Banks Prepare For Big Changes In Switzerland’s Financial Landscape

Banks Prepare For Big Changes In Switzerland’s Financial Landscape

by November 12, 2021

When it comes to the financial landscape in Switzerland, there’s perception, and there’s reality. The perception may be that it is an isolated, neutral country that opted for independence from the European Union.

The reality is it has also made the necessary moves to connect its financial system to the rest of the world, while reserving the rights to be independent where it deems necessary, for example as it does by keeping the control for domestic payments.

And while it has a deserved reputation for global wealth management, the big banks in Switzerland like UBS and Credit Suisse account for less than half of the country’s assets (46.4 percent).


The balance is made up of smaller regional financial institutions (FIs), branches of foreign banks installed in Switzerland for private banking activities, and so called “cantonal banks”.

The truth is that Switzerland is a diverse financial ecosystem, open to and ready for changes in global payments.

Diving into the Swiss financial ecosystem

Switzerland has been an innovator over the past few years to keep its financial system efficient and ahead of the changes sweeping global payments.

To illustrate its innovative approach, as of December 2020, 382 fintechs were in operation, with one-third working in the blockchain space.

Having worked in Switzerland and in the financial industry for more than two decades, I am unsurprised by the changes.

In fact, from my perspective, Swiss banks and other financial institutions have been changing, and will continue to do so, as payments methods, messaging, and regulations evolve. This is necessary in order to keep an efficient marketplace for any investment.

All of the major global payments changes currently in motion – instant payments, clearing systems renewal, new cross border payment rails – are being embraced by Swiss FIs.

Four examples of this change stand out as the most impactful and each address separate pain points, ranging from quite technical changes to reduce cost and improve efficiency (e.g. new SSFN protocol, RTGS version 5), to more user driven change like instant payments.

Those changes sit alongside the recent combination of SIX with Worldline, and the rebranding of the SIX group banking consortium that has defined the market domestically and for cross-border payments within the EU.

4 global payments changes embraced by Switzerland

1. Welcome To Worldline

Currently the Swiss settlement and payment infrastructure is operated by Swiss Interbank Clearing (SIC), which is owned by SIX Group Ltd. SIX, according to its website, is owned by “121 domestic and international financial institutions, which are also the main users of its services. The shares are distributed in such a way that no single owner or type of bank has an absolute majority.”

Either way, the SIX Group has always been part of Worldline, an EU-wide payment transaction company.

It bought SIX in 2018, in part to get more of a foothold into the Swiss market via a ten-year “commercial relationship” consummated at that time.

As of Oct. 21, Worldline announced a new logo and more digitally-oriented brand positioning and as a result the SIX Payment Services brand (among others) will be “retired” and replaced by Worldline.

Worldline’s CEO says it is a move toward making his company a more global brand.

Time will tell whether it has any impact outside of the name on the SIX Group.

2. Connecting with the Real-Time Gross Settlement system

Amongst the technical evolution that is aimed at improving efficiency, security and reduction of cost, the Swiss market place will also make evolving the connectivity to its Real-Time Gross Settlement system throughout its SIC 5 version a priority.

As a reminder, some major changes occurring globally such as the usage of the rich ISO 200222 format don’t have the same impact in Switzerland as they have already had this in place for several years.

Throughout the course of the journey for the SIC 5 upgrade, the Swiss National Bank and Worldline have teamed up to create a completely different payment rail that will enable the market place to process Instant Payments.

RTGS will be operational in 2022 and instant payments in August 2024. SIC5 represents a transition from the existing SIC network and will accommodate more demanding environments, such as business to business payments.

In the context of instant payments, it has been described by SIX in the following way:

“SIC5 is to payment transactions in Switzerland what 5G is to mobile communications: speed.” The new SIC5 payments rail will allow more banks to extend instant payments use cases beyond today’s very low thresholds.

3. SSFN

Another initiative to adapt access to SIC comes from a change in the physical connectivity.

The SNB and SIX (Worldline) launched the Secure Swiss Finance Network (SSFN) communication network in July in reaction to the increasingly digital changes in the payment system and it is expected to significantly reduce the cyber risks inherent in digital transactions.

It has been developed in collaboration with several telecommunications providers including SCION anti-fraud software provider Anapaya Systems.

The SSFN allows for the exchange of messages between participating FIs, and also enables data to be shared securely between participants using the same architecture.

It will eventually replace the FinanceIPnet system that used costly and legacy technologies.

4. CBPR+ Messaging

All these domestic changes are happening in tandem with the proliferation of cross border payments.

Financial Messages are of course a substantial element of cross-border payments, and to accommodate that the international Financial Stability Board and SWIFT have designed Cross-border Payments and Reporting Plus (CBPR+).

It will define how ISO 20022 messaging should be used for cross-border payments and cash reporting on the SWIFT network and make ISO 20022 usage mandatory for all cross-border payments over the SWIFT network.

ISO 20022 is undoubtedly familiar to financial institutions all over the world. CBPR+ will standardise how these exchanges of information address one of the critical challenges for any bank-helping to reduce manual tasks with more automation. This is thanks to the end-to-end machine-readable format of ISO 20022.

So, change does come to Switzerland and with change comes the need to understand new technologies and communications for financial institutions.

These changes are just part of the overall picture that portrays Switzerland as a future-ready country that is keeping controls on its infrastructures in order to be more agile in reacting to changes and ensure they remain one of the most attractive financial market-place in the world.

Banks that do business in Switzerland, whether they be foreign or domestic, need a partner that can provide connectivity and create infrastructure harmony across a wide range of domestic, cross-border, and regulatory mandates.

This is the Bottomline mission. To find out more, listen to our webinar with SIX, Anapaya System and Bottomline – Positioning Banks & FIs for Business Change in Switzerland.

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Featured image credit: Photo by Patrick Federi on Unsplash 

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