sluggish customers happy banks blog 2023
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Heavy-Footed Customers, Happy Banks

September 7, 2023 - Dan Urner

Sara Stalder, the director of price watchdog Konsumentenschutz, believes that banks’ fees are too high and interest rates are too low. That is correct – but customers are also to blame.

Revenue boosts here, record results there: Swiss banks have it good these days. That was once again confirmed when the Zürcher Kantonalbank (ZKB) released its latest semi-annual figures: 677 million francs of profit – a record. The flourishing interest business played a notable role in the growth of around twenty-five percent compared to last year’s results. Not that those were too shabby: The bank’s profits last year were also record-breaking.

And the ZKB’s formidable business results are not exceptional. The current interest environment has proven to be fertile ground for nearly all Swiss retail banks. The money which they park at the Swiss National Bank (SNB) brings them interest of up to 1.75 percent per annum. Meanwhile, the interest rates they charge for loans and mortgages have drastically gone up with each hike of the SNB’s key interest rate.

But so far, banks have been stingy when it comes to sharing this bonanza, with depositors being paid interest at relatively minuscule rates. According to moneyland.ch calculations, the average interest rate across Swiss savings accounts for adults is just slightly over 0.7 percent, opening the door for banks to enjoy generous profit margins.

So it is fair to say that Sara Stalder has every reason to be upset, especially when consumers’ purchasing power is being relentlessly eaten away by rent increases and now climbing electricity prices and health insurance premiums as well. The director of the foundation for consumer protection is calling for banks to pay at least one percent interest on savings, and that fees introduced during the negative interest environment be removed. Her demands were made at a purchasing power summit called by Swiss price regulator Stefan Meierhans.

Bank customers must take action

It is not surprising that some people will be upset when, in these times of high inflation, banks are raking in shamelessly-high revenues and breaking one profit record after another. But it is important not to forget that consumers themselves are part of the problem. Their behavior equates to signing blank checks and handing these to their bankers.

The problem is that Swiss are very sluggish when it comes to changing banks, preferring to change their doctor than their banker, as this year’s consumer migration study from moneyland.ch shows. Apart from the effort required, this is also due to the measures that banks take to make it difficult for customers to leave. One-time charges for closing accounts are one example.

So what we see is that competition is not working effectively. Expensive banks do not see any reason to cease practices that disadvantage their customers. If, on the other hand, Swiss bank customers were to begin migrating in large numbers, banks would suddenly be faced with the uncomfortable situation of having to be competitive. Ridiculously low interest offers would not likely survive. Tip: The private account comparison and the savings account comparison on moneyland.ch make it easy to find more favorable accounts.

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Editor Dan Urner
Dan Urner is editor at moneyland.ch.