“The world of online retailing was very simple 15 years ago: purchase on account, advance payment and sometimes also credit card were available as payment options. Today, umpteen providers are competing for the favour of merchants and consumers. One payment method would actually be enough, although this opinion is admittedly based on a subjective consumer viewpoint. The reality is different, however. With the establishment of smartphones and similar devices, the number of options is increasing on an almost daily basis and ultimately the final decision lies with the consumer. Germany’s Der Spiegel magazine just recently ran the headline ‘The customer as God’ and indeed the sole success criterion for a payment method is whether it is ‘liked’ or ‘disliked’.
And how are consumers behaving today in the area of online retailing?
Just recently I was once again asked ‘is Switzerland really a country of invoice payers?’ My standard answer is that ‘it depends!’ Which segment, which life situation, which generation, what does the order comprise? The following observation helps in adopting a differentiated view of the overall situation: Swiss consumers are very happy to use their credit card for online retail. They make international purchases with their credit card, whether in the US, Germany or China. They pay for their trips with SBB, Swiss and Ebookers by card and also use their credit card to pay when downloading concert tickets and music online. But in the area of Swiss online retail: they prefer to pay by invoice – if this option is actually offered. Still.
What does this development look like?
Consumers still pay for around 80 % of all online retail purchases by invoice, although this share is falling continuously. Credit cards, PayPal and TWINT are growing more significant day by day and this will also soon be true for debit cards (it is expected that from 2019 both Mastercard and Visa will make their debit cards available in Switzerland for use in e-commerce). Why this is still the case? It is very simple: invoices offer security to consumers in the area of online retail: ‘I pay when the product is delivered’. The fact that this apparent and psychologically important benefit for consumers already exists to some extent with other payment methods is something that consumers still first need to learn. And this brings us to another reason for the slow rate of change here:
People are slow to give up what they are accustomed to
Debit card and credit card providers have already experienced this in Switzerland. Due to our secrecy when it comes to money, which is very much part of our DNA, it took much longer for the credit card to establish itself than was the case in the US, UK, France, etc. A lack of willingness to use the credit card’s credit function also contributed to this delay.
Where do we stand today?
Much heralded mobile payments are – in stark contrast to China – still in their infancy. The current wallet solutions of Apple, Samsung, Google, etc. are credit card payments in disguise without any ground-breaking disruptive technologies in the background. The Swiss banks recently tried to develop and offer proprietary payment systems primarily aimed at their own clients. The direct debiting of payment amounts was unthinkable for Swiss online retailers. The merger of TWINT and Paymit, however, now appears to be building on the knowledge that only a shared ‘open’ payment solution promises success. One that can be used anywhere, does not put up any new technical barriers, works across different systems and is based on the linking of bank/postal accounts. Good things take time!
As pleasing as it is that Switzerland’s financial institutions have joined forces, we online retailers are ‘sad’ that, contrary to the original plans, the fees for the TWINT payment solution are somewhere between those charged as debit and credit card commissions. We would simply also at some point like a payment method with conditions similar to those for stationary retailers. Here too: good things take time and we are confident that digitalisation will allow for further cost reductions in favour of online retailers.
And what is happening around us?
In the EU, various start-ups are busying themselves with this very topic: the EU’s PSD2 requires that from autumn 2019 all European banks grant access to payment providers and merchants for direct account debiting – something inconceivable for the people of Switzerland. You can imagine what this means: if this direct account access is also ‘accepted’ by customers, then we will have real disruptive potential for change in the area of electronic payments (both online and stationary). And prices will plummet.
Conclusion: Swiss solution is desirable
Things remain exciting and new solutions are emerging (and disappearing once more). To date, no new mobile payment method has ultimately succeeded in establishing itself with us. One, however, will become the market leader – it would be great if there was a real European or even Swiss alternative to the American and Asian payment methods... After all, we have learnt one thing in recent months: there remains a great international hunger for data. As you know, those who hold this data are in possession of the new oil. Payment data is oil and Switzerland thus also sits on a small oil reserve of sorts. Metaphorically speaking, we need to watch out that this oil is not pumped out from under our feet.”
Patrick Kessler has headed up the Swiss Association of Distance Selling (VSV) as President since 2008. Since taking up his position, the association’s number of members has grown from 80 to more than 300. Between 2000 and 2007, he had previously served as CFO and the CEO of Quelle Versand and various associated brands in Switzerland. He is viewed as an expert in the Swiss online retail market and is not afraid to prompt his members and the stationary retail sector to think and act with provocative theories.