Digital Banking in Switzerland: Banking of the Future – Status Quo & Forecast

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There is talk of huge transformations at the banks; as a customer, you are reaping the benefits of digital banking, which is becoming increasingly customer-friendly. But what is the actual status today and what percentage of the Swiss population already uses digital banking? Equally exciting: what is the situation in other countries?

Anyone involved in digital banking will also ask themselves: does this mean switching from analog to digital or can I, as a customer, benefit from innovative possibilities that were previously closed to me?

This article is intended to give you an overview.

The most important facts at a glance

• Digital banking is a collective term for the electronic provision of banking services. For this purpose, it is possible for customers to carry out their banking transactions online on a PC or via smartphone.
• Switzerland is one of the leading countries in terms of digital banking.
• By using digital banking services, customers can carry out their banking transactions anywhere at any time, easily and quickly.
• For banks, digital banking has the advantage that they can offer their customers new services and at the same time make their internal processes more efficient.

Digital banking: what does it mean?

Digital banking refers to conducting all financial transactions over the Internet. You’re probably sitting at a computer, laptop, tablet or smartphone as you read this post. The device allows you to use digital banking to pay your bills, analyze stock prices, check your spending, and more.

As a customer, you conduct your banking transactions in digital banking on the Internet. This manifests itself for you in particular through the use of the following tools:

• Online banking on your PC
• Banking app on your smartphone
• Digital credit card (on the smartphone)
• AI-based financial advice
• digital investment advice
• Trading apps for stock market trading – anytime, anywhere
• Payment of bills without tedious manual recording (using the smartphone’s scanner)

Digital banking – driving the transformations at banks

Digital banking offers banks the opportunity to counter increased competitive pressure. Digitalization is therefore one of the primary drivers of transformation in the banking sector. This goes well beyond pure rationalization effects. Interfaces, for example, enable networking and the exchange of data that would have been inconceivable years ago.

For example, there are now real estate financiers who handle the entire credit process digitally. The end customer, advisor, bank, appraiser and clerk are networked in this way in a complete digital process. The entire process is therefore more cost-effective, faster and transparent at all times. And Switzerland’s banking regulator, for example, is also currently working on digital solutions to automate the risk analysis of banks.

Fintechs and neobanks with new business models

Technology allows financial service providers, so-called fintechs, to offer customers new business models. Together with the newly emerged neobanks, they are a banking revolution. They have finally evolved through digitization and offer a business model that is completely paperless.

The digital “smartphone banks” are the innovative banks of our time and they are putting traditional banks under pressure. These digital banks and fintechs differ from traditional banking houses in many ways. All processes are geared to the digital age and customers can easily obtain everything they offer via their smartphone.

One step ahead of the future – where does digital banking stand today and tomorrow?

In recent years, the behavior of bank customers has changed, and the Covid pandemic has further accelerated this trend. More and more people prefer digital solutions, such as online banking or mobile apps, instead of using traditional bank contact points. Similarly, the number of virtual customer conversations has increased significantly in recent years.

During the Corona pandemic, many people have been forced to conduct monetary transactions online or via mobile banking. What was initially unfamiliar and sometimes viewed with skepticism has now caught on with a high proportion of the population. After the crisis, many people would like to completely avoid going to the bank branch and continue to rely on the new digital way of banking.

New providers are appealing to more and more customers with their banking solutions

Furthermore, the Swiss financial market is changing. Through easy-to-use mobile solutions, fintechs and neobanks have managed to capture market share. In doing so, they have shown that design and intuitive operation are at least as important for the choice of a financial service as its functionality.

Digital banking among Swiss within Europe more advanced than average – with room for improvement

The increased acceptance of new market players is triggered by a heightened interest in digital content among the Swiss population. The Swiss are using the Internet more and more, and this trend is reflected. According to the Federal Statistical Office, the number of people who are online at least once a week has now developed to a current 91 percent.

• According to evaluations by Statista for the period between 2014 and 2021, around 77 percent of the Swiss population used online banking options in 2021. This share was only around 54 percent in 2014.
• This puts the Swiss above the European average in terms of both the proportion and the pace of development. In the same period, this developed from 42 percent to 58 percent of the population accessing their payment transactions and other banking products via digital channels.

A look outside Switzerland already shows the additional potential

Even though the use of digital banking services in Switzerland is already comparatively high today. In comparison, however, examples of a higher usage rate for digital banking can still be found.

According to a study by payment service provider Unzer, the following countries are ahead:

1. Denmark (95 percent)
2. Finland (93 percent)
3. Netherlands (91 percent)
4. Sweden (84 percent)
5. Estonia (80 percent)
6. Latvia (80 percent)

The future of digital banking: How financial services providers are improving customer experiences.

Consumers are increasingly accustomed to doing everything digitally – including their banking. Digital banking has a number of benefits for both banks and customers. By leveraging technology, banks can reduce costs and increase efficiency. Customers can access their accounts anytime, anywhere and benefit from offerings such as online banking and mobile banking.

Key benefits from the bank customer’s perspective

• View accounts and conduct transactions anytime, anywhere
• Always have an up-to-date overview of account balances as well as income and expenses
• Real-time notifications of transactions
• Use of new digital offerings (such as digital investment advice)
• Conduct payment transactions conveniently from a smartphone, PC or tablet
• Security features such as two-factor authentication
• Hardly any cash required (security against theft)
• Low-cost account management
• no time-consuming handling of paper documents

Banks that operate digital banking efficiently also generate significant benefits

• cost reduction through the use of technology
• Reduction of error sources with manual processing
• increase in efficiency
• reduced dependence on branches and employees
• expanded business models through new technologies
• networking with other service providers through interfaces
• Offer customers a personalized experience
• Offer customers a variety of incentives to use digital banking services
• Leverage cross-selling approaches through digitally generated data

Neobanking apps: typical functions

A smartphone bank enables its customers to do their banking easily and conveniently from home or on the go. At the same time, the app is intuitive and easy to use, so that even newcomers can quickly find their way around it. Among other things, the app can be used to manage debit card or credit card functions or view past payments.

Many banks offer an app that makes it possible to stay up to date at all times. For example, it’s easy and straightforward to pay your bills. However, as is so often the case, there are differences between the individual providers.

Functions that can typically be used in the apps of neobanks:

• Overview of account balance and account movements even on the go.
• Push notifications when cards are used
• Sending money to third parties (provided the recipients use the same smartphone app)
• Display of card information (for online purchases)
• Approval of online purchases
• Overview, deposits and withdrawals with digital asset management
• Trading functions also available for mobile use

Digital banking: these are the functionalities you should look out for

Switzerland places second in terms of the overall digital maturity of banks, according to a survey by Deloitte. This is a very impressive achievement among 38 other countries, and Switzerland is considered a market that offers comprehensive functionalities. Swiss banks are global leaders, mainly due to the wide range of functions they offer along the customer journey. And this is not only true for the classic direct banks, all the big banks have also evolved both for companies and for their private customers.

But this is only an average view. Since the providers sometimes differ considerably, you should ask the following questions regarding essential functionalities when comparing them:

• Can account opening and account management be done in an end-to-end digital process (paperless)?
• Is the operation intuitive and the design of the website clear?
• Can the menu or interface be personalized (arrangement of personally frequently used tiles)?
• Are all required functions offered (account balance inquiry, transfers, securities orders, deposits and withdrawals for asset management, necessary applications)?
• Is there online data storage for personal documents?
• Are push notifications sent for important transactions?
• Is a multibanking solution offered (checking account balances at other banks)?
• Is online banking support available and at what times?
• Are current share and fund price queries offered?
• How is mobile banking organized (is there an app and what functions are offered there)?
• What information on money and assets is offered (FAQ, videos, editorial articles)?
• Which payment methods are covered (Apple Pay, Google Pay)?
• Can credit cards be managed digitally (payment via smartphone)?
• Can an investor profile be determined online?
• Are there personalized digital investment recommendations?
• Can an account be closed online within the Pillar 3a pension plan?
• Can a vested benefits account be closed online?
• Is biometric authentication possible (fingerprint)?
• What connections are there to third-party providers and software (for example, financial software, accounting for the self-employed)?

Conclusion: Shaping the banking transactions of the future with digital banking

Customers are less emotionally attached to their bank today than they were years ago. The situation in the closed-branch pandemic has reinforced this, as older customers have also become accustomed to digital banking. It is becoming apparent that a significant proportion of bank customers can and do completely do without branches in the meantime.

The bank customers of the future are becoming more self-confident and act independently on different communication channels. In addition, markets are constantly changing, with new services being offered by competitors and fintechs at an increasingly rapid pace. In order for financial service providers to keep pace, complex systems must be deployed. Digital platforms can provide the necessary flexibility and future-proofing for this.

In order to exploit the new market opportunities and retain customers, major efforts and investments are required on the part of banks to digitize processes and create innovative offerings for their clientele.

Continue reading in our journal:

• Create private financial planning
• Private banking: Background and tips
• Explanation of the vested benefits principle
• The 3-pillar principle in Switzerland