Cheaper euro transfers benefit firms

A Sepa form is revealed Keystone

Swiss firms stand to make savings on their euro currency business with the introduction of an improved European-wide electronic bank transfer system earlier this week.

But Swiss banks could pay hundreds of millions of francs to convert their systems to plug into the new European Union standard. Failure to do so would have risked losing business to rivals.

The much-heralded Single Euro Payment Area (Sepa) will save businesses across Europe an estimated €123 billion (SFr197 billion) in banking charges in the next six years. There is also the potential for a further €238 billion customer windfall if it is adapted for e-invoicing.

Switzerland is one of 31 countries to adopt the non-cash euro payment system that stops banks charging higher fees for cross border transactions than domestic transfers. It is the same principle as mobile phone roaming charges that were recently abolished in the EU.

However, converting their systems has cost Swiss banks an estimated SFr100 million so far with a potential SFr100 million, plus lost fees, to be added on top.

“It is very complicated and expensive to set up so not all banks are keen on this new payment system,” Germain Hennet of the Swiss Bankers Association told swissinfo.

“Banks have to pay to adapt their system and they are losing fees, so it is not a good deal. But they have been forced into these measures to avoid losing business to rivals and to protect their reputation.”

Only 64 out of well over 300 Swiss banks were hooked up to Sepa when it launched on Monday. However, many do not have retail operations and some bigger banks have agreed to process payments on behalf of smaller rivals. Together they cover around 90 per cent of the potential euro payment volume out of Switzerland.

Consumers will benefit though. Changes will include being able to use their debit cards across the euro area, their accounts will be able to be debited from anywhere in that zone and they will be able to keep only one bank account even if they move countries, instead of having to open a new one.

Full benefit unknown

The Swiss financial sector has so far avoided becoming entangled in bilateral treaties with the EU. But this is the second occasion within months that it has been forced to comply with EU standards, after an overhaul of the financial markets last November.

The EU is Switzerland’s most important trading partner, both in terms of exports and imports.

Businesses broadly welcomed the development, but it is too early to tell just how much impact it will have, according to the manufacturing sector’s umbrella organisation, Swissmem.

“It is difficult to calculate in real figures how big the benefit will be,” chief executive Hans-Ulrich Bigler told swissinfo. “The main advantage is that it will bring down administrative costs and it will be a quicker and easier system. But it will not have a big impact on company results.”

Swiss-based Nestlé, the world’s largest food producer, also doubted that Sepa would affect profits too much.

“Any system that simplifies payments is something an internationally active company appreciates, but the benefit will be very modest,” spokesman François-Xavier Perroud told swissinfo. “It is not going to be very visible in our accounts.”

swissinfo, Matthew Allen in Zurich

Key facts

The EU absorbs some 62% of all Swiss exports, making it the largest customer of Swiss goods.
Some 82% of all imports coming into Switzerland come from the EU.
After the US, Switzerland is the EU’s most important export market.
Around 400,000 Swiss nationals live in EU member states while 900,000 EU citizens live in Switzerland. Added to that are an estimated 700,000 cross border commuters.

In brief

The European Payments Council in Brussels set the Sepa credit transfer system rolling in 2002.

It has been billed as the latest step towards the realisation of the European single payments market since the euro currency was introduced in 2002.

All 27 European Union countries have adopted the new procedures along with the European Free Trade Association states of Switzerland, Norway, Iceland and Liechtenstein.

It will be further developed to allow direct debits by 2009. The system will also allow bank customers to use debit and credit cards at ATMs and stores throughout the European zone by the time the project is completed in 2010.

At present more than 4,000 banks and financial institutions are participating in Sepa.