Payment Preferences in Switzerland: 3 Myths and How They Pass the Test of Data

Payment Preferences in Switzerland: 3 Myths and How They Pass the Test of Data

With card or cash? The question is not only for consumers when paying, but also for the payment industry. Read in this blog post what conclusions can be drawn from millions of transactions about the payment preferences of Mr. and Mrs. Switzerland.

Digitalization, demographic change, increased connectivity, urbanization, and open banking are some of the trends which are greatly affecting the payment industry. Our payment behavior is constantly changing, and so is our understanding of it. New, supposed truths quickly emerge – outright myths about how people pay today. In the worst case, belief in these myths can lead the industry to make the wrong decisions or miss opportunities.

How Do Swiss People Pay?

The antidote to myths is facts, facts like those recently compiled by SIX together with the University of St. Gallen in the white paper “Understanding Swiss Payment Preferences: Cash, Cards and Other Patterns.” This blog post uses the insights gained from millions of transactions to put three common payment myths to the test – and to improve the general understanding of Swiss payment preferences.

Myth 1: People Pay More with Cards in the City than in the Countryside.

When it comes to differences between urban and rural areas, there are quickly clear expectations. To put it bluntly, the city stands for openness and progress, while the countryside is more about tradition and sticking to the status quo.

These prejudices also exist around the topic of payments. The white paper dispels them. It shows that the distribution of the different “payment types” hardly varies between city, agglomeration, and countryside. This is quite surprising. It also becomes clear that most points of sale (even in rural areas) now accept card payments. This, in turn, is an important prerequisite for the success story of card payments – and an important insight for the banks: Thanks to the homogeneity in the market, there is no need for different offers. They can work the market more easily.

Myth 2: People Pay More with Cash in Ticino than in German-speaking Switzerland.

The Italians’ preference for cash and coins has its roots in the days of the Roman Empire. And this behavior is often also attributed to the Italian-speaking Swiss in Ticino and the French-speaking Swiss in western Switzerland.

The data in the white paper back up this myth for Ticino, which has the highest proportion of Cash Payers (11%). In addition, the proportion of Mainly Cash Payers is also the highest in comparison (24%). A good third of people in Ticino thus prefer cash. Beyond that, however, the myth cannot be confirmed. This is because only the canton of Zurich has a significantly smaller number of Cash Payers (3%) and Mainly Cash Payers (13%) than the rest of Switzerland. For German-speaking regions, the proportion is about the same with 4% Cash Payers and 14.6% Mainly Cash Payers as for French-speaking regions with 6% and 17%. Even cantons that border each other, such as Jura and Fribourg or Geneva and Vaud, have inhabitants with clearly different preferences. This refutes the classification by linguistic-cultural background.

The availability of cash in Switzerland must therefore be somewhat better in Ticino, while the density of dispensing points may be lower in the rest of Switzerland. Furthermore, microfactors such as accessibility and the like are crucial in determining the optimal density of dispensing points, not language barriers.

Myth 3: Customers of Big Banks Are More Modern and More Card-Savvy than Those of Regional Banks

According to popular opinion, the customers of the two major Swiss banks are digitally affine, use online services and therefore require little cash. By contrast, customers served by locally based cantonal and regional banks tend to be more traditional, shy away from new technologies – including card payments – and prefer cash.

However, the data shows a completely different picture. The customers of the two big banks have the same high proportions of Cash Payers and Mainly Cash Payers as the cantonal banks, which show up at just under 6% and 16%. At Raiffeisen and the other regional banks, the proportion is significantly lower at 4% and 14%. It is questionable whether this difference can really be explained by customer behavior or whether other factors have an influence. For example, the range of debit and credit card products could have an influence: The big banks tend to focus strategically on credit cards, which are not included in point-of-sale revenue in the white paper’s statistics. Accordingly, cash is gaining weight over measured debit cards (see also grey box below).

About the Whitepaper: The Power of Data – and Its Limitations

The approach of this white paper is unique. It covers the behavior of consumers over a significant period of time. SIX together with the University of St. Gallen examined 760 million anonymized transactions executed by three million cardholders over a period of 13 months. The sample represents all regions, languages, and bank groups in Switzerland. A study with such a comprehensive scope and in-depth analysis for the Swiss market is a novelty.

To answer the various research questions, only data on debit card transactions were available. In this respect, the objection is justified that the payment behavior of Mr. and Mrs. Switzerland cannot be described holistically solely on this basis. However, this is balanced by the principle of “Constant Active Data”: In contrast to credit cards, debit cards are consistently used for cash withdrawals or at the point of sale and thus steadily generate data that can be analyzed. The restriction to debit card transactions made it possible in the first place to observe the preference for cash or card payments continuously – and representatively – over the entire period. The amount and frequency of the spending made by the three million cardholders in the sample make it likely that the debit card is the main means of payment for them.