Digital investment to constitute a significant share of the market by 2020

Berne, 30 April 2015

The Swisscom think tank e-foresight and the Institute of Financial Services Zug have published a study on digital investment. Experts point out that Swiss banking customers also use automated digital investment assistants for their asset management. However, the investment volumes are low, especially with regard to fully-automated investment. Solutions that combine a digital assistant with advice are more promising. In general, digital investment will become more suitable for widespread use in the future. Because personal advice remains an important cornerstone, established banks are in a much better position than start-ups.

The increasing digitisation of every aspect of our lives is also affecting banking services. Following developments in online finance, Switzerland is now seeing an increase in offers in the field of digital investment. A study conducted jointly by Swisscom's banking think tank e-foresight and the Institute of Financial Services in Zug (IFZ), entitled "Digital investment: a snapshot of 2015 and an outlook towards 2020," shows which business digital investment models are in greatest demand and thus have the best long-term chances of success.

Established business models for digital investment

On the basis of market analyses conducted in Switzerland, Germany, the UK and the US, the study defines four digital investment business models: robo advisers, social trading, a hybrid model and advice-supported digital investment. Robo advisers are highly standardised, automated and do not involve personal interaction. Social trading relies on social networks: users share their own trading strategies or invest in trading strategies previously published by others. Advice-supported digital investment is highly sophisticated, personalisable and offers an opportunity for personal advice. This business model comes closest to the products currently offered by banks. The hybrid model combines aspects of robo advisers with occasional supportive advice. Providers can charge differing amounts for each business model. Digital investment opportunities will further increase the pressure on margins in investment business.

Few offers in Switzerland at present

All four models are on offer in Switzerland. However, Switzerland is still in the starting blocks compared to Germany, the UK and the US. In both the US and Germany, established financial service providers and start-ups are already offering many digital investment products. By contrast, only a handful of such offers are available in Switzerland, for instance, those of Glarner Kantonalbank, TrueWealth and UBS. However, Swisscom and the IFZ presume that other banks and fintech start-ups will launch their own solutions in the coming years and that managed assets will grow significantly.

Demand is growing; trust and competence remain crucial

Of the 821 Swiss individuals questioned as part of the survey, the majority said they could imagine investing part of their assets via digital investment solutions. Whereas 44 per cent of respondents would invest only 10-30 per cent digitally, a quarter said they would be prepared to invest more than 30 per cent of their wealth with the aid of digital investment products. The survey findings show that although trust and competence are of the utmost importance, customers also want a say in the issue of their digital orders. Respondents stated that the main reason for using digital investment solutions would be because they were simple in the sense of being intuitive to use and comprehensible. Security concerns were the most-cited reason against digital investment. Lower costs are another important aspect. Presented with comparable offers, 69 per cent of respondents said they would favour products offered by their own bank over those of external providers.

Significant volumes by 2020; robo advisers remain a niche service

The authors of the study predict that the Swiss market for digital investment will grow at double-digit rates in the coming years. The basic scenario assumes a market volume of CHF 54.3 billion in 2020. This would correspond to 9 per cent of the total market, with advice-supported digital investment accounting for the majority of this volume. The significance of robo advisers will grow in future, although the invested assets will remain relatively low. Depending on the scenario, providers will manage assets worth between CHF 1 billion and CHF 8 billion in this area in 2020.


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