Swiss Financial Center: Paving the Way to More Data Sovereignty

However, the slow progress in implementing ambitious data protection laws illustrates their complexity. Most sectors are not even in a position to do so because they lack the know-how, the necessary technological capabilities or, more fundamentally, the economic interest. Until now, this has mainly affected technology and online-savvy companies, which are so advanced that in some cases they have had to be strictly regulated in their use of data. With open banking, however, the financial sector, often perceived as outdated, is working to lay the foundations for open, secure, and customer-driven data exchange. And not just between financial service providers, but also across industry boundaries. This is also happening in Switzerland, but so far it has been rather hidden from the general public. Yet this could soon change, with the launch of the first multibanking offerings for private clients in Switzerland in 2025.

But first things first. Open banking has similar goals to cookie banners, but for financial services. Bank customers will be able to share their banking data with third parties, such as fintechs, if they so choose, in order to use their alternative products and services. The open exchange of data between banks and third parties is intended not only to increase control and transparency over one’s own finances, but also to promote innovation and competition in the financial sector.

To accelerate this market development, the global majority of major industrialized and developing countries have now introduced or are in the process of developing recommended or binding guidelines. In particular, the latter means that the scope of data from payment accounts will be extended to almost all financial sectors, i.e., not only banks, but also other financial institutions such as insurance companies, investment companies, pension funds, or fintechs themselves. We are no longer talking about open banking, we are talking about open finance. Prominent examples of regulation can be found in the EU, the UK, and, more recently, the US. Until recently, the latter relied on a market-driven approach in which the financial sector was expected to implement open finance on its own.

Switzerland also has strict data protection regulations. The Swiss Federal Data Protection Act and the supplementary Data Protection Ordinance, which are closely based on the European GDPR, contain clear obligations for companies that store and process data. Open finance is not yet enshrined in law, but it is certainly on the Federal Council's radar.

In its report “Digital Finance – Fields of Action 2022+” from the end of 2022, it postulates open finance as a central element for the digitalization of the Swiss financial center, along with topics such as artificial intelligence and DLT. While the US has now jumped on the regulatory bandwagon, Switzerland continues to pursue an industry-driven approach. It is well positioned and promising developments are emerging, albeit slowly. This assessment was shared by the Federal Council in June in its latest press release on open finance, in which it described current progress in the sector as “sufficient for the time being”.

Open banking is not a new idea. Nor is the intent behind it. Banks have long partnered with selected fintechs or other banks to provide value-added services to their customers. The innovation lies in the standardization of these offerings and their unprecedented market scale. This in turn facilitates access for a much broader target group that can benefit from these services.

The Swiss financial sector has achieved a high degree of standardization in the implementation of open banking thanks to strong cooperation. Swiss Fintech Innovations, a central industry body, is working with banks, fintechs and infrastructure providers to define the necessary interface standards – i.e., rules and specifications that uniformly define what data can be exchanged with whom and in what format via a technical interface (API). Such standards are currently being defined for payments and asset management. Uniform and secure API platforms, such as SIX’s bLink, enable the efficient and scalable implementation of these standards for banks and fintechs that connect to them. Providers and operators of core banking systems such as Swisscom, Avaloq, Finnova, Inventx, and ti&m have specialized in the integration and oper­ational management of APIs in banks in cooperation with API platforms.

In recent years, this has resulted in a growing ecosystem that is jointly driving new open banking offerings in Switzerland.

Despite progress, a critical view is warranted. To date, Swiss offerings have focused primarily on corporate customers, or more precisely on Swiss SMEs. These benefit mainly in the area of accounting, as bank balances and transaction movements from several bank accounts can be displayed in real time in an accounting solution such as bexio, Klara, or Abaninja. In addition, SMEs can transfer their payments directly from such a third-party solution to their house bank’s online banking system. The ePost application already offers this option today – even for private individuals.

The situation is similar in asset management. Here, independent asset managers can integrate position and transaction data from custodian banks into their portfolio management system via standardized interfaces and, conversely, transmit stock market orders directly to their clients’ custodian banks.

The first step for SMEs is to connect their bank accounts to the desired software solution or application. The setup with modern open banking solutions takes only a few seconds to minutes and works entirely via industry standards for online authorization, such as OAuth 2.0, and security methods for identity verification, such as two-factor authentication.

The Swiss do not currently enjoy such data sovereignty. However, an ongoing banking initiative to introduce multibanking services for individuals promises to change that. More than 40 Swiss banks have signed a letter of intent under the auspices of the Swiss Bankers Association. The first services will be launched in 2025. For the first time, Swiss citizens will be able to share their financial data with third parties easily and completely digitally. The exchange of private client data will not only take place between banks, as the term “multibanking” suggests, but also with non-banks such as fintechs. Only then will the multibanking initiative be “effectively implemented”, as the Federal Council puts it in its press release.

As a first step, the initiative concerns private accounts, which already offer a wide range of possible applications. By merging bank accounts, applications from banks or third parties could enable comprehensive financial management, including calculating savings rates or tracking sustainability based on spending. Third parties could perform efficient identity checks based on existing account data, making it much easier to onboard new customers. The creditworthiness of individuals could be determined quickly and easily by querying credit balance and transaction data. The latter is particularly relevant in the context of small loans or the rapidly growing “buy now, pay later” payment method in online retail. All of these services are already widely used in the EU and the UK.

A fundamental problem in the traditional financial world is the lack of interoperability. Financial services and financial service providers exist in isolated silos and have limited ability to connect with each other to create new services. This stifles innovation. The Multibanking Initiative is enabling unprecedented interoperability through the development of an API in­frastructure in which the majority of Swiss banks are participating. Abroad, financial institutions are beginning to use this technological and strategic foundation not only to share their data, products, and services with each other, but also to integrate with the value chain of companies in other sectors to enable seamless customer experiences and financial inclusion.

In its press release, the Swiss Federal Council emphasizes that the multibanking model is an interesting approach for opening up further data sources via standardized interfaces, for example in the pension or insurance sector. This would give Switzerland a high degree of data sovereignty, at least as far as our finances are concerned. If this development succeeds, the financial sector has the potential to set the course for an open, standardized, and secure Swiss data landscape and serve as a role model for other sectors such as healthcare, telecommunications, or the energy and housing market. Then we will not only be moving towards open banking or open finance, but also towards open data. A world where we have full control and transparency over all our data and can use it in a conscious and purposeful way in our personal and business lives.