidly.
Published by the Lucerne University of Applied Sciences and Arts, the annual Crowdfunding Monitoring report is already into its fifth year. The current report features record figures: CHF 374.5 million was brokered via crowdfunding platforms in 2017, almost three times more than in 2016 (CHF 100 million, +192%). Over the past eight years, more than half a billion Swiss francs have been brokered via this form of financing.
The major growth drivers in terms of volumes in recent years have been finance for SMEs via crowdlending and investing in property via crowdinvesting. “Professional investors increasingly perceive crowdfunding as an interesting investment,” says report author Andreas Dietrich. “We expect the Swiss crowdfunding market to break the billion franc mark at the end of the year.”
High growth in all areas
Some 160,000 people backed crowdfunding projects in Switzerland in 2017. The Swiss crowdfunding market can be divided into four segments: reward- and donation-based crowdfunding, crowdinvesting, invoice trading, and crowdlending (see box for details). Crowdlending recorded the largest volume (CHF 186.7 million, +239% over the previous year), followed by crowdinvesting (CHF 135.2 million, +245%). Invoice trading generated CHF 23.5 million (+38%), while reward- and donation-based crowdfunding achieved a volume of CHF 29.1 million (+72%) (see illustration).
Over 1500 cultural and creative projects successfully funded
“The lower volumes recorded for reward- and donation-based crowdfunding do not mean that this segment is unimportant,” says report author Andreas Dietrich. Since the segment primarily involves creative and cultural projects, the volumes of the campaigns tend to be small compared, for example, to real estate projects. But with over 1500 successfully financed campaigns in 2017 (+15% over the previous year), reward-based crowdfunding/crowddonating has continued to grow as a relevant source of funding. Arguably the highest-profile campaign in this segment in 2017 was that run by Republik magazine (CHF 3.5 million).
International perspective: Switzerland two to three years behind – but catching up
The Swiss crowdfunding market has grown significantly more rapidly than those of neighbouring countries since 2015. With a per capita investment volume of CHF 45 (2016: CHF 15), Switzerland still lies two to three years behind leading crowdfunding markets such as the USA (2016: CHF 78) or the UK (2016: CHF 90) – but it is catching up fast: “The strong momentum provided by new platforms and alternative business models suggests that Switzerland is catching up with highly developed crowdfunding countries such as the USA and the UK,” says Andreas Dietrich.
Hidden concentration in the crowdfunding market
43 crowdfunding platforms were maintaining a physical presence in Switzerland as of the end of April 2018. Also in the market are several nondomestic platforms without an office in Switzerland. Despite the large number, each crowdfunding segment is dominated by a handful of major platforms. In the crowd lending and reward-based crowdfunding segments, for example, the six largest platforms each have a market share of 96 percent and 97 percent respectively.
This concentration is expected to continue: “That said, small, innovative niche players will continue to survive in the market,” says Andreas Dietrich.
Businesses and institutional investors discover crowdfunding
The involvement of larger businesses and institutional investors is becoming more prevalent across all areas of crowdfunding. In reward-based crowdfunding/crowddonating, for example, projects are increasingly being launched with the support of businesses. In crowdlending, crowdinvesting and invoice trading – segments of interest to investors – the proportion of institutional investors will increase significantly in future. This will have the effect of contributing significantly to the continued rapid growth in volume.
Two Swiss platforms have already announced their intention to launch innovative products based on blockchain technology in 2018. From spring 2018, Swisspeers is looking to transact loans between business and investors as “smart contracts” in the Ethereum blockchain and represent creditors’ claims using tokens. Wemakeit is planning to launch a new crowdfunding platform that will be completely blockchain based. The report’s authors are anticipating that blockchain technology will find other fields of application in the crowdfunding market in the coming years.
The Crowdfunding Monitoring Switzerland report is published on an annual basis by the Institute of Financial Services Zug IFZ (an institute of the Lucerne University of Applied Sciences and Arts) with raw data supplied by all crowdfunding platforms in Switzerland. The following platforms provided support in the form of data: 100-days, 3Circlefunding, Advanon, Cashare, Creditfolio, CreditGate24, creditworld, Crowdhouse, crowdli, Funders, GivenGain, Hyposcout, I believe in you, I care for you, ideenkicker.ch, Immoyou, Indiegogo, investiere, Kickstarter, Lend, Lendico, Lendora, Lokalhelden, Progettiamo, ProjektStarter, Splendit, Swisslending, Swisspeers, and wemakeit.
Download: The Crowdfunding Monitoring Switzerland can be downloaded here.
Reward-based crowdfunding: typically used to raise funds for creative and cultural projects as well as those in the area of sports. Investors receive a product, artistic work or service for their contribution, e.g. a free copy of the book in the case of a book launch.
Donation-based crowdfunding: typically donations for social, charitable and cultural projects that are not linked to any consideration/reward.
Crowdinvesting: investments of equity or mezzanine capital in businesses (start-ups) or real estate. In return, investors receive a share of the profit.
Crowdlending: used by businesses and individuals to raise loans. In return, lenders receive interest payments, the level of which depends on the risk of the borrower.
Invoice trading: investors buy outstanding invoices from businesses for a discount. This allows businesses to bridge payment periods or free up liquid resources.
Crowdlending Survey 2018
At the beginning of May the Lucerne University of Applied Sciences and Arts in partnership with PwC Switzerland and the Swiss Marketplace Lending Association published a separate study on the Swiss crowdlending market showing the economic relevance of crowdlending in Switzerland and abroad. In addition, the study highlights the key challenges and problem areas – especially the lack of transparency – facing the crowdlending market. The Crowdlending Study 2018 is free and available in German and English here.
- Graph: progression of crowdfunding in Switzerland 2008 – 2017
- Tables: crowdfunding volumes and campaign numbers in Switzerland 2008 – 2017
- Graphs: international comparison of crowdfunding (volume per inhabitant)
Crowdfunding volumes and campaigns in Switzerland 2008 – 2017
Campaign volumes disbursed in CHF million
Reward- & Year Crowd- donation-based investing Crowdfunding Crowdlending Invoice trading Total
2008 0 0 0.1 0 0.1
2009 0 0 0.2 0 0.2
2010 0.4 0 1.3 0 1.7
2011 1.7 0.3 1.1 0 3.1
2012 1.9 2.5 0.9 0 5.3
2013 5.6 4.2 1.8 0 11.6
2014 4.6 7.7 3.5 0 15.8
2015 7.1 12.3 7.9 0.4 27.7
2016 39.2 17.0 55.1 17.0 128.2
2017 135.2 29.1 186.7 23.5 374.5
2008-2017 195.7 73.1 258.5 40.9 568.3
No. of campaigns
Reward- & Year Crowd- donation-based investing crowdfunding Crowdlending Invoice trading Total
2008 0 0 17 0 17
2009 0 0 28 0 28
2010 3 0 74 0 77
2011 6 15 85 0 106
2012 7 331 61 0 399
2013 10 594 116 0 720
2014 10 854 214 0 1,078
2015 17 1,059 266 n/a 1,342
2016 25 1,338 840 n/a 2,203
2017 42 1,536 2,086 n/a 5,113
2008-2017 120 4,668 3,787 n/a 11,083
Pandemic risks eclipse treasury priorities as businesses diversify investments to mitigate impact
The Covid-19 pandemic has shunted aside existing challenges to sit atop treasurers’ priority lists, according to “The resilient treasury: Optimising strategy in the face of covid-19”, a survey run by the Economist Intelligence Unit (EIU) and sponsored by Deutsche Bank.
The results show that treasurers are looking to diversify their investments in a bid to mitigate the pandemic impacts, including heightened liquidity, foreign-exchange and interest-rate risk. As many as 55% plan to increase investments in long-term instruments, with 48% increasing investments in bank deposits, another 48% in local investment products, and 47% in money-market funds.
“The Covid-19 pandemic has drastically altered business plans in 2020. It has placed a certain level of strain on treasury processes, but the challenge it presents has been managed by traditional treasury skills. It is clear that pandemic risk will be on the treasury checklist for years to come, but it is one of many risks the department faces and will continue to manage,” says Melanie Noronha, the EIU editor of the report.
Despite Covid-19 looming large, other challenges wait in the wings. Notably, the replacement of the London Interbank Offered Rate was identified by 38% of respondents as the main challenge of their function.
Technology, meanwhile, continues to be a pressing issue, with treasury teams becoming increasingly reliant on IT solutions. Here, data quality is rising up the list of concerns. Already highlighted as very or somewhat concerning in 2019 by 69% of respondents, the figure rose to 78% in 2020. Acquiring the necessary skill sets to realise the full benefits of this data and technology is also a continuing priority – with some progress registered from last year. In 2020, 30% of respondents say they have all the skills they need to manage technological change, up from 22% in 2018.
“Treasury’s focus on technology is not only helping teams operate more efficiently in a remote-working environment, it has long played – and continues to play – a key role in realising their long-term priorities,” notes Ole Matthiessen, Head of Cash Management, Corporate Bank, Deutsche Bank. The survey shows that
Release 1 | 2 managing relationships with banks and suppliers (highlighted by 32% of respondents) and collaborating with other functions of the business (also 32%) remain top of the agenda – and seamless digital systems will help give treasurers the bandwidth and insight to be more effective partners for both internal and external stakeholders.
Based on a global survey of 300 treasury executives, conducted between April and May, the survey explores stakeholders’ attitudes among corporate treasurers towards the drivers of strategic change in the treasury function – from the pandemic through to regulation and technology – and their priorities for the next five years.
Digital collaboration: Shaping the Future of Finance
By Ryan Lester, Senior Director of Customer Experience Technologies at LogMeIn
With heightened economic uncertainty and increased customer expectation becoming the norm in the banking industry, it is understandable that the sector is struggling to keep afloat. Due to its precarious nature, banking institutions are trying their best to ensure they remain relevant in the competitive landscape and guarantee that their customers continue to be a priority.
When it comes to the first half of this year, the pandemic has shown how easy it is for industries to fail. Customers and companies alike had to get used to the new normal, as physical locations started to close. The banking industry felt this first hand, as banks were made to restructure how their business ran, with restricted opening hours and a wider push to motivate people to use online banking.
While some had already embraced digital options prior to the pandemic, this proved to be a stark contrast to the elderly population, who frequently visited branches to access their finances. Moving forward, banks have to adopt new methods to ensure customers get the most out of our their accounts, without their experience suffering.
Heightened Customer Expectations
When the pandemic reached its peak, people were encouraged to use online banking, as telephone contact was under strain with long waiting times and pressure mounting on contact centre agents. According to Fidelity National Information Services (FIS), which works with 50 of the world’s largest banks, there was a 200% jump in new mobile banking registrations in early April, while mobile banking traffic rose 85%.
With branches remaining closed, customers were continuously being urged to limit the amount of calls they made to the most urgent cases and consider whether they could solve their answers through mobile online banking or checking the company website. Although already being adopted in pockets of the industry, this was a real catalyst that spurred banks to up their game on digital channels and with self-service tools.
Banks are challenged with precariously balancing customer needs with the cost of personalised support. With the demographic of customers changing over the last few years, customers are becoming increasingly younger and more comfortable with technology. Influenced by the “Amazon Effect”, their expectations have raised to an all-time high, placing record strain on the sector
Customer experience isn’t just about support anymore, it’s about serving your customer at every point in the journey. Companies have an opportunity to elevate the experience they provide by moving beyond one-and-done interactions to create continuous engagements with their customers. It is starting to become a primary competitive differentiator in the market and one that doesn’t have a lot of variation. Deploying AI chatbot technology will be able to strategically help banks improve customer experience and raise the level of support that agents provide.
Digital collaboration: Working around the Clock
The benefits of adopting digital channels and self-service tools are second to none. By implementing chatbots, fuelled by conversational AI, banks will be able to help serve a wide range of customer queries and ensure they are protected from fraud and scams.
Conversational AI is exactly what it sounds like: a computer programme that engages in a conversation with a human. When it comes to service delivery, conversational AI can be deployed across multiple channels to engage with customers in ways that effectively address evolving customer needs. At a time defined by COVID-19, self-service tools such a conversational chatbots can work around the clock to solve customer queries in a concise and timely way. Of course, self-service tools won’t completely replace human agents in the banking industry, but they will help companies re-distribute customer traffic and workflows in ways that enhance customer experience. Self-service tools fuelled by conversational AI can also improve employee experience because service employees can handle fewer, but higher-level service tasks that chatbots might escalate to them.
Adopting new tools to help facilitate consistent and concise answers and help maintain customer experience is on the forefront of many industry minds. Banks such as the Natwest Group have seen this first-hand and are testament to the benefits that a good digital experience can provide. Simon Johnson, Capability Consultant, Digital at NatWest Group highlights NatWest’s use of digital tools during lockdown, “Over the last few months, we’ve learnt how to use digital tools to help our employees remotely. From a banking perspective, there have been a lot of changes including base rates, waive fees and the best ways of contacting our vulnerable customers, ensuring we keep them protected from frauds and scams.
“By introducing our Bold360 chatbot interface, Ella, we’ve been able to get relevant information out quickly, apply the best practice and ensure that our customer journeys are being developed correctly. Due to the volume of questions, some of our customers were finding themselves waiting longer than usual. So digital channels become essential to helping reduce the wait time. Using Bold360, we were able to mitigate issues and answer questions in a more timely way through our chatbot.
“Moving forward, as we open more digital services, we are analysing our data to see if customer will return back to their usual way of banking, now that they’ve seen what a good digital experience can provide. Either way, with Ella, we are ready.”
Chatbots and Humans: The Best Option for Customer Service
Over the last year, banking institutions have recognised the power that digital collaboration can have to their success. Delivering exceptional customer service and support is key for any business wanting to stay competitive in today’s market and banks are especially challenged with precariously balancing customer needs with the cost of personalised support. Leveraging the right technology, such as AI-powered chatbots, will enable the banking industry to provide better support and a more robust customer experience in the long term. Other institutions must follow suit, or risk becoming obsolete.
A sleeping digital giant wakes? 4 key trends accelerating payments transformation in the US
By Lauren Jones, International Payments Ambassador, Icon Solutions
The US payments industry is undoubtedly ripe for change. Before the unprecedented shock of COVID-19, digitization and payments transformation initiatives had been organic, piecemeal and predominately the preserve of the largest banks.
Now, increasing pressure means that financial institutions of all sizes are working to define a digital strategy to unlock new opportunities, drive business value, and stay competitive. But beyond the immediate impact of COVID, what underlying trends are accelerating digitization in the US?
- Real-time payments – the stimulus for change
Real-time payments have been met with a degree of caution by US financial institutions. Risking traditional profit generators in return for potential revenues down the line is a gamble many have not been willing to take. But immediate payments are coming to the US whether banks like it or not.
Major payments infrastructure providers, including NACHA and The Clearing House (TCH), have moved to encourage immediate payment adoption in recent years. But the Fed, frustrated with a slow rate of progress, has announced that it is pressing ahead with the implementation of its FedNow system (despite significant industry objection). Although the Fed’s true intentions are open to interpretation and this may just be a play to accelerate private initiatives, it is a clear signal that they mean business.
This means holdouts risk their own ‘Kodak’ moment if they miss the huge opportunities in front of them by fixating on traditional revenue streams. Banks are in a position to support innovation across entire industries such as healthcare, which could be released from the constraints of paper-based bureaucracy and slow, expensive transactions.
Another opportunity that can be unlocked via instant payments is ISO 20022 (used in the TCH RTP system). It is the future of payments messaging standards and can greatly enhance various payments processes through increased data-carrying capabilities. More importantly given the current climate, citizens reliant on federal or state support can benefit from RTPs combined with additional data to immediately access emergency funds.
- The kids are growing up
The US is getting older. Consumers who were 10 when the iPhone first launched are now 23. This means we are seeing a ramp-up of digitally native Gen Z consumers (roughly those born between 1995 and 2010) accessing banking services.
Demographics are an inexact science and not perfect predictors (there are technophobe college students and 100-year-old Instagram influencers), but we can detect noticeable trends.
Younger customers don’t usually choose a bank because there is an ATM in their neighbourhood, a slightly better interest rate or an advert in the newspaper. Rather, a strong digital presence, personalised tools, rewards and experiences, and the trusted recommendations of friends and family, will have a more significant impact on customer acquisition.
Banks must look at the effect this will have on their longer-term digitalization strategy and be able to segment what this emerging customer base might want and how they will interact in years to come.
- Checkmate? Evolving corporate requirements
Corporate treasurers are people and their experience of seamless, immediate payments in their personal lives shapes expectations in the workplace. Although check usage for business-to-business (B2B) transactions is still the norm in the US and barriers remain, corporates are increasingly demanding the ability to transact in a real-time, omnichannel environment, 24×7.
The benefits are clear. Corporate treasurers stand to enjoy enhanced liquidity management and transparency, greater control over payments and enhanced data for reconciliation purposes. And for consumers, alternative digital payment options such as buy now pay later promote choice and flexibility.
- Increasing competition
A significant consequence of emerging consumer and business demand for digital offerings is the increase in competition from fintechs, technology giants and other third-parties. Traditionally, incumbent banks have enjoyed the advantage of consumer trust to offset more limited innovation. But as consumers become more comfortable entrusting their financial transactions to non-banks, banks must differentiate and digitize to remain competitive.
Data is where the technology giants excel, and their ability to personalise experiences and emotionally connect with their users is unprecedented. Banks need to learn from the positive aspects of this model to better understand their users and deliver meaningful, useful products and services.
For data to become the cornerstone of a banks’ customer relationship and take services to the next level, breaking the channel silos and extracting value from a comprehensive dataset will be decisive. But with only 18% of banks reporting that they are in the process of shifting from a transactional revenue model to a data-driven revenue model, this work has some way to go.
Taking customer propositions to the next level
Customers now expect services that work for them, not their banks. All banks, no matter the footprint, need to move quickly to offer a broad digital service platform that adds value to both the customer and the bank.
By defining a robust payments transformation strategy, banks of all sizes can remain fiercely competitive by rapidly lowering costs, unlocking revenues and promoting innovation
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