Switzerland Cashless Behaviour To Change Permanently
Introduction to Switzerland
An overview of Switzerland's currency, population and key statistics.
Switzerland's official currency is the Swiss franc (CHF), which is subdivided into several denominations of banknotes and coins, catering to a diverse array of transactions. The banknotes are available in denominations of 10 CHF, 20 CHF, 50 CHF, 100 CHF, 200 CHF, and the higher 1,000 CHF note. The coinage includes 5 rappen, 10 rappen, 20 rappen, ½ franc (50 rappen), 1 franc, 2 francs, and 5 francs.
Switzerland is making progress in the development of a digital version of the franc for instant transactions on its primary stock exchange. The trial, known as Project Helvetia, demonstrated the feasibility of a central bank digital currency capable of immediate trade payments convertible back to Swiss francs. However, the Swiss National Bank (SNB) has not yet confirmed the full implementation of the project.
Switzerland had an estimated population of 8,654,622 in mid-2020, according to UN data. Worldometer's analysis of the latest UN data indicated a population of 8,695,315 as of February 2021, with 74.1% residing in urban areas, primarily in Zurich and Geneva. The country had around 8.42 million active internet users as of January 2021, according to DataReportal. The United Nations estimated the Swiss population at 8,796,669 as of July 1, 2023. The median age of the country's population is approximately 43.1 years.
Switzerland boasts four official languages: German, French, Italian, and Romansh. These languages mirror the nation's diverse linguistic regions, with German being the predominant tongue, followed by French and Italian in specific locales. Romansh, on the other hand, enjoys less frequent usage and is confined to certain regions.
Switzerland had a gross domestic product of $807.71 billion in 2022, accounting for 0.36% of the total global economy, according to World Bank data. Projections by the Organisation for Economic Cooperation and Development meanwhile suggest a significant deceleration in the country's GDP growth, with a forecast of 0.6% for 2023, followed by a slightly higher 1.2% in 2024. This represents a notable slowdown compared with the robust post-pandemic expansion, which was the Swiss economy growing at 4.2% in 2021 and 2.1% in 2022. As a result, the country's economy is expected to operate below its full potential until the second quarter of 2024.
Internet & mobile phone trends
Around 98.9% of internet users in the country fell within the 14 to 19 age range as of 2020, as reported by Statista. Statistics released by DataReportal showed that the country had a total of 8.42 million internet users as of January 2021, having increased by 1.8% or approximately 146,000 users from the previous year. Additionally, the country's internet penetration rate stood at 97.0% in January 2020 while 80% of the population possessed smartphones.
Switzerland's robust levels of internet, banking, and smartphone usage lay a solid foundation for developing its e-commerce market. The PPRO Report shows that the county had an average annual revenue per paying user of $2,623 in 2020. Swiss consumers primarily engage in cross-border e-commerce, with popular purchases from China, Germany, and the United States.
Furthermore, the PPRO Report highlights that an impressive 98% of Swiss individuals had bank accounts as of 2020 while 65.5% were credit card holders. These statistics underline Switzerland's strong financial infrastructure and its population's digital readiness.
Summary of fiscal policy
Switzerland continues to be confronted with uncertainty and ongoing challenges due to the prolonged impact of the pandemic. A sudden surge in infections, coupled with the emergence of a new variant in late 2021 had cast doubts over the possibility of a swift economic recovery.
On the positive side, the economy showed resilience and began to rebound. Despite a strong performance in 2022, Switzerland is facing a more complex economic landscape in 2023. The country's GDP growth is projected to slow to 0.8% for the year, down from 2.1% in 2022, primarily due to a weaker global growth trajectory. In response, monetary authorities are taking decisive actions to address financial stability concerns.
While the general government fiscal surplus will persist, it is likely to be lower than in 2022, given the absence of SNB profit transfers and due to increased expenditure related to energy security and refugees. Switzerland is encouraged to continue leveraging its fiscal policy flexibility without undermining the disciplined approach maintained by the debt brake mechanism. This fiscal instrument ensures responsible public finances and provides essential adaptability to tackle the ongoing challenges stemming from the coronavirus crisis.
How people pay in Switzerland
An overview of how people in Switzerland choose to make payments.
Traditional payment methods
The primary traditional payment methods used in Switzerland
A Visa credit/debit card is a financial payment card issued by banks or financial institutions. It allows users to make purchases, withdraw cash, and be used online and in person. Visa's processing network can handle over 65,000 transaction messages per second.
Mastercard is a worldwide payment network that links financial institutions, merchants, and individuals, facilitating seamless transactions. This renowned company provides a range of credit and debit cards issued through partner banks. Depending on the specific bank, customers may enjoy supplementary benefits such as rewards programs, cashback offers, and insurance coverage.
American Express cards encompass a range of payment cards provided by the multinational financial services corporation, American Express Company. The Amex card portfolio includes diverse options like credit cards, charge cards, and prepaid cards. Renowned for their broad acceptance among merchants, these cards grant cardholders access to various advantages, including perks, rewards programs, travel benefits, and dedicated customer service assistance.
The Single Euro Payments Area (SEPA) is an EU initiative that harmonises direct debit payments across countries in the eurozone. It ensures consistent payment processing for merchants and offers consumers the same level of security and convenience. SEPA covers all banks that provide euro-denominated direct debits and uses standardised identifiers like BIC and IBAN for payment transactions. It aims to create a unified payment market and promote cross-border trade within the eurozone.
The mobile payment application TWINT provides users with a convenient and secure smartphone payment method. This versatile app enables cashless transactions at various points, including cash registers, supermarkets, online shops, and farm shops. Beyond its payment capabilities, TWINT offers additional features, such as sending money to friends, purchasing train tickets, and facilitating club donations. It is Switzerland's preferred mobile payment option, with over 3 million users.
Alternative payment methods (APMs)
Alternative payment methods
Apple Pay, a mobile payment service from Apple Inc, allows users to make in-person, online, and in-app payments. It replaces chip and PIN transactions at contactless terminals.
PayPal is a frequently used digital payment system that allows clients to use their PayPal accounts, debit/credit cards, or bank accounts. Customers use PayPal for secure online shopping and to send/receive money.
Google Pay is a digital wallet and payment service developed by Google. It allows users to make secure payments using their mobile devices or computers. It supports various payment methods, offers compatibility across different devices, and provides features like loyalty program integration and transit ticketing. Google Pay prioritises security and convenience with tokenisation and biometric authentication. It has expanded to include digital banking services and continues to evolve.
With Amazon Pay, consumers can easily pay for their purchases on the website using the information they have stored with Amazon. It eliminates the need for them to set up a new account with a different merchant. In addition, they can also make purchases at restaurants and stores using the app.
Founded in 2005, Klarna is a global payment and shopping service. It offers flexible payment options, including bank transfers, BNPL, and instalments. Klarna's Buyers Protection policy ensures consumer protection. The payment options are integrated into the checkout process of partnering merchants. With 90 million active consumers and over 250,000 merchants in 17 countries, Klarna is a trusted and popular choice for convenient and secure payments.
Accepting payments in Switzerland
A guide to accepting payments in Switzerland
How to accept online payments in Switzerland
Before accepting online payments, you must determine which methods you prefer. Then you can choose a payment gateway provider, a service that authorises and processes online payments with their specific system.
Although there are plenty of payment gateway options in Switzerland, the general process for online payments typically involves an acquirer, issuer, retailer, and cardholder in the following steps:
The cardholder initiates a payment by presenting their payment card to the retailer to purchase goods or services.
The retailer sends the payment details to the acquirer, who processes the payment request and sends it to the payment scheme (such as Mastercard or Visa).
The payment scheme sends the payment request to the issuer (such as a bank or licensed issuer) who issued the card to the cardholder.
The issuer checks if the cardholder has enough funds to complete the transaction and approves or declines the payment request. If the payment is approved, the issuer sends an authorisation code to the payment scheme.
The payment scheme sends the authorisation code to the acquirer, which then sends it to the retailer, completing the transaction.
How long does an international payment from Switzerland take?
The payment processing time may vary depending on the method and the recipient's bank. For instance, online money transfers through platforms like PayPal can quickly and conveniently send money to multiple destinations.
Bank debit/credit cards: International payments with bank debit or credit cards may take a few minutes to a few hours, depending on bank processing times.
Online money transfers: Platforms like PayPal can process international payments within minutes to hours, depending on the service and destination country.
Wire transfers: Traditional bank-to-bank transfers via SWIFT or wire may take one to five business days or longer, depending on the destination country, intermediary banks, and transaction requirements.
Merchant fees for online payments in Switzerland depend on the payment method and the merchant services provider used. Here are some examples of typical merchant fees for online payments in Switzerland:
Credit and debit cards: Merchant fees for accepting online credit and debit card payments can range according to the transaction amount. It also varies depending on the type of card used and the merchant services provider.
Bank transfers: Bank transfer fees can vary depending on the bank used, with some banks charging a flat fee per transaction and others charging a percentage of the transaction amount.
Other fees surrounding online payments in Switzerland include charges incurred by merchants, payment processors, and financial institutions involved in the payment processing chain. Below are some common fees:
Interchange fees: Interchange fees are charges paid by merchants' banks to cardholders' banks to cover the costs of processing card transactions. These fees are usually based on a percentage of the transaction value and can vary depending on the type of card used and the merchant's industry.
Payment gateway fees: Payment gateway providers charge a fee for processing transactions on their platform, which may be a percentage of the transaction value or a flat fee per transaction.
Cross-border fees: If a merchant accepts payments from customers outside the country, they may be subject to additional fees for cross-border transactions, including currency conversion fees and international processing fees.
Merchant discount rate: A processing fee that merchants are charged for transactions made using credit or debit cards. This fee generally falls within 1% to 3% of the total transaction amount.
Security challenges of online payments in Switzerland
As the volume of online payment transactions continues to rise, the potential for various forms of fraudulent activities also increases. A 2022 report showed that over 85% of online retailers in Switzerland experienced instances of fraud. Globally, the losses stemming from online payment fraud have steadily climbed, projected to double between 2018 and 2023.
In Switzerland, multiple solutions are deployed to counteract online payment fraud. One notable strategy involves the implementation of fraud prevention solutions, which offer real-time monitoring to detect and prevent fraudulent activities. Additionally, there's a focus on enhancing online security measures to address consumer concerns. Numerous institutions are heightening online security precautions as a direct response to these concerns, working to ensure a safer online environment for transactions.
Key sectors & industries in Switzerland
The top 10 industries in Switzerland, as reported by the country's Federal Department of Foreign Affairs and various sources, encompass:
Banking and Finance
Switzerland is renowned for its robust banking and finance sector, hosting global wealth management and financial services leaders.
While agriculture contributes less than 1% to Switzerland's GDP, the government actively supports it through subsidies for farmers and high tariffs to promote domestic agricultural practices.
This industry significantly drives the Swiss economy, accounting for 25% of its GDP. The country is home to major players in pharmaceuticals, food products, chemicals, and construction materials.
The tourism sector is vital, providing employment to approximately 4% of the workforce and playing a crucial role in the economy.
Watches and Clocks
Switzerland is globally renowned for its high-end watches and clocks, with significant exports to Asia, the Americas, and Europe.
This sector accounts for approximately 74% of Switzerland's GDP, employing a substantial portion of the workforce.
Commodities and trade
Switzerland holds a significant position in the global commodities trade, housing numerous companies actively engaged in this industry.
Swiss insurance companies are esteemed leaders in their field, delivering essential financial services worldwide.
Research and Development
Switzerland invests over CHF 22.5 billion annually in research and development, with the private sector contributing more than two-thirds of this amount.
Small and Medium Enterprises
Over 99% of small businesses in Switzerland employ less than 250 staff members.
Imports and Exports
As reported by the Observatory of Economic Complexity, Switzerland's leading exports in 2021 included gold ($86.7 billion), packaged medicaments ($48.5 billion), vaccines, blood, antisera, toxins, and cultures ($40.3 billion), base metal watches ($15.2 billion), and nitrogen heterocyclic compounds ($14.6 billion). Significant exports from Switzerland included machinery and equipment, chemical-pharmaceutical products, watches, textiles and apparel.
Simultaneously, Switzerland's primary imports during the same year included gold ($83.8 billion), packaged medicaments ($28.4 billion), vaccines, blood, antisera, toxins, and cultures ($11.2 billion), cars ($10.2 billion), and jewellery ($8 billion). Furthermore, raw materials, food, vegetable oils, and fuel collectively accounted for about one-quarter of Switzerland's total imports.
Regulation in Switzerland
The regulatory environment of Switzerland
Summary of the regulatory environment in Switzerland
To maintain fairness and operational smoothness in business ventures in Switzerland, entrepreneurs are required to comply with a range of laws and regulations, which include:
Company law: This includes regulations governing companies' establishment, operations, and dissolution.
Employment law: This includes regulations governing employment contracts, working conditions, and employee rights.
Product liability law: This includes regulations governing the legal liabilities and responsibilities of manufacturers, sellers, distributors, and other parties involved in the production and sale of goods.
Intellectual property law: This includes regulations governing copyrights, patents, and trademarks.
Competition law: This includes regulations governing competition and antitrust matters to promote fair competition.
Consumer protection law: This includes regulations governing the rights of consumers, product safety, and advertising standards.
Data protection law: This includes regulations concerning the collection, use, and storage of personal data.
Like many other nations, Switzerland has some governmental entities and rules overseeing those various regulations. In Switzerland, the primary legal framework governing corporate governance practices is found in Title Twenty-Six of the Swiss Code of Obligations ("CO," SR 220), which specifically pertains to Swiss corporations.
Meanwhile, Switzerland's labour laws are characterised by clear and explicit regulations, including limitations on weekly work hours, stipulations for overtime compensation, and mandatory annual paid leave. The Swiss Confederation consists of 26 cantons, each enjoying autonomy. These cantons exercise competencies not vested in the Confederation.
How card payments are regulated in Switzerland
In Switzerland, the regulation of payment standards falls under the purview of the SNB and the Swiss Financial Market Supervisory Authority (FINMA). It's important to note that Switzerland, not a member of the European Union, is not bound by European Directive 2011/7/EU.
Swiss law does not establish any mandatory minimum or maximum payment terms. The guiding principles of contract law, particularly contractual freedom, apply in this context. Consequently, parties can mutually agree upon extended payment terms without specific prerequisites. However, this contractual freedom is subject to the restriction that it must not violate the law or public morals.
Do I need a licence?
Yes. But Switzerland offers a relatively straightforward process for establishing your own company. While specific regulated fields in the country, such as medical, educational, and social professions, as well as various sectors within individual cantons (like traffic, architecture, and legal professions), may require special authorization, the overall process is conducive to entrepreneurship.
There are various resources and agencies available to aid entrepreneurs at different stages of their business establishment journey. The State Secretariat for Economic Affairs facilitates this process through its online portal, EasyGov.swiss, providing valuable support for setting up a business.
Payment solutions in Switzerland
An overview of how to accept payments from customers in Switzerland
Payment gateways and providers in Switzerland
Due to the rise of payment methods in Switzerland, many businesses can now accept various types of transactions. This has prompted them to find a solution that will allow them to accommodate their customers' varying needs. With the support of APEXX's POL platform, a central hub for banks and payment methods can be created.
One of the main advantages of the POL system of APEXX is its ability to support different payment methods. It also has various features designed to help companies improve their efficiency.
Integrating the functionalities of APEXX's payment processing solution into existing systems is effortless. Through its pre-built APIs and plugins, organisations can easily integrate it with various payment platforms, such as POS terminals and e-commerce shops. Its flexible nature helps make operations more effortless and minimises potential issues and disruptions.
In Switzerland, companies rely on the capabilities of the payment processing solution of APEXX to improve their operations and handle various payment methods. With its adaptable framework, businesses can handle different types of payments and provide better customer service.
Cheapest payment solutions in Switzerland
To reduce fees in their payment stacks, merchants in Switzerland can implement the following strategies:
Negotiate fees: Merchants should negotiate with their payment providers for better rates, including transaction fees, interchange fees, and monthly fees.
Choose a suitable payment provider: Merchants should research and compare different payment providers to select the one that offers competitive rates and low fees.
Use alternative payment methods: Merchants can reduce fees by using alternative payment methods such as e-wallets or bank transfers instead of traditional card payments.
Prevent chargebacks: To avoid chargebacks and additional fees, merchants can offer clear product descriptions, prompt customer complaint resolution, and refunds when necessary.
Implement fraud prevention measures: Merchants should adopt fraud prevention measures to prevent fraudulent transactions, which can lead to chargebacks and additional fees.
Monitor payment processing fees: Merchants should keep a close eye on their payment processing fees and use payment analytics tools to track their expenses and identify areas where they can reduce costs.
Merchants can also consider using payment aggregators such as APEXX, which allow them to accept multiple payment methods through a single platform, reducing the need for multiple payment providers and lowering costs.
BNPL in Switzerland
The buy now, pay later (BNPL) market in Switzerland has experienced rapid expansion in recent years. As per a Statista report, the Klarna app witnessed a surge of 70,000 more downloads in 2022 compared with its launch in Switzerland in 2021. Klarna, the Swedish fintech company that officially entered the Swiss market in June 2021, stands out as a notable international player in the BNPL field. TWINT is expected to introduce instalment payments to compete with Klarna or potentially become a significant BNPL player in Switzerland.
Switzerland's BNPL payment sector has shown robust growth over the past four quarters, driven by increased e-commerce adoption and the economic impact of the pandemic. The long-term growth prospects for the BNPL industry in Switzerland remain promising. The adoption of BNPL payments is projected to steadily increase at a compound annual growth rate of 19.9% between 2022 and 2028. The country's BNPL gross merchandise value is forecasted to rise to $7.4 billion by 2028 from $1.7 billion in 2021.
Merchants in Switzerland can take advantage of the services offered by APEXX to capitalise on the increasing acceptance of BNPL and the number of payment providers. APEXX also allows them to manage their operations more effectively under one platform.