The latest financial reports from Swiss banks show that they are preforming well in spite of the low interest environment. Swiss cantonal banks, for example, reported combined annual profits of nearly 3 billion francs for the 2017 financial year.
“Swiss bank customers, who stick with their banks in spite of fee hikes and interest cuts are one of the key factors in banks achieving these high profits and turnovers,” says moneyland.ch analyst Michael Burkhard. Swiss bank customers are known for their low bank migration rates and – even in the digital age – continue to shy away from comparing the costs of products and services. These are expensive habits.
Savings potential of 1000 francs per capita
The savings potential calculated by moneyland.ch indicates the theoretical savings which could be achieved if all non-business bank customers would migrate to the most favorable services available. The analysis accounts for possible savings across private accounts (including debit cards), savings accounts, 3a retirement accounts, 3a retirement funds, credit cards, mortgages, personal loans, online securities brokerage and wealth management services. Potential savings for business banking customers are not accounted for in the analysis.
The high estimate by moneyland.ch shows bank customer savings potential of 7869 million – around 7.9 billion – francs per annum. Divided among bank customers, that figure averages 1000 francs of potential savings per customer and year. That staggering figure indicates the amount of money which bank customers could collectively save by simply comparing services and migrating to the best available offers. “The reluctance of Swiss customers with regards to changing banks has a direct, negative impact on their bank balances,” says moneyland.ch CEO Benjamin Manz.
Wealth management: 2.46 billion francs
Wealth management is the category of banking services with the highest saving potential for non-business customers. Although only a fraction of bank customers make use of wealth management services, this category shows the highest annual savings potential across banking services at 2.46 billion francs of potential savings. The generally high wealth management and investment fund fees are the primary reason for this. The average wealth management customer could save around 10,000 Swiss francs by migrating to the most affordable service provider. In many cases, the savings potential for customers is much higher than that. Affordable alternatives are available in Switzerland. Robo advisors, for example, offer digital wealth management at flat rates as low as 0.5%.
Mortgages: 2.3 billion francs
Swiss banks continue to earn significant profits on mortgages in spite of general low interest rates. This is not only true in the case of the banks with the highest mortgage rates. Customers which pay more than average for their mortgages can also save a lot of money by migrating to the most affordable mortgage offers.
Mortgagors with average outstanding mortgages can save nearly 1400 francs per year, or around 2.3 billion francs collectively. The difference in cost between the lowest-cost and the highest-cost mortgage available is 2700 francs per year for an average customer. While mortgage interest rates are generally low, there are still notable cost differences between mortgage offers.
Savings accounts: 1.075 billion francs
Savings accounts currently pay very little in the way of credit interest. The interest rates of savings accounts for adults now average just 0.05% interest per annum. Still, the savings potential in this category is around 1.075 billion francs. This is due to the fact that some banks offer interest at rates which are far above the average. On average, adult savings account holders can earn 158 francs more in interest per year by moving their savings to the accounts with the highest interest rates.
Private accounts: 769 million francs
In contrast to savings accounts, the savings potential for private accounts is primarily affected by fees and charges rather than interest rates. In addition to basic account fees, private account holders pay for numerous additional services such as money transfers and debit cards. Several banks raised these fees and charges last year. The average savings potential per adult is 87 francs per year, or 590 million francs in combined annual savings between all adult private account holders. The combined savings potential for private account holders up to the age of 20 is around 179 million francs.
Credit cards: 550 million francs
Around 6.6 million credit cards are currently in use across Switzerland. Around 56% of the adult population are credit card holders. A third of adults hold two credit cards and 11% hold three credit cards or more. The savings potential for the average Swiss credit card holder is 83 francs per card and year – not accounting for prepaid cards and expensive platinum credit cards. That translates into a high estimate of more than half-a-billion francs (550 million francs) in combined annual savings between all credit card holders.
3a retirement funds: 199 million francs
3a retirement funds may be less popular than 3a retirement accounts, but at 199 million francs in savings potential, they outdo 3a accounts in terms of potential savings for customers. The reason for this is that the costs of 3a retirement funds are high and differences in costs between different funds are large. In addition to fund fees and charges (the total expense ratio or TER), additional costs like custodial fees, front-end loads and back-end loads may also apply. On average, 3a retirement fund customers could save around 291 francs per fund and year by migrating to the most affordable 3a retirement fund. In some scenarios, customers can save up to 459 francs per year.
3a retirement accounts: 198 million francs
In contrast to 3a retirement fund solutions, the primary indicator of savings potential for 3a retirement accounts is the interest paid on savings rather than fees and charges. The average interest rate paid by 3a retirement accounts is currently just 0.3% per year. However, as with standard savings accounts, there are major differences between the interest rates paid by different banks. On average, 3a retirement account holders can earn an additional 55 francs more in interest per account and year by migrating to the highest-earning accounts. That adds up to a combined savings potential of 198 million francs per year between all 3a retirement account holders.
Personal loans: 160 million francs
Borrowers could save an average of 500 francs per personal loan by getting the most affordable loans available. That adds up to a combined total of 160 million francs in savings potential if all borrowers were to obtain the most affordable personal loan. That savings potential does not account for leasing and installment loans. Also, possible savings would be much higher if borrowers were to repay their loans ahead of schedule.
Online trading: 158 million francs
Compared to the savings potential for other banking services, that of execution-only securities brokerage does not seem particularly significant at 158 million francs per year. The main reason for this is that only a small portion of bank customers actively invest in securities. However, at an average of 375 francs per year, the savings potential per brokerage customer is substantial. Some brokerage customers can save as much as 1473 francs per year. It is worth noting that these figures apply to average brokerage customers and not just to day traders or other heavy traders.
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