Guide to Swiss payments
In Switzerland various types of payments are available for individuals and businesses. Since 2008. Swiss banks have been members of the SEPA (Single Euro Payments Area) credit transfer scheme, supporting payments in Euro (EUR). The domestic Swiss credit transfer scheme allows for payments in both euro (EUR) and Swiss francs (CHF).
Regarding direct debits, Swiss banks offer two options, LSV+ and BDD, while PostFinance provides two additional options through their CH-DD standard. Both systems can be used to settle recurring payments in both Swiss francs and euros.
The Swiss Interbank Clearing (SIC) is Switzerland's central electronic payment system, where participating financial institutions settle both high-value transactions and retail payments. It plays a central role in the final settlement of Swiss payments in central bank money.
Payments must be sent in Swiss francs or euros between accounts domiciled in Switzerland to leverage domestic schemes. To access local rails as a business you need to open an account with a local or international bank with a Swiss branch. Get in touch here for recommendations.
In addition, it's worth noting that Switzerland and Liechtenstein have been part of a common economic and monetary area since 1923 with the Swiss franc serving as the official currency for both countries.
Bank account numbers in Switzerland
Swiss banks assign International Bank Account Numbers (IBANs) to customers' accounts. IBANs in Switzerland consist of 21 characters and have the following structure:
- The first two characters represent the ISO country code (for Switzerland, it is "CH")
- The next two characters are check digits used for validation purposes
- The following five characters indicate the Swiss bank's Bank Clearing Number (BCN), which identifies the specific bank
- The remaining twelve characters represent the actual account number
An example of a Swiss bank account number: CH93 0076 2011 6238 5295 7.
Clearing and settlement
The Swiss Interbank Clearing (SIC) payment system operates as Switzerland's central payment system. SIX Interbank Clearing manages SIC on behalf of the Swiss National Bank (SNB). The system facilitates efficient and secure clearing and settlement of payments in Swiss franc within the country. The SNB acts as the system manager, responsible for establishing the criteria for both admission to and exclusion from the SIC system.
SIC is a real-time gross settlement system and handles the settlement of large-value payments, including those associated with the SNB's monetary policy operations, as well as retail payments in Swiss francs. The settlement process is continuous, with each payment being settled individually, irrevocably and with finality.
Since 2017, PostFinance, a popular financial services provider and part of Swiss Post, began integrating its bilateral payment transactions with other financial institutions into the SIC system. This integration aimed to streamline and improve payment processing within Switzerland. The migration was successfully completed by the end of March 2021, leading to a substantial increase in the number of retail payments processed through the SIC system.
Payment methods in Switzerland
Credit transfers are the predominant cashless payment method in Switzerland. Despite not being a member of the European Union, Swiss banks and PostFinance have been part of the SEPA (Single Euro Payments Area) credit transfer scheme since the end of January 2008. As a result, customers can efficiently execute domestic and cross-border payments in euros using the SEPA Credit Transfer scheme.
Under the Swiss domestic payment scheme, payments can be made in both Swiss francs and euros. It is not possible to specify the desired processing time or urgency of the payment – it may take a couple of hours, a day or even longer depending on when the payment was initiated. Swiss banks do not currently support instant transfers, but plan to do so by August 2024 (see the SIC5 section below).
In addition to traditional payment methods, it's worth mentioning TWINT, a widely-used digital wallet in Switzerland that enables users to make payments effortlessly with their smartphones through a simple app. The platform has achieved significant adoption, with approximately 77% of physical stores and 76% of online shops in the country offering it as a payment method.
With over 5 million active users, TWINT has been adopted by over half of the Swiss population, highlighting its prominence in the domestic payment ecosystem. Currently, payments can only be made in Swiss francs and are limited to businesses and shops within Switzerland.
LSV+ is a direct debit system that incorporates a right of objection for customers. Tailored for businesses that frequently collect payments in Swiss francs or euros, LSV+ streamlines the process of automatically paying recurring bills, accommodating both varying and fixed amounts while ensuring convenience and timely payments.
To set up LSV+, a debit authorization from the debtor is required, as well as a bank account for both the debtor and the creditor. Creditors submit direct debits electronically through an interface such as their online banking portal or to SIX Interbank Clearing (via payCOMweb or file transfer).
Outstanding bills in the creditor's accounts receivable remain open until the direct debit is paid, and reconciliation occurs automatically based on the reference number provided. Some common use cases for LSV+ include utility payments, insurance premiums, and subscription services.
Debtors can object to a direct debit payment without giving a reason within 30 calendar days after debiting their account. Each transaction must have a unique reference number to ensure proper incoming payment allocation to open accounts receivable entries.
Business Direct Debit (BDD)
BDD is a direct debit system offered by Swiss banks designed explicitly for transactions without the right of objection. It caters to companies that predominantly collect large payments in Swiss francs or euros from their business customers, frequently following the delivery-versus-payment principle.
Similar to the LSV+ process, the necessary steps for initiating BDD include obtaining a debit authorization from the debtor and having bank accounts for both parties. Creditors then submit direct debits electronically, via online banking, or to SIX Interbank Clearing, via payCOMweb or file transfer.
PostFinance uses the standard CH-DD for direct debit payments. Similarly to what is offered by Swiss banks, PostFinance provides customers with two distinct direct debit scheme options for businesses and consumers: Core Direct Debit (Swiss COR1 Direct Debit) and B2B Direct Debit (Swiss B2B Direct Debit).
One key difference between these two options lies in the debtor's rights: Core Direct Debit grants debtors a 30-day objection period, while B2B Direct Debit does not provide any right of objection. Both Core and B2B Direct Debit schemes feature the possibility of chargeable multiple debit attempts in cases where the direct debit is not paid on the due date.
As for LSV+ and BDD, businesses utilizing this system benefit from automatically collecting invoices in either Swiss francs or euros directly from the debtor's account. To use it, companies must register for CH-DD Direct Debit. Furthermore, businesses must obtain written payment authorization from the debtor to facilitate the direct debit process.
Looking ahead: SIC5 project
The SIC5 project, initiated in 2020 by the Swiss National Bank (SNB) and SIX Interbank Clearing Ltd, is set to transform the Swiss payment landscape by introducing instant payments. SIC5 is designed to enhance the SIC system further by enabling the settlement of instant payments – meaning that, for example, cashless retail transactions will be processed 24/7, with the funds being made available for use to the recipient within seconds.
In June 2021, the Swiss National Bank instituted a mandate for financial institutions to accept these instant payment transactions, with the new SIC5 platform expected to launch by the end of 2023.
From August 2024, Swiss banks will be required to receive instant payments. Smaller banks, processing less than 500,000 transfers per year, will have until the end of 2026 to comply. However, Swiss banks will not be obligated to offer outgoing instant payments.
Even after transitioning to the SIC5 platform and introducing instant payments, Swiss banks will continue offering regular bank transfers, with instant payments as an additional service.
How Atlar can help
With Atlar, you can access local Swiss payment rails through an API and dashboard via your existing banks.
To save companies from manually managing payments and wasting engineering resources on building direct integrations with banks, we have built the Treasury Operating System that allows you to support Swiss payment schemes out of the box. As mentioned before, the Swiss payments landscape is evolving with the upcoming introduction of instant payments, and Atlar's platform makes it easy for companies to transition to the new infrastructure.
Our Treasury Operating System offers an end-to-end solution for managing payment flows, enabling businesses to initiate credit transfers in both Swiss Francs and Euros and set up direct debits. It automates reconciliation, monitors transactions and balances in real time, and tracks the status of payments via webhooks to combat returns and refunds.
Get in touch
If you're a company looking to automate payments over Swiss payment rails, we'd love to speak with you! Book a demo here.