Mr Kraenzlin, why is Switzerland a ‘cash country’?
Indeed, this is something that I am also personally interested in, as I myself am a ‘cashless person’. Switzerland, however, is a country in which cash is king. This is related to the characteristics of cash that the people of Switzerland obviously miss when making cashless payments. First of all, cash can be used everywhere. Secondly, it always ‘works’, irrespective of whether the relevant card infrastructure is available or not. Thirdly, cash makes budget control easier than is the case with cashless payment methods. Many fear that they may lose an overview of their outgoings when using cashless payment means and spend too much money as a result. And fourthly, data protection is also an issue. Only those who pay with cash enjoy full anonymity.
And why do you not pay with cash?
I simply find it more practical to pay with my smartphone. This may possibly also be age-related. As a ‘cashless person’, I pay particular attention to where I can make cashless payments and deliberately make purchases in those shops where this is possible.
In Switzerland, larger amounts are also today often paid in cash. For example, more than one-third of all payments in excess of CHF 1000. Why is this the case?
This is down to habits that appear to be firmly rooted in Switzerland. Larger transactions that are settled in cash tend to take place in very specific situations that do not occur on a daily basis. When purchasing a car, for example a used vehicle, it is still common to pay with cash. Large notes are also used when making significant payments at post office counters or when buying furniture.
Such payments cannot yet be replaced by mobile payment systems such as TWINT. Among other reasons, this is because the maximum payment amounts are limited for such solutions.
At present, almost 450 million Swiss banknotes are in circulation. It costs around CHF 0.40 to produce each banknote. Would it not be cheaper to get rid of cash?
This is not an issue for us. Cash supply is one of the statutory duties of the National Bank. Incidentally, the same also applies to cashless payments, which under the Swiss National Bank Act we are required to facilitate and safeguard. The issue of cost is therefore not decisive for us. Notwithstanding this, it should also not be forgotten that cashless payments also generate costs.
There are estimates of the private and social costs of payment transactions, which account for around 1% of GDP. And with respect to their costs, both payment methods more or less balance one another out.
Cash is made digital with the TWINT app. How do you view the future of mobile payments in Switzerland?
Our survey has shown that around 40% of the population is familiar with mobile payment forms in the sense of payment apps but only 10% makes use of this option. I believe that mobile payments are also set to advance further in Switzerland.
The reason for this is the smartphone, which is assuming an ever more significant role in everyday life. Usage will also likely depend on the level of availability of the payment options and the associated costs. If both of these aspects are right for consumers, this payment method will become more widespread.
Then, however, there are also still subjective factors that play a large role. People who are in a rush and have an affinity to cash will primarily pay with cash in such situations as they believe that this is quicker. People who are used to making cashless payments will also do so when faced with stressful situations.
Our investigation shows that in terms of value 55% of transfers are made in a cashless manner and 45% with cash. The opposite is true when we look at the number of transactions: 70% can be allotted to cash payments.
Over the past ten years, the share of value accounted for by cashless payments has only grown very slowly, by a total of 10% to be precise. Nevertheless, I believe that the use of mobile payment methods will experience stronger growth in future. Smartphones have now become a highly established part of everyday life and I see this fact as being the main driver of this development. An important prerequisite for this growth, however, will be that data protection is ensured. Should instances become known in which data has been misused, a trend reversal in the direction of cash cannot be ruled out.
Do you use TWINT yourself?
I use various payment apps as well as contactless payments and also make use of TWINT. I use these payment forms wherever I can for all possible purchases.
You conducted this survey in 2017. How will the people of Switzerland be paying in 2027?
I suspect that the share of mobile payments will increase significantly over the coming decade. As I said, however, it should not be forgotten that in the past too the decline in the use of cash has only progressed very slowly.
An important factor, however, will be how attitudes towards the four characteristics of cash mentioned at the beginning change, i.e. with respect to possible use, availability, data protection and the options for efficient budget control when using cashless payment systems.
And it is here that TWINT must succeed in demonstrating that users can also find these qualities with its solution.
Your President has mentioned in interviews that TWINT is a very significant innovation that allows for users to access their bank account around the clock. What do you say to this?
I believe that these around-the-clock payments are a good example of a development driven by demand: if innovation can be used to satisfy demand from the population, this is certainly a very positive thing for the economy.
Sébastien Kraenzlin, Head of Banking Operations at the Swiss National Bank in Zurich