Switzerland has many banks, but only few good ones

OK, this is mostly our opinion and a bit hard to substantiate with clean facts. But we would advocate that the vast majority of Swiss banks is not good for various reasons and that you should stay away from them.

Many Swiss banks will charge you high fees, offer mediocre customer service and annoy you with outdated and hard-to-use e-banking websites as well as apps.

This is because banking is traditionally a very inefficient industry. In the background, so many things have to happen to make banking work, be it due to regulatory reasons or because of cumbersome processes that banks were never forced to stop.

Just to give you one example: All traditional banks still operate so many branch offices in so many places. This was of course absolutely necessary 100 years ago when sales was done offline and credit cards did not exist. And many more conservative customers as well as the elderly still try to hold on to this tradition. But for the banks it means an extremely high cost which they have to pass on to you as their client somehow.

Offline branches are a waste of your money

Being cold rationalists, we advocate that nobody needs these offline branches. Banking nowadays is a highly standardized payment product. Banks are not good at consulting you on anything (like buying a house), because they can not be independent. So there is no need to have somebody at a branch to talk to about buying a house or financing a car since this sort of bundling of savings accounts with lending, mortgages and sometimes even insurance products does not make any sense nowadays (maybe it did before the internet and smartphones).

So one obvious first step is to eliminate the cost of traditional offline branches from your banking fees by choosing a banking service that does not offer those or at least does not price them in because they expect the users of that particular service to never go to a branch.

The revolution was started outside of Switzerland

Since banking in Switzerland has always been and still is a conservative business, modern banking services of course did not start in Switzerland. Instead, banks in various other countries were far more aggressive the last couple of years in developing innovative products with lower fees and less frills. 

Revolut to the rescue?

The obvious fintech that probably comes to mind for European users is Revolut. Certainly not the first fintech, Revolut has been probably the most aggressive fintech company in the last few years. Different to most traditional banks, they released a retail banking product with low fees not only for one European country, but instead targeting all of the EEA + Switzerland at the same time. 

Like many fintechs, Revolut has not been a bank until very recently. Instead, they cooperated with various banks in the background while Revolut themselves only had an e-money license, a simplified and less strict license for wallet providers. So Revolut was basically regulated similar to a provider of prepaid wallet services.

The benefits of being a fintech, not a bank

On the one hand, this had some benefits for Revolut: Less rules to fulfill, less restrictions in general, more freedom in launching new products. On the other hand, they could pass these benefits on to users in the form of very low fees on using the Revolut services. And having a bank-like payment account where you could easily transfer money across borders and currencies was a further benefit that not many other banks could offer. Not even the good old SEPA system for the Euro achieved that: It only supports one currency, even today, and transfers used to be quite slow (taking a day or two) vs. immediate transfer of funds on Revolut in multiple currencies. Immediate SEPA transfers were only introduced years later, and once again, they were limited to certain countries and the EUR as a currency. Part of that success was the fact that due to Revolut’s super aggressive marketing strategy, chances were high that your friend from another European country might actually already have a Revolut account or be willing to sign up for it. On the other hand, your friend would most certainly not use the same main bank if you lived in Switzerland while your friend was from the UK. But both of you might have already have signed up for Revolut like all your other hip friends at that time.

The dark side of a fintech

But after a while, many downsides of Revolut emerged. Revolut was of course discovered by money launderers and shady people. As not an actual bank, Revolut had less oversight about what their users were doing and was, especially in the early days, still a bit under the radar of investigators. Soon, this caused Revolut to show up on the radar of money laundering investigators, so Revolut was forced to do something.

This in turn led to Revolut becoming stricter and responding to all sorts of complaints and desires from regulations in a sometimes very abrupt and customer-unfriendly fashion. Many users have been reporting up until today that they started using Revolut as their main account and were suddenly locked out of their account. Typically Revolut would be asking them for the source of their funds, requesting documents about it or some other newly introduced rules kicking in. Those rules could sometimes feel very arbitrary to users. So if you had more than X thousand EUR/CHF/GBP coming in to your Revolut account within a year, Revolut might have all of a sudden started asking your for a tax return that shows a fitting amount of income or similar. In the mean time though, accounts were often completely blocked. And sometimes, users could not even ask Revolut about what was going on, because Revolut was only reachable via chat function, which in turn was conveniently inside the Revolut app that would not let you log in. If Revolut was just yet another payment card for you which you use only occasionally to save on foreign transaction fees on your vacation abroad, this was certainly less of a problem. But other users jumped fully onto the Revolut train and started using Revolut as their main bank account where their salary was coming on and from which they would pay the rent, buy groceries and so. 

So, quite some users were locked out of their Revolut account, sometimes for weeks and months - that shows why it is dangerous and not recommendable to rely on Revolut as your main account, even if it may seem very convenient to so. The Revolut mobile app is really good for keeping track of what you spend across the multiple currencies and even the foreign exchange fees on weekends or if you over the limits in the free tier, are still overall very moderate, considering what you get. 

Important Swiss features are missing

Some features that are relevant for Swiss users are also not implemented yet. For example, there is still no Swiss IBAN of your own to transfer CHF reliably without unpredictable fees. If you use the GB/LT IBAN for CHF transfers, there will often be hidden correspondence bank fees since it’s a SWIFT transfer. If you use Revolut’s correspondence IBAN at Credit Suisse, you have to be careful to instruct anyone sending you money there to use the correct transfer reference text. Otherwise, the transfer will not work and your money might be inaccessible for a while. So using your Revolut account to receive salary in CHF from a Swiss employer tends to be difficult, even today in 2021.

And you can’t scan the famous Einzahlungsschein (ESR) nor use the Swiss direct debit system (LSV).

Expect to answer Revolut’s questions on a holiday

Finally, you will have to send documents about your finances (tax return etc) to Revolut some time every year. They literally asked us on Christmas’s Eve (Dec 24) about this last year. Not very nice to fear getting your Revolut account locked while you are on Christmas vacation and then having to send very sensitive documents abroad (Revolut being very cheap, these documents might easily land anywhere in the world in some call center / sweatshop outside of the EEA).

Overall, it is therefore not recommended to use Revolut as your main / only account if you live in Switzerland. 

In the next article, we will look at some more reliable and especially, Swiss-based, alternatives to the otherwise very convenient Revolut.