THE FINTECH BRIEFING: How to grow Swiss fintech - Lloyds hires former Rabobank Exec - UK startups want BOE accounts

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WHAT'S HOLDING SWITZERLAND BACK IN FINTECH: Financial services is an integral part of Switzerland's economy at £57 billion (€73 billion, $82 billion) or 13% of the nation's GDP. Further, about 5% of the country's workforce is employed in the industry. The problem is that the country has thrived historically as a place where people can store money in secrecy. But now countries like the US are cracking down on this practice and making it more difficult for foreigners to use the Switzerland's banking system to hide their assets. For Switzerland's financial services industry to succeed in the long term it must reinvent itself, according to a report from Ernst and Young.

Bolstering fintech could be the answer to Switzerland's financial services problem. The digitisation of financial services is improving the user experience as well as opening up new markets that have historically been difficult to monetise. And institutions that don't innovate will fall behind. Switzerland boasts a number of features that make it a fertile environment for fintech innovation - economic and political stability, a highly educated population, and significant cash holdings. In fact, the country tops the Global Innovation Index published by WIPO.

But Switzerland also faces unique challenges as a fintech hub:

• Burning through capital: Starting a business in Switzerland can be particularly expensive. Salaries, rent, insurance, and cost of living are all very high relative to other markets. And because of Switzerland's location in Central Europe, startups are often expected to launch in many markets throughout Europe almost immediately.
• Engaging young entrepreneurs: Despite being a global leader in innovation, Switzerland has the smallest percentage of young entrepreneurs (ages 18-24) in comparison to other countries competing in the fintech landscape, according to data cited by Ernst and Young.
• The offshore money isn't going to fintech: While Switzerland benefits from troves of cash that could potentially be used for venture funding, the incubator and venture community is relatively undeveloped in comparison to other fintech hubs like London and New York.

The Swiss government could overcome many of these hurdles by taking a more proactive role in developing a fintech community modeling London. Tax breaks and other incentives could help reduce the expense of starting a fintech business in Switzerland while a more permissive regulatory environment for startups would enable fledgling companies to compete with legacy players nationally and globally.

LLOYDS MAKES FINTECH HIRE: Lloyds Banking Group has hired Han Veldwijk as its "head of fintech discovery," according to the Financial News. Veldwijk , who began his new role in January, was previously head of digital transformation at Dutch lender Rabobank. At Lloyds he'll work on developing new fintech products and services and building relationships with London's fintech community. While at Rabobank, he held a similar role, primarily structuring fintech partnerships and starting digital ventures, like a millennial-oriented banking service.

Lloyds is working to improve its digital assets. The firm announced plans in October 2014 to invest £1 billion (€1.2 billion, $1.4 billion) to develop its digital presence across divisions, according to the Financial News.

In the face of disruption from challenger banks, it's becoming crucial for UK high street banks to upgrade digital technology and build relationships in the fintech community.

• Challengers are well-funded. Atom Bank recently closed an £82 million (€105 million, $118 million) funding round led by Spanish bank BBVA, bringing its total to £135 million (€174 million, $194 million) before its launch. And Starling Bank, another millennial-focused challenger, recently closed a £40 million (€62 million, $70 million) funding round - indicating that investors view this as a promising industry,
• Brits are using fintech. 14% of digitally active UK adults have used at least two fintech services in the last month, and that number rises to 25% in London.

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UK TECH FIRMS WANT SETTLEMENT ACCOUNTS: Major tech firms that operate in the UK are reportedly in talks with the Bank of England to gain proprietary access to the country's payments system infrastructure, according to The Telegraph. As it currently stands, fintech firms are forced to pay major banks for secondhand access to the system.

That's extremely expensive for the tech firms, and also forces companies building disruptive technology to rely on the country's major banks - as of now, 400 smaller firms pay 10 large players for access to the system. Current talks are expected to lead to wider industry discussions, with a decision coming by the end of 2016.

Small banks are about to gain access to the UK's Faster Payments Scheme. 10 banking firms have signed letters of intent indicating interest in building systems that allow smaller banks direct access to the UK's payment rails, according to The Telegraph. But fintech firms are still restricted since many do not have banking licenses.

Giving fintech firms access to payment infrastructure will open the door to competition. These firms, which include regulated, low-risk companies like PayPal, could pass on the money they save from direct settlement access to their customers in the form of lower rates for services like wire transfers. That could make them more appealing to customers looking for the cheapest possible payment option, and thereby make digital-oriented firms increasingly competitive in the eyes of major banking institutions.

FINTECH AROUND THE WORLD...

• Istanbul banks are seeking to grow fintech. In partnership with Istanbul University and Ozyegin University, Turkish banking consortium BKM has launched Fintech Istanbul, an industry group that "seeks to nurture the emerging ecosystem through the provision of training and the sharing of ideas and information between banks and startups," according to Finextra.
• US-based Fifth Third bank will add Touch ID to its iOS app. The technology will allow users to use their fingerprint to log in and authenticate a variety of transactions. The bank, which added Touch ID in response to customer requests, saw mobile banking use increase by 43% from 2014 to 2015.