Cash No Longer Is Switzerland’s Top Payment Method, SNB Says

(Bloomberg) — Debit cards just overtook bills and coins as the most widely used payment method in Switzerland in a sea change for an economy that long stood out from peers for its obsession with cash.

Some 35% consumer transactions in stores were settled by card last year, with physical money accounting for 30%, according to a Swiss National Bank survey published Tuesday. That compares with 21% and 70% respectively in 2017. Another 18% were settled using mobile payment apps and 14% via credit cards.

“International comparisons show that German-speaking countries in particular are very attached to cash, unlike the Netherlands and Scandinavia,” said Alexander Koch, an economist at Raiffeisen Switzerland. “But the pandemic — which put the hygienic challenges of handling bills and coins in focus — has accelerated the move away from it also here.”

Many consumers “then realized that it’s indeed more convenient to pay without cash,” he added.

Physical money is an emotive issue in Switzerland, where every inhabitant on average holds the equivalent of $10,481 in bills and coins. That’s the second-largest holding of all economies where the Bank for International Settlements collates data.

But over the past years, the signs of dwindling usage have become clearer. The SNB said in October that public transport operators have plans to curtail cash acceptance, and payment apps — especially the popular domestic solution Twint — are now more widely accepted at businesses than cards.

“Today, it’s common practice to pay with Twint at flea markets, farmers’ markets and village fairs,” Koch said.

Regardless of this, the Swiss government said last year that it will support a popular initiative seeking to enshrine the existence of cash in the constitution. Unless the campaigners of a right-wing group withdraw their proposal, a vote on this will be held in the coming years.

The SNB maintains that it remains agnostic to the means of payment citizens want to use. Still, the central bank, government and private sector have convened an expert group to identify problems in the supply of physical money if they arise. 

In a separate study on Tuesday, the SNB estimated that Switzerland’s infrastructure for cash access accrues costs in a range of 640 million francs ($720 million) to 880 million francs per year, costing between 70,000-90,000 francs for each teller point.

That compares with 41,000 francs in Finland and 83,000 francs in Poland. Expenses vary significantly by how much cash is dispensed through ATMs as opposed to via more expensive bank branches, the central bank said. 

President Martin Schlegel has reminded citizens that the infrastructure costs mean that availability of bills and coins will also be determined by how widely they are used.

“It’s about preventing a vicious circle,” he said last year when unveiling plans for a new banknote series. “If the population wants to keep the current availability of cash, then it has to keep using cash.”

(Updates with economist in third paragraph)

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