The advantages at a glance
Harmonizing payment traffic will create the basis for an end-to-end digital payment process. This will pay off: by reducing the amount of manual work involved in entering payments and the number of credit transfers with errors, the move will save private individuals and – more particularly – organizations time and money. Financial institutions will be able to digitize compliance with the new anti-money laundering requirements on an end-to-end basis.
Fewer errors, less work
- IBAN will replace all existing account numbers at financial institutions. Thanks to this standardization, e-banking applications will be able to recognize even before the transfer takes place whether the IBAN entered is correct. If there has been an error this will be notified directly for immediate correction by the client. This will reduce the amount of work, time, and expense for inquiries.
- The IBAN, as well as all the other payment information, is saved in the QR code, and can thus be captured digitally with a smartphone or reader. This is more efficient and reduces errors to virtually nil. More
- Credit transfers to the Single Euro Payments Area (SEPA) will be much easier following introduction of the IBAN across the board. Only one number will be required: the IBAN. More
- The same standard (ISO 20022) will be used for both domestic and foreign payment traffic. This will enable organizations to work more efficiently by exchanging all the information necessary for a payment on an automated basis end to end.
- Communication between financial institutions and their clients will be much quicker and more precise. Organizations will receive detailed status information and error messages in real time, enabling them to respond immediately and easily. With the appropriate accounting software, error messages will be shown directly in the payment software, from which it will also be possible to submit credit transfers to the bank. More
- The Swiss financial industry intends to incorporate the functionalities of the different direct debit procedures used by the banks and PostFinance in a single market solution. More
Money available more quickly
- Until now, cash deposits at post office counters have run via a settlement account at PostFinance and from there to the relevant bank. This process will be shorter after the changeover.
- Thanks to lower error rates fewer inquiries and investigations will be necessary, saving time. This means that organizations and private individuals will have quicker access to their money. SMEs will be able to use their free cash more effectively and schedule how they meet their own obligations more effectively.
- Corporate clients will be able to optimize their cash management by requesting account statements several times a day.
- A combination of quicker and more precise communication between financial institutions and their clients, and a lower error rate, will enable companies to control their cash flow more precisely, reduce their cash holdings and thus the cost of capital.
- With payment procedures brought into alignment, organizations will be able to merge accounts, giving them even greater control of their finances and reducing account management expenses.
- Following the changeover it will be easier for financial institutions to meet the additional regulatory requirements with regard to money laundering and the financing of terrorism.
- Structured data fields will make it more straightforward to evaluate data when clarifying the background of transactions, report suspicions, and meet documentation requirements.
- Financial institutions will be able to comply with their duties of due diligence more efficiently, and will be better prepared in terms of technology for future requirements. More
A worthwhile investment
A study conducted by the consulting firm Deloitte on behalf of the Swiss financial industry* indicates that annual process and capital costs will be around CHF 271 million lower than at present following the changeover to the new system. CHF 197 million, or three-quarters of these savings, will fall to private companies, and CHF 9 million to the public sector. Financial institutions themselves will save some CHF 65 million a year, and will contribute CHF 550 million of the investment costs. The private sector can probably expect to have to pay one-time costs of CHF 500 million, which it will be able to amortize within around 2.5 years; the public sector’s costs will amount to CHF 80 million. According to Deloitte’s calculations, private households will save some CHF 1.2 million a year on inquiry fees.
Helping strengthen the economy
The costs of this investment are put into perspective when considering the importance of payment traffic for the economy as a whole. Payment transactions make a key contribution to Switzerland’s economic output by supporting the entire range of domestic and international business processes. Every year, payments worth around CHF 39 trillion are processed via the interbank and customer payment systems. This means that the equivalent of 60 times Swiss GDP is transferred via the financial industry’s infrastructure. The investment will facilitate the efficient fulfillment of existing and future regulatory requirements and the process of digital structural change taking place in many areas of business and society. Harmonization of payment traffic will thus also help ensure that Switzerland can make the most of its opportunities in an ever-more digital world. More
*Deloitte (2016): Study into the impact of payment system harmonization in Switzerland