The smartphone banks are coming - and putting traditional banks under pressure

Moneyland.ch has examined the fees, exchange rates and services of the new smartphone banks and compared them with traditional banks. The result shows that exchange rates and fees are significantly lower at most smartphone banks, putting traditional banks under pressure.

The British smartphone banks Revolut and TransferWise, the Swiss smartphone banks Zak and Neon and the five major Swiss banks UBS, Credit Suisse, Raiffeisen, PostFinance and Zürcher Kantonalbank were examined in more detail. In addition, the three Swiss "free credit cards" Migros Cumulus-Mastercard (Cembra Money Bank), Cashback (Swisscard) and Coop Supercard (TopCard) were also included in the credit card comparison. Services, functions, fees, exchange rates and total costs for various usage profiles were compared.

Conclusion: The foreign neobanks Revolut and TransferWise impress with favorable exchange rates and user-friendly processes. However, neither is yet a complete replacement for Swiss banking services. As they do not offer a Swiss account, employers and other companies cannot transfer money. They are particularly worthwhile as an additional credit card alternative for low-cost purchases and cash withdrawals abroad. Disadvantages include lower security without Swiss deposit protection and, in the case of Revolut, a greater lack of transparency.

The Swiss smartphone bank Neon performs significantly better than the traditional banks in the private account and banking package comparisons for adult customers, but only has average exchange rates. Bank Cler's smartphone app Zak is slightly more expensive than Neon in terms of fees and even more expensive than average in terms of exchange rates. For young people and students, the traditional bank offers are generally still the cheapest solution.

In general, it can be said: With Revolut and TransferWise, innovation is mainly coming from abroad, although Swiss start-ups such as Neon are also jumping on the bandwagon. "In the short term, smartphone banks will not put traditional banks under pressure. In the medium term, however, Swiss banks will have to be careful not to fall behind," says Benjamin Manz, Managing Director of Moneyland.ch. "In particular, the expensive foreign currency fees charged by traditional banks are likely to come under increasing pressure."

The credit card conditions of traditional banks were also compared with the cards of smartphone banks. Card management fees, processing fees for foreign currencies, exchange rate costs (Swiss francs versus euros) and any credits for purchases in Switzerland amounting to CHF 5,000 and abroad amounting to EUR 1,000 over the course of a year were taken into account.

The British provider TransferWise was the cheapest for this profile with total costs of CHF 3.95, followed by Revolut with CHF 7 (purchases during the week) and CHF 12.60 (purchases at the weekend). The big Swiss banks bring up the rear. However, the ranking can also look different depending on the profile.

International smartphone banks do not yet offer a valid alternative to a Swiss bank account. Neither Revolut nor TransferWise offer Swiss deposit protection. In the worst (albeit unlikely) case of bankruptcy, it would probably be difficult to recover the money from the foreign smartphone banks.

However, Moneyland.ch carried out an account comparison of the costs of payment transactions and debit cards ("EC cards") from Swiss smartphone banks and traditional banks. The result: for adults, the smartphone bank Neon is the cheapest solution for the profile examined - with total annual costs of CHF 30 per year. The smartphone bank Zak charges CHF 90 per year for the same profile.

Larger traditional banks are significantly more expensive at 160 francs upwards. However, there are also traditional banks that are significantly cheaper for the profile examined, above all the Freiburger Kantonalbank (salary account: CHF 69) and the Appenzeller Kantonalbank (CHF 76). Here too, the ranking can look markedly different depending on the user profile.

Also interesting: For young people and students, traditional banks are often still the cheapest solution when it comes to special offers. Larger banks also often offer better conditions for young people and students than the Swiss smartphone banks Neon and Zak.

Depending on the usage profile, bank packages at different Swiss banks are cheaper than a combination of individual products such as a private account, credit card and debit card at the same bank. For this reason, a comparison with bank packages was also carried out, taking into account, among other things, purchases in Switzerland and abroad with the credit card, cash withdrawals with the debit card, payment transactions and savings account interest for an amount of CHF 30,000.

For adults, the smartphone bank Neon is also the cheapest solution for the profile examined, with total annual costs of CHF 49.50 per year. This is followed by PostFinance's Private Account Plus at 106.30 francs, the Zak smartphone bank at 122.50 francs, Zürcher Kantonalbank's Inclusive Silver package at 164.80 francs, UBS's Individual package at 178.25 francs, Credit Suisse's Bonviva Silver at 200.35 francs and Raiffeisen's Private Account Plus at 224.80 francs.

Moneyland.ch has analyzed the exchange rates in Swiss francs (CHF) for the euro (EUR), US dollar (USD), British pound (GBP), Swedish krona (SEK) and Thai baht (THB) over four key dates. 

TransferWise offers interbank exchange rates for all currencies examined at no extra charge (processing fees are added, however). Revolut also offers interbank rates, but not for the Thai baht (surcharge of around 1 percent). Revolut also charges more expensive rates at weekends (main currencies with a surcharge of 0.5 percent, others such as Thai baht with a surcharge of 2 percent). Swiss smartphone banks did not offer any particularly favorable rates for card transactions on the surveyed dates. In terms of exchange rates, Neon was on a par with the traditional banks surveyed, while Zak from Bank Cler offered even more expensive rates.

For example, the Swiss franc-euro selling rate showed the following average surcharges at traditional banks for purchases made abroad with a debit card: PostFinance 1.18 percent, Raiffeisen 1.49 percent, UBS (debit cards): 1.67 percent. Revolut and TransferWise, on the other hand, had no surcharges (0 percent), while Neon had a surcharge of 1.69 percent and Zak even 2 percent. By comparison, the credit card surcharges for Viseca were 1.69 percent and 1.63 percent for Swisscard. In addition to the exchange rate surcharges, there are other fees depending on the transaction type and bank. For the US dollar and pound, the surcharges were similar to those for the euro, while for the Thai baht they were significantly higher. The surcharges in ascending order (without additional foreign currency fees) were as follows for the Thai baht: TransferWise 0 percent, Revolut 1.18 percent, PostFinance 1.50 percent to 1.73 percent (depending on the ATM), Neon 1.66 percent, UBS debit cards 1.80 percent, UBS credit cards 2.29 percent, Viseca credit cards 2.35 percent, Swisscard credit cards 2.50 percent, Raiffeisen 2.54 percent and Zak even 5.00 percent.

Traditional Swiss banks offer both credit cards and debit cards ("EC cards"). Depending on the type of use, one or the other card is the more favorable solution. For example, Swiss credit cards should generally not be used for cash withdrawals, as otherwise high fees will be charged. The new smartphone banks such as Revolut, TransferWise and Neon, on the other hand, generally rely on a single card for all applications. For example, unlike conventional debit cards (such as Maestro cards), the Mastercard debit cards from TransferWise and Neon can also be used to make online purchases.

The two foreign smartphone banks TransferWise and Revolut in particular offer a number of functions that are not yet common among Swiss providers. These include real-time notifications directly at the time the card is used, extensive configuration options for using the card - for example, blocking the magnetic strip or the contactless function - or a system with several currency pots. "For payments in online stores, stores and restaurants, TransferWise and Revolut are now an alternative to the established Swiss cards," says Ralf Beyeler from Moneyland.ch. Surprisingly, however, the smartphone banks are not yet focusing heavily on mobile payments: TransferWise and Neon do not yet support mobile payment systems. Zak plans to support all common mobile payment systems in July. Swiss banks, on the other hand, mainly rely on Twint as a mobile payment solution.