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The go-live date for the receipt of instant payments took place this week for large Swiss financial institutions, as the country readies itself for a step-change in payment habits similar to its neighbours in the EU.

As of August 20, 2024, the 50 largest banks in Switzerland are required to facilitate instant interbank payments.

This includes around 60 banks that collectively handle more than 95 percent of customer payments in the country.

The ability to process incoming customer payments instantaneously will be mandatory for these institutions.

However, smaller banks, defined as those processing fewer than 500,000 transfers annually, have been given until the end of 2026 to meet these requirements.

This is a significant step in payments modernisation for Switzerland, similar to what is happening in the EU with the incoming Instant Payments Regulation (IPR).

“Both initiatives facilitate instant payments, but they differ in their scope,” said Andreas Helbling, country head for Switzerland and financial messaging marketplaces at Finastra, who pointed out the difference between the EU’s regional push and Switzerland’s local push.

“The Swiss project is more focused on interbank payments and is driven by a regional regulatory mandate that all banks need to respond to, while the EU regulation covers all types of payments and includes additional features like the verification of the beneficiary’s IBAN and name, or confirmation of payee,” he told �鶹��ý.

Challenges

As is evident in the EU, introducing this new type of payment may not be a smooth ride.

“Banks face several challenges when implementing instant payment systems,” said Helbling.

He continued to point out that these include infrastructure requirements, seeing as “introducing instant payments requires significant upgrades to existing financial infrastructures”.

Security also “remains a concern for financial institutions as they expand their digital offerings”, he said, continuing to point out that anti-money laundering controls “represent another significant hurdle”.

The Zurich-based payments expert added that legacy issues are also likely to affect these financial institutions, as complexity is “significantly higher with legacy infrastructures, and the design, implementation and deployment of these requirements must be done while considering existing system or operational constraints”.
These include “high availability, high-throughput, and low latency”.

As of now, a confirmation of payee (CoP) solution has not been suggested by the Swiss National Bank (SNB) nor SIX, which means that some of the fraud prevention services created via instant payments regulation and standards elsewhere, such as the EU and UK, have not yet come around in Switzerland.

For example, when asked by �鶹��ý whether the country would be introducing a form of CoP, the Swiss National Bank said that it could not comment.

This could, potentially, mean that the country risks a rise in fraudulent authorised push payments, especially if consumers are not used to this type of fast payment.

However, options such as the mobile payment service TWINT, are already widely used, which means that Swiss consumers have less of a jump to make in payments culture.

Are the banks ready?

When �鶹��ý approached banks in the country about the deadline, a few did respond.

For example, a spokesperson for Swissquote bank confirmed that the institution “will meet the implementation deadline for incoming payments from Swiss banks, which will be supported and free of charge”.

“We are currently evaluating our service offering and pricing for outgoing payments. These are expected to be introduced and adjusted in 2025,” the spokesperson added.

Meanwhile, a spokesperson for PostFinance commented “yes, we are ready”.

“In August 2024, instant payments up to a limit of 20,000 Swiss francs within Switzerland and Liechtenstein will be possible. PostFinance will initially only offer the receipt of instant payments,” the spokesperson said.

The spokesperson for PostFinance, which is the financial services wing of the country’s postal service, added that instant payments have “very high requirements in terms of security and performance”.

“This is why we want to gain more experience with the new systems before we introduce the ‘Send’ service,” the spokesperson said.

“PostFinance will add instant payments services where customers will have a significant added value. The first use case involving sending instant payments will be piloted from Q3/Q4 2024.”

“Other instant payment services, like express payment, same-day transfer, and the Swiss TWINT mobile payment service are current alternatives until the introduction of the “Send” service,” the spokesperson continued.

As the banks implement their new compliance requirements, it will be interesting to see how impactful this ends up being on payments culture in Switzerland, and whether consumers take up instant payments over traditional methods, or whether higher prices for these transactions and more fraud risk mean that they opt to remain with what they know.