Swiss expats thrown partial banking lifeline by digital disruptor

Swiss expats have found it increasingly difficult to get the most basic banking services in recent years. © Keystone / Gaetan Bally

Digital bank Yapeal is offering basic accounts to Swiss people living in neighbouring countries that undercut the rising fees of mainstream competitors. 

Swiss expatriates have long complained that banks in their homeland are giving them a rough deal with extra costs and account closures.

Attempts by the Organisation for the Swiss AbroadExternal link (OSA) to make the state-owned Postfinance bank offer the same services to expats as Swiss residents have been rejected by parliament.

Banking restrictions followed a global crackdown on tax evasion, led by the United States, which heaped increasing compliance costs on Swiss banks. Their answer has been to pass on the costs to overseas clients and in some cases to terminate services.

Price comparison research group Moneyland estimates that Swiss expats pay an average CHF300External link ($328) in extra costs per year compared to people living in Switzerland.

Expansion plans

Yapeal, which became the first Swiss entity to receive a fintech banking license last year, is attempting to capture a market share of this dissatisfied client segment with a cut-price model.

It says it can do this because it has lower personnel expenses and does not operate physical bank branches. Because Yapeal is a digital bank, it does not require people to come to Switzerland to open accounts.

“We are well aware of the problems that the Swiss abroad are having to open and maintain accounts. They are facing higher costs and discriminatory fees,” said Daniel Bänziger, Market Development Lead at Yapeal.

Yapeal has launched three types of accountExternal link. One comes with no annual fee but has reduced services that attract transaction fees and can only be used in Switzerland. The other two are accounts with annual fees of CHF49 or CHF89 and offer a greater variety of services and fewer transaction fees.

The service has been launched in Germany, France, Italy, Austria and Liechtenstein with plans to increase coverage to another 15 countries next year, mainly in western Europe.

In addition to the 776,000 Swiss people living abroad, Yapeal is also targeting the 340,000 people living in neighbouring countries who cross borders to work in Switzerland.

The OSA said it “welcomes the initiatives of financial institutions that recognise the banking problems of the Swiss abroad and offer them a concrete and price-optimized banking solution that takes their specific needs into account.”

Fintech restrictions

Opening a Swiss account whilst living in the US poses a particular problem as the American authorities impose severe restrictions and reporting obligations on banks. For this reason, Yapeal does not currently offer any of its services to US residents.

“Depending on the reaction of the market, we would consider getting rid of this restriction for people living in the US if there is enough demand,” said Bänziger. This could equally apply to South America or Asia he added.

While the Yapeal service offers some respite for Swiss expats, it also has restrictions. The fintech license forbids the bank to pay interest or invest client assets. It also restricts total customer deposits to a maximum of CHF100 million.

That rules out the possibility of providing savings accounts or offering loans. The accounts can only be used for basic withdrawals and payments within Switzerland or cross-border.

Yapeal has no immediate plans to apply for a full banking license but is exploring the option of partnering with a key investor, Bank Vontobel, to expand its range of services in future.