5 November 2013
The unique SEPA position of Switzerland
Switzerland has a very special position in Europe. The country is not a member of the European Union (EU), but is relying heavily on trade with the rest of Europe. In this blog, Zeno Bauer, Manager Product Management Payments at the Zürcher Kantonalbank, elaborates on the payments structure in Switzerland in relation to the rest of Europe. He also explains the impact of the implementation of SEPA and the decision not to use SEPA direct debit (SDD) in Switzerland. Bauer: “Even though Switzerland is not a member country of the EU, it was and still is of prime importance to participate in SEPA.”
Swiss Payments Council
The Swiss Payments Council (SPC) was established ten years ago. The council consists of all major Swiss banks including the bank groups, the Swiss National Bank, the Swiss Bankers Association and representatives of other Swiss organisations with impact on the payment industry.
The SPC offers a platform to discuss all major topics concerning the payment services, not including card schemes and ATM. It actively influences the strategy of the payment services within Switzerland. The activities to join SEPA have been initiated by this body.
Financially, the SPC is carried by the SIX Interbank Clearing Ltd.
The Swiss National Bank is informed about all the SEPA activities and participates in discussions if necessary but its supervisory function is limited to all Swiss Franc topics.
Switzerland and SEPA
The EU is Switzerland’s most important trading partner and the Euro currency is by far the most significant trading currency. Therefore an efficient, competitive and reliable European payment service is crucial for the Swiss import and export industry, consumers and the whole banking industry. Bauer: “Even though Switzerland is not a member country of the EU, it was and still is of prime importance to participate in SEPA.”
SEPA in Switzerland
For the time being, 147 financial institutions are participating in SEPA credit transfers (SCT), seven at core SDD and four at B2B SDD level. Switzerland complies with the SEPA rulebook and the country’s availability for SCT is assured to nearly 100 per cent. However, the availability of SDD solutions is not expected before October 31st , 2016.
“Switzerland’s exceptional position within SEPA is the result of the country’s non-EU membership and the fact, that the Euro is a foreign currency for us. You have to bear in mind that by far the largest part of the Swiss payment traffic is denominated in Swiss francs. The part of Euro payments is rather small and contributes to only a few per cent of the overall volume.”
Even though Switzerland is not guided by the Directive of Payment Services (PSD), which is a recent piece of EU legislation designed to harmonise the payment services laws across Europe, the country is obliged to apply rules of equivalent quality. Therefore the Swiss banks using SEPA are in a position to charge for SEPA payments coming from Switzerland. Unfortunately this business opportunity leads to the situation that in some cases the payee is charged for such transactions. “Our exceptional position has, in such cases, its price,” stated Bauer.
Benefit for customers
The efficiency gains through SEPA (e.g. increased STP rate) are passed on to the customers by the Swiss banks to the full extent. In Switzerland, incoming payments have been charged in the fewest cases. On the other hand, the prices for outgoing payments in the Euro area range around 4 Euros and higher per transaction. Many banks are charging SEPA payments analogical parallel to domestic payments. This means that SEPA payments sent to the banks through electronic channels are free of charge for private customers in most cases.
SEPA Quo vadis?
The development of the PSD will lead to further modifications also in Switzerland. The implementation of the ISO 20022 standard for Swiss francs and Euro payments will start from the middle of 2016 onwards and will be completed in 2018.
Is the implementation going as planned or are there any difficulties? Bauer: “From a Swiss point of view we are satisfied with the progress of SCT. The de facto discrimination regarding the pricing structure should be eliminated. On the other hand, we are not fully satisfied with the SDD procedure. Recently we have decided within SPC not to adopt this procedure for the Swiss francs. Inquiries with companies that are payment receivers have shown us that a large majority consider this procedure as too complicated. As an alternative we will bring the Swiss direct debit solution as close as possible to our ‘E-Rechnung’, the existing Electronic Bill Presentment and Payment solution already implemented by the Swiss banks. This should enable the payer to switch from a paper-based solution to an electronic channel.”
In retrospect, what could have been done differently or better? Bauer: “Looking back, I would have strongly appreciated if instead of developing the SDD the necessary resources would have been directed to an electronic payment schemes for the advantage of all market members.”