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Finance and payments

Payments overview

International brands should be aware of the different expectations around payment types in the Swiss market. 80% of consumers still expect to be able to pay via open invoice, after delivery. Card usage amounts to only 12% of total online sales, but PayPal is starting to gain some traction in the market. Costs of acceptance can vary widely from card payments, so this needs to be accounted for, as does any risk from foreign exchange.

As with other territories, offering the right mix of payment types is important and worth investigating. Direct payments from a bank account are also gaining popularity.

At this point, it is also worth revisiting the popularity of devices by age group.

Figure 27. Device usage by age group. Source: Statista.com analysis 2017.

As younger age groups, and those used to transacting via mobile device, get older, their expectations will move with them. Entering card details into a mobile browser or app is not very user-friendly. At the same time, we aren’t seeing a big take-up of e-wallets, so there are some challenges around the customer journey on mobile devices. However, the bulk of purchases are still through desktop so ‘traditional’ payment methods should still be the norm.

However, reflecting the growth of mobile technologies, most of the Swiss banks enable direct bank-2-bank payments to be made via the app TWINT (www.twint.ch). This enable the customer to pay the retailer on the door-step, at point of delivery. This reduces risk of fraud to the retailer, increase speed of payment and provides consumers with confidence to purchase. Swiss Post are providing this service through their normal postal network.

For international merchants it is important to adapt to local requirements, and payment methods are key.Also, adopting local currency is another mechanism for increasing trust and transparency.

Fraud figures/trends

Distance selling attracts a degree of fraudulent sales and activity. A Q3 2017 survey by VSV and CRIF AG have reported a number of interesting trends in the Swiss market.

Overall, fraud attempts are trending upwards, in-line with overall market growth. Over 92% of surveyed retailers state that they are affected by fraud, and a quarter of these have seen an increase over the previous 12 months. Though 50% have reported that fraud attempts have maintained the same levels over the period.

Typical fraud attempts include ordering goods with no capacity to pay for them (one of the challenges of open invoice), the use of false/stolen information to buy goods and ‘friendly fraud’, where the customer reports not receiving the goods despite having them in their possession.

Figure 28. Fraud losses suffered as percentage of sales. Source: VSV Online fraud survey Q3 2017

The tools used by Swiss retailers to combat this fraud activity will be familiar to international merchants. For example, manual review of suspicious orders, black lists, fraud filters and identity verification services.

Taxes and Duties

VAT and duties is a complex area and any businesses should seek expert local guidance before trading into any international market. This section is designed to provide an overview of key figures, processes and authorities in Switzerland. Wider political changes, such as the UK leaving the EU in the coming years, may well have an impact on how these regimes impact international merchants, particularly those currently based in the UK.

Swiss Tax Authorities

Figure 29: Key factors around VAT for consideration. Source: Schweizerische Eidgenossenschaft, Department of Finance 2018

For businesses that aren’t resident in Switzerland which sell goods to consumers via the Internet, there is a CHF100,000 (source: www.vatlive.com) threshold before registration is compulsory. It is important to note that this figure is based on Global revenue, not just from sales in Switzerland. This was introduced in 2018 to combat small firms selling ‘VAT-free’ and undercutting local competition.

Local customers would expect any international merchant to look like a domestic merchant, particularly when it comes to VAT, how it is displayed, and the levels applied.

The Swiss Federal Customs Administration provides the following example to consumers who are looking to make a purchase from an international website (EU) who does not ship in volume to Switzerland:

An example purchase of a handheld vacuum cleaner from a German online shop. The purchase price is EUR 150 (net amount, excluding foreign VAT). For dispatch to Switzerland, an additional EUR 12.50 must be paid to the online shop. The overall payment to the online shop is thus EUR 162.50.

International merchants targeting the Swiss market would typically use a collective shipping and clearance service, based on 7.7% VAT and selling in CHF.

From 1st January 2018, the standard rate of VAT in Switzerland has been cut from 8% to 7.7%.

Figure 29: Main VAT categories and charges. Source: VATLive.com January 2018

With regards to duties, which in itself is a complex area, Swiss authorities provide a portal where rates can be determined. The portal can be found at http://xtares.admin.ch/tares

Switzerland is a member of the European Free Trade Area, so this does make shipping from a EU state simpler than for other international destinations.

Table 21: Names and website addresses of relevant customs and taxation authorities.

There are a number of global providers of advice that can help businesses better understand their tax and duties obligations, but it is important to understand the local variations.

 

 

 

Demographics

Political and socio-economic environment

Online and mobile usage

Online shopping behaviours

Marketing and branding

Legal framework and regulation

Logistics and delivery

References

 

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