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Banking and payment transactionsUpdates edition 2017 – June 2019

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Banking and payment transactionsUpdates edition 2017 – June 2019

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Folder Banking and payment transactions Corrections and new content (June 2019)

Corrections and new content (June 2019)

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3BankingToday

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Folder Banking and payment transactionsCorrections and new content (June 2019)

Section Banking 1: Introduction to the World of Banking

2.1.2 Swiss National

Bank statistics and

bank categories

The bank categories in SNB statistics are now identified as additional information for the purposes

of an excursus.

Adjustment to the categories of bank in line with SNB statistics:

The SNB has changed the way that it categorises banks. The groups “Other banks” and “Institu-

tions with a special field of business” no longer exist, with the SNB now classifying banks as one

of the following nine types:

However, the institutions with a special field of business continue to play a key role in the Swiss

banking sector.

2.3 The Swiss

Bankers Associa-

tion (SBA)

Figure 15: The main tasks of the Swiss Bankers Association (SBA) are now identified as additional

information for the purposes of an excursus.

2.5 SIX Group SIX Group Ltd (now SIX) is changing its organisational structure to create five new business areas:

• Exchange Services. Securities trading services and infrastructure for stock exchange trading.

• Banking Services. Infrastructure for Swiss payment transactions and connection to the SEPA

area.

• Financial Information. Gathering and distribution of financial information.

• Cards. Swiss and international infrastructure for the settlement of card payments.

• Innovation & Digital. Development of SIX products and services.

Chapter 2: Tasks 8

and 9 B]

Chapter 2.1.2 and illustration 15 are now identified as an excursus. The following tasks and the

associated answers are therefore no longer used:

8 A] Which features do banks in the category “Banks specialised in the stock exchange” have in

common?

8 B] As well as the banks as per SNB statistics, some other institutions are also important to the

Swiss banking sector. Earlier on we gave six examples of this kind of institution. Select two and

explain what they do using key concepts.

9 B] What tasks does the SBA carry out as the representative of Swiss banks?

This leads to all following tasks and solutions each being numbered one figure less.

Swiss National Bank (SNB) statistics

Cantonal banks

Big banks

Regional banks and savings banks

Raiffeisen banks

Banks specialised in the stock exchange

Foreign-controlled banks

Other banking institutions

Branches of foreign banks

Private bankers

BankingToday


4. Banks in the digital environment

Learning goals: After studying this chapter you will be able to:

• distinguish between digital transformation and digitisation.

• list the relevant digital technology concepts in banking.

• define blockchain and its potential applications.

• categorise risks and opportunities of big data and algorithms in banking.

Key concepts: Algorithm, API, artificial intelligence, augmented reality, big data, blockchain,

cloud, coin, digital technologies, digital transformation, digitisation, ICO, Internet of Things, miner,

open banking, smart contract, token, virtual reality, wallet

Technological progress provides new opportunities for the finance industry. But progress also

means change. Familiar client needs change as a result of opportunities offered by new technolo-

gies. This results in the bank increasingly being faced with new requirements from its clients.

The bank’s clients want access to their banking data at any time and from anywhere. They do still

want to be able to speak to their client adviser in person. However, they also want to be able to

make contact by e-mail, online banking or chat. They want to be able to open a new account or

buy shares from the comfort of their own sofa.

On the one hand, these new requirements present a challenge to banks. On the other hand, they

open up exciting opportunities. The digital transformation has begun.

4.1 Digital transformation in banking

4.1.1 Digital transformation

New technological opportunities as well as new client needs are changing banks. Well-established

processes are being superseded, the business culture is changing and new services are being

offered. Banking as a whole is changing. We talk about the digital transformation.

The digital transformation is not only a process of digitising processes and services. It is a transfor-

mation that affects all aspects of the organisation. Or, as the MIT defines it: Digital transformation

is the use of digital technologies to significantly improve the organisation, focusing on new busi-

ness models, new forms of client interaction or process improvements within the organisation. In

short, the digital transformation is the continuous transformation of the banking industry towards

the digital future.

4.1.2 Digitisation

The driving force behind the digital transformation is digitisation. In its original sense, digitisation

describes the conversion of analogue content into a digital and thus electronic form. A book writ-

ten by hand is transformed into an e-book – that is digitisation. Digital content can be duplicated

and, at the same time, distributed to countless people at minimal cost and effort.

In the broader sense, the term digitisation refers to the integration of digital technologies into exist-

ing processes and the bank’s business model. This means that previous processes are supported

by digital technologies. For example, in the past, clients would pay their bills with physical payment

orders. The bank would transfer these payment orders into its computer system and make the pay-

ments. Now, many clients use e-banking to make their payments. The payment system then pays

the outstanding amounts automatically.

The driving force of digitisation is digital technologies.


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4.1.3 Digital technologies

Banks use digital technologies to gather, process and transmit information. This enables the banks

to make their services more client-friendly, more personalised and accessible at any time. The most

important digital technologies are:

4.2 Blockchain and its potential applications

4.2.1 The blockchain story begins with bitcoin

In 2008, a white paper (functional description) was issued for a global and purely computer-based

currency – known as bitcoin (virtual coin). The creator of this new technological achievement is

Satoshi Nakamato – a pseudonym. Even now, we do not know for sure who the real person is

behind the name.

Bitcoin seeks to offer an alternative to currencies managed by central banks. Unlike national cur-

rencies, bitcoin transactions are transferred directly from the payer to the recipient. No financial

institution is involved as an intermediary for the transfer. The first bitcoin transfer was made on 12

January 2009. For this type of transfer to function, bitcoin relies on blockchain technology.


Artificial intelligence

(AI)

The human brain enables us to perceive our environment, process our impressions of it and draw

conclusions from it. As people, we can therefore act, react and learn. Artificial intelligence (AI) cop-

ies human thought and action on computer systems. support people. They

undertake tasks and processes and become more adaptive. Well-known forms of AI include

Apple’s Siri and Amazon’s Alexa.

Chatbots Chatbots are a They can communicate with people. They answer

questions and provide solutions for specific problems. Users ask their questions via the chat mech-

anism. In just a few seconds, the chatbot processes the requirements and provides the answer.

Banks use chatbots on their websites and offer their clients the opportunity to obtain answers to

their questions.

Internet of Things

(IoT)

When the fridge speaks to the washing machine. With the Internet of Things,

over the Internet. They exchange important data to

support people. Smart devices are used in all kinds of homes. An app can be used to control light,

room temperature and the TV. When the milk runs out, the fridge orders another bottle.

In industrial production, machines coordinate their processes with each other completely automat-

ically by communicating with each other.

Virtual reality are created by computer systems. Users become immersed in these worlds.

Whether the user is sitting in a 360-degree cinema or wearing a pair of virtual reality glasses, they

experience these worlds as if they were real. Virtual reality is used for games or scientific documen-

tation.

Augmented reality Augmented reality supplements the real world with digital images. The real world is filmed on a

mobile phone camera. Augmented reality simultaneously supplements the image on the mobile

phone screen with The game Pokémon Go is one example of this.

Open banking Banks traditionally offer their own services by means of their own digital channels, such as online

or mobile banking. Open banking differs from this as clients applications from third-party pro-

viders with their bank's applications. For example, online banking payments can be directly inte-

grated into the client’s accounting program. There is also the opportunity to group accounts from

different banks on a single platform. This enables the client to manage their savings account at

bank X, their personal account at bank Y and their custody account at bank Z all at the same time.

The link is made by a mechanism known as an (application programming interface).

API (application

programming

interface)

The API is an between various applications, websites or software packages that enables

data to be exchanged. The API is thus a bridge These platforms are

often programmed differently and require a common “language” to transfer data – API enables

this.

Cloud Data can be stored locally on a device. The data is then only available on that device. Cloud storage

offers greater flexibility. Data is stored and accessed in a cloud

Several people usually have access to a cloud. Banks can therefore set up a more flex-

ible IT infrastructure, which can be subsequently adapted. It also gives the bank the opportunity to

provide its clients with storage space. This increases client loyalty and if the bank charges for this

service, it can generate additional income.

FinTech

(Financial

technology)

The term FinTech describes that rely on technological

Innovative financial technology companies are often referred to as FinTech.

BankingToday


4.2.2 Blockchain

The technology behind the bitcoin is a decentralised posting system, known as blockchain. It is

accessible to anyone who is interested and is thus transparent. This means that all transfers previ-

ously made are publicly available.

The blockchain is a network of several participants – nodes – who are independent of each other.

Each node has access to the blockchain and everyone involved jointly manages the posting sys-

tem. The responsibility for postings is thus distributed between a number of members and there-

fore decentralised.

To assist understanding, the key blockchain terms are explained below:

Transfers are made via the blockchain and the network nodes process these together. Miners are

a special form of node. They check the transfer and approve it. Each transaction is packed into a

block with others and added to the previous blockchain. All previous transfers are thus recorded

in the blockchain. The blockchain can no longer be amended retrospectively and is publicly avail-

able at all times. This ensures security.


Block A block is a that groups together a certain number of transactions and stores these

in a Each new block is attached to the existing chain and irreversibly stored. Each indi-

vidual block is clearly indicated by the digital signature – the hash.

Hash The hash is the result of a and is shown as a long composed of letters

and numbers. Each block in the chain has its own

Node A node is a computer that has the blockchain software. All nodes together form the blockchain

network and are responsible for the of the posting system. Each node the

blockchain with the previous transactions and records future transfers. The nodes also check com-

pliance with the They thus ensure the security of the network.

Miners Miners in the blockchain network. They combine several transactions in a

block, confirm them and enter them into the blockchain. To do this, they need to solve complicated

mathematical problems to obtain the hash. Each mathematical problem can only be solved by one

miner. For each problem solved, new coins in the digital currency are generated – the fastest miner

receives these as payment. In the early days of the blockchain era, miners were private individuals

with their own computers. Because calculations are becoming more and more complicated, an

increasing number of miners are specialised companies with high-speed computers.

Wallet A wallet is a where digital currencies, such as bitcoin, are stored, paid out and

received. Wallets are either installed on an individual’s computer, downloaded as an app to a

mobile phone or requested from a provider online. Wallets can also be held offline on a USB stick

or as a hard copy.

Public key /

Private key

Every wallet has a It is like a fixed password for the account. A wallet also generates

a for each transaction. This key is like the account number for incoming transfers. A

sender transfers coins from their public key to the recipient’s public key.

Blockchain wallet /

Cryptocurrency

wallet

Blockchain-based currencies like bitcoin are handled using specialised wallets and exchanged for

other forms of blockchain currency or traditional currencies, such as US dollars, euros or Swiss

francs.

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The following example of a bitcoin transfer shows how a blockchain transaction works:

Figure 18 Blockchain transaction

The bitcoin is the oldest blockchain-based currency. There are various other forms of currency.

4.2.3 Cryptocurrencies

Cryptocurrencies are a form of digital money that relies on the blockchain. At the end of 2018,

2,000 different currencies were recognised and could be bought on crypto markets Trading is open

24/7 all year round. Purchasing these currencies is associated with high risk. Daily rate fluctuations

in percentages that reach high double digits are not unusual.

Figure 19 High rate fluctuations for bitcoin


Mandy Smith wants to transfer some money

to John Graham.

Mandy and John both have a wallet, each with its own

private key.

Bitcoin miners groupMandy’s transaction

with other transactions in a block.

All participants (nodes) aremade aware of the transfer,

so that they can check it.

The miners secure the block by solving

a mathematical problem (hash).

The first miner to solve the mathematical problem adds a new block to the blockchain. The new block groups Mandy and John’s

transaction with even more transfers. The miner receives bitcoins

and the fees as their payment.

John’s wallet is credited with the

bitcoins.

Mandy uses a blockchain exchange to change CHF into bitcoins

and sends them to her wallet.(Alternatively, she can pay in CHF using a credit card,

bitcoin machine or bank transfer.)

Mandy and John’s wallets each generate a public key

for the transaction. Mandy also confirms the transaction with her private key and pays the

required transaction fee.

➀ ➁

➂➃➄

➅ ➆ ➇

CHF

20,000

17,500

15,000

12,500

10,000

7,500

5,000

2,500

0

+4,000%

+3,000%

+2,000%

+1,000%

0%

Mar. 16 Aug. 16 Mar. 17 Aug. 17 Mar. 18 Aug. 18

+776.2%

CHF

BankingToday


Cryptocurrencies can be split into two types:

• Coin – has its own blockchain via which transfers are made. For example, bitcoin transactions

are processed via the bitcoin blockchain.

• Token – does not have its own blockchain via which transfers are made. The test token, for

example, has no individual technology and processes transactions via the bitcoin blockchain.

Tokens themselves can be split into three types:

• Payment tokens – are the conventional currencies used to pay for goods and services as well

as for transfer or savings purposes.

• Usage tokens – grant the buyer a usage right. The buyer can use the future product of the

company that issues the token.

• Investment tokens – are assets and promise the holder a share of the profits in the block-

chain company or regular fixed payments.

Some examples of the 2,000 or so cryptocurrencies are presented below in more detail:


Bitcoin The bitcoin is the first and The coin has achieved values in

excess of CHF 20,000 per unit. The bitcoin runs on its own blockchain, which is based on the white

paper issued by in 2008. The bitcoin enables fewer than

which is inconsistent with a global and effective payment system. When miners pro-

cess transaction blocks in the network, new bitcoins are issued as a reward. The maximum number

of bitcoins is limited to 21 million by the system itself. It is anticipated that only after 2130 will all

bitcoins have been generated.

Litecoin The litecoin largely adopts the principles of the bitcoin blockchain. One of the key differences is the

which is four times faster. The litecoin is considered to be an

advanced form of bitcoin.

Ether / ethereum The cryptocurrency ether is processed via the ethereum blockchain. The technology of this block-

chain goes beyond purely transmitting funds. Dynamic elements, known as

make ethereum a platform for other potential applications; this is covered in more detail in sections

4.2.4, S. 48 and 4.2.5, S. 49.

Ripple Ripple has specialised in the processing of payments via its own blockchain. Compared with bit-

coin, the speed of ripple is very fast, processing thousands of transactions per minute. The ripple

network can thus be used for making international payments within a matter of seconds. Trans-

action costs are also very low.

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4.2.4 Smart contracts

In addition to payment processing, the ethereum blockchain also offers another potential applica-

tion. Ethereum and its inherent technology provides a platform for smart contracts. Companies

use this as a basis for developing their own applications for blockchain-based applications, known

as distributed apps (decentralised applications).

A smart contract is an electronic representation of a real contract and is achieved by means of com-

puter protocols. Thus, a conventional paper contract is replaced with a digital contract. Individual

parts of the contract are recorded as conditions in the smart contract. If a condition is fulfilled, an

action is initiated completely automatically. This is known as an IF/THEN function. For example:

If the light switch is pressed, then the light comes on.

A comprehensive smart contract can include hundreds of “if” conditions, which need to be fulfilled

incrementally before an action is executed. So it is not enough to simply press the light switch.

Doing so requires other conditions to be fulfilled. If the power cable is properly connected and if

electricity is flowing and if the switch is pressed, only then will the light come on.

Example

Stefan Meier wants to eat pizza, preferably at home. He therefore orders a Quattro Stagioni pizza

from Turbo-Italian-Food AG for CHF 19, to be delivered to his home within 45 minutes. Both parties

enter into a contract at 6:15 p.m. With a smart contract, this is how the contract works:

Conditions:

• If a Quattro Stagioni pizza is delivered and

• if delivery is made to Stefan Meier’s address and

• if the delivery is made today, before 7 p.m.,

Action:

• then CHF 19 will be transferred from Stefan Meier via the blockchain to Turbo-Italian-Food

AG.

In the Stefan Meier example, we assume that all conditions are fulfilled. However, if this is not the

case and the pizza is delivered, say, after 7 p.m., then the action will lapse. In this case, no funds

will be transferred to Turbo-Italian-Food AG. Alternatively, there is an option to specify what should

happen in such a case. If, for example, Stefan Meier receives his pizza too late, but its temperature

is still higher than 50 degrees, then the delivery service will still receive CHF 16.


BankingToday


4.2.5 Initial coin offerings (ICO)

Start-ups can take advantage of blockchain technology to obtain finance by means of initial coin

offerings (ICO). A start-up can create a new token on the usual cryptocurrency exchanges. Inves-

tors buy the new tokens and pay for them with real currencies or other forms of cryptocurrency,

such as ether or bitcoin.

An ICO is therefore similar to a conventional company “going public” and a common means of

blockchain companies financing their future business activity.

The new token is either purely a means of payment or the investor receives a right to the use of

future products or a claim on future profit distributions. In rare cases, an investment is associated

with a stake in the company. Investors buy the new tokens because they believe in the business

idea or the future product. However, they invest in the hope that these tokens will increase in value,

enabling them to recoup their investment.

4.3 Big data – algorithms in data management

Day after day, people place enormous quantities of data on the Internet. We surf online, watch vid-

eos, read newspapers, compare products or plan our next holiday. All of these activities leave data

trails on the websites we visit. Even when we use a company’s products and services off-line, data

is still collected. Over time, companies accumulate huge quantities of data about their clients, staff,

competitors and all other interest groups with whom they are in contact. Much of this information

comes from various sources and has no structure whatsoever, is extremely complex or is con-

stantly changing. Making meaningful use of this mountain of data requires technological tools.

4.3.1 The risks and opportunities of big data

Big data is about organising and analysing huge quantities of unstructured, complex or fast-mov-

ing data from various sources. To do this, companies use digital technologies to look for pat-

terns, connections or differences.

Big data is used in a variety of areas:

• It is used to identify fraud in financial transactions, such as insider trading.

• Doctors use it to isolate and treat illness and disease with greater accuracy.

• The police find it easier to track down perpetrators as the profile is more informative.

• Companies use it to offer their clients personalised products and services.

The opportunities of big data are very appealing to banks for increasing client loyalty, optimising

processes or improving risk management.

The opportunities of big data for banks:

• They get to know their stakeholders better.

• Their marketing measures are better targeted.

• Their clients receive recommendations for products that are tailored to suit them.

• New products and services are optimally adapted to their client’s requirements.

• Waiting times in branches are reduced, as clients are able to see from the app how long they

have to queue.

• Lending risks can be better assessed.

• Anonymous credit card data is sold on the market.

However, as well as these new opportunities, big data also brings risks for banks. Data includes

personal interests or reflects a person’s behaviour. Any misuse of this sensitive data may result in

a risk to the bank’s reputation, as well as legal or financial consequences. It is therefore vitally

important that banks handle data responsibly.

To avoid risks, banks should pay particular attention to the following criteria:

• The result of any data analysis is only as good as the questions that are asked.

• Poor data quality leads to poor results.

• Clients need to trust the bank because it is analysing their personal data.

• Sensitive data must be carefully protected.

• The bank must comply with legal data protection provisions.

• If anonymous data is sold, it should no longer be possible for this to be unencrypted.


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4.3.2 Algorithms and big data

Big data involves collecting, analysing and interpreting huge quantities of data from various

sources. Technological support is needed to obtain useful results. It is very challenging to review

mountains of data and the basic information is also constantly changing as new data comes in or

previous data is updated. Algorithms are used to overcome these challenges.

In IT, an algorithm is an instruction that uses a sequence of commands to solve one or more prob-

lems. An algorithm is characterised by the following features:

1. The chain of command must be unambiguous and should not include any contradictory

descriptions.

2. It must be possible for each command to be executed.

3. The chain of command must have an end and should not continue endlessly.

4. The commands must always provide the same result with the same precondition.

Algorithms can be found everywhere in everyday life. For example, a navigation system calculates

the quickest route. To do this, it takes account of the distance, speed limits, volume of traffic, traffic

lights and roadworks. The navigation system solves the problem of finding the best route from A

to B.

In big data, algorithms are used to specify the data to be analysed in a particular time with a par-

ticular objective. This enables huge quantities of data to be structured, analysed and interpreted for

a specific objective, fully automatically within a very short space of time.


Section Banking 2: Banking regulation, compliance, annual financial statements and

risk management

1.1.4 International

tax agreements

Entire section 1.1.4 “International tax agreements” revised.

The most significant change is the introduction of the automatic exchange of information

in tax matters (AEOI).

A global standard for the automatic exchange of information (AEOI) is now intended to prevent

cross-border tax evasion. The legal bases for implementing AEOI entered into force in Switzerland

with effect from 1 January 2017.

Switzerland and the EU signed an agreement to introduce the automatic exchange of informa-

tion back in May 2015, and AEOI was instigated between Switzerland and all EU countries based

on this agreement on 1 January 2017. Since then, financial institutions in the EU and Switzerland

have been gathering data. In other words, they now establish their clients’ identity in compliance

with AEOI regulations, which include determining the client’s tax domicile in accordance with AEOI

criteria. As far as Switzerland is concerned, for instance, this means checking whether a client is

resident in an EU member state. The financial institutions also record account information (e.g.

balance, dividends received and interest earned). Starting in 2018, the Swiss authorities will then

begin sharing the data they have collected with the relevant partner countries.

As well as the EU, Switzerland has also signed agreements to implement AEOI with other coun-

tries. All in all, some 100 nations have committed to implementing the global standard. One excep-

tion is the USA, which uses its own standard known as FATCA.

2.8.1 Liquidation

of a bank

Clarification of the terms depositor protection and deposit insurance.

Depositor protection means that, in the event of a bank going bankrupt, up to CHF 100,000 per

customer is protected through a three-stage system. In the first stage, the bank pays from its liquid

funds. If these are insufficient deposit insurance is used.

3. Summary Connection between the annual financial statements and the annual report is clarified. The

annual report consists of the annual financial statements and additional information:

The annual financial statements contain the balance sheet, the income statement, the statement

of changes in equity, the cash flow statement and the notes.

The additional information contains details of the bank’s organisation and a report from the man-

agement on the financial year.

BankingToday


Chapter 3: Task 9 B] Task omitted:

The task relates to the sub-section: 3.2 Excursus – using financial ratios to analyse bank financial

statements. This is an excursus. The following sub-task is therefore no longer included:

There are two differences between the balance sheets of banks and those of other companies.

What are they?

Section Banking 2: Banking regulation, compliance, annual financial statements and

risk management

Section Money Laundering

1. What is money

laundering?

No corrections identified

2. How does

Switzerland fight

money laundering?


3.1.1 When should

identity be verified?

Correction:

When a third party opens a bank account for a minor, the minor’s identity does not have to be

verified – even for deposits in excess of CHF 25,000.

Addition:

The identity of clients, who only have a pillar 3a or vested benefits at a bank does not have to

be verified.

Answer task 4 Connections between the law, regulations and the banks implementing them are rectified: The

Money Laundering Act (MLA) sets out the principles in this area and names the FINMA as the

supervisory authority. The Money Laundering Ordinance (MLO-FINMA) was created by

the FINMA and contains detailed provisions concerning the principles in the MLA. The Money

Laundering Ordinance additionally refers to the CDB. The CDB Agreement was created first. It con-

tains detailed provisions concerning the Money Laundering Act. Although the CDB is not a law, all

banks are required to comply with it under the MLO-FINMA.

Section Deposit Services

1. The importance of

deposit services for

banks


2.3 Accounts for

businesses

Addition of a savings account for companies:

With interest rates keeping persistently low, many banks now also offer companies savings

accounts in which to invest their assets.

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new subchapter

3.3.2 Opening

process when a

company is set up

New subchapter:

Every company begins as a start-up. To establish a joint-stock company or limited liability com-

pany, start-up capital is required. The legal basis for a joint-stock company can be found in art. 633

of the Code of Obligations and for a limited liability company in art. 777 of the Code of Obligations.

The start-up capital must be deposited in an account. But at this point in time there is no company

yet, which makes the above-described identification process impossible. Banks therefore offer a

special form of current account: the capital deposit account. This is a blocked account which

freezes the start-up capital. After the company is founded, the assets are released and then form

the company’s shareholders’ equity. The opening process for a capital deposit account is as fol-

lows:

1. One or more natural persons or legal entities (the founders) wish to set up a company.

2. The founders ask the bank to open a capital deposit account.

3. The founders provide the following information about the company and themselves:

• company, i.e. the company name

• registered office, i.e. the location of the company’s headquarters

• legal form, i.e. joint-stock company or limited liability company

• sector, i.e. sector of the economy (e.g. banking)

• purpose, i.e. the actual business activity (e.g. florist shop)

• expected annual revenue, i.e. the total income expected in the first year

• governing bodies, i.e. board of directors, executive committee

• depositors, i.e. the persons who pay in the capital

• origin of the deposit, i.e. how was the money generated?

4. The bank opens the account and issues a capital deposit confirmation.

5. The founders go to a notary with the capital deposit confirmation and other documents of incor-

poration and receive a charter once the company has been incorporated.

6. The founders register the company with the trade register and receive a trade register certificate.

7. The founders submit a copy of the trade register certificate to the bank.

8. The bank determines and identifies the beneficial owner as with an existing company. It also

compares the information provided previously with the trade register certificate.

9. The bank releases the capital for the company and converts the capital deposit account into a

current account.

The start-up company can now use the capital and begin its business.

3.3.2 Signature card With the new chapter 3.3.3 on the opening process when a company is set up, the previous

subchapter 3.3.2 Signature card will be renamed to 3.3.3.

4. Account state-

ments and with-

holding tax


Section Deposit Services

Section Basic Services

Entire course book Term “e-banking” modified in line with changes to subsidiary competencies:

the term “digital banking” is now used instead of “e-banking”.

1.1.1 Maestro

(or debit) cards

Replacement in the event of a lost Maestro card

For some time now, replacement Maestro cards have also been sent abroad if the old one was lost.

BankingToday


1.1.1 Maestro

(or debit) cards

Further information on V Pay card and the comparison with Maestro card:

Three debit cards are widely used in Switzerland: the Maestro card and V Pay card, issued by

banks, and the PostFinance card. As well as having a different issuer, the main difference

between the Maestro and V Pay cards lies in the technology used. The V Pay card is protected

against misuse through skimming as all the data on the V Pay card is only stored on the chip and

not on the magnetic strip as well as in the case of the Maestro card. The drawback of the V Pay

card, on the other hand, is that it can only be used where the ATM has the required chip technol-

ogy. This is still not the case in all countries.

Figure 2 of Maestro card updated:

1.1.2 Credit cards Further details for prepaid function:

Cards with a prepaid function are available to young people and any client who wants one. These

cards only allow the amount that was paid onto them in advance to be spent. The prepaid card is

topped up either by transfer, directly in the bank’s e- or mobile banking system, at the bank counter

or at an ATM.

Additional description of virtual credit cards:

Virtual credit cards have existed for some time. They include the card issued by Revolut, a com-

pany specialising in digital banking services. Virtual credit cards are not issued physically. If a client

wants to make a payment, they do so using an app on which the credit card data are stored. These

credit cards work according to the prepaid principle, so payments are only possible if credit has

been put on the card in advance.

One benefit is they can be used as soon as the client has been identified. However, the client can-

not withdraw money from ATMs. The virtual credit card is purely intended for internet purchases.


XY Bank

Magnetic strip

Front

Back

Logo of the Maestro card company

Logo of the

account holding

bank

Chip Contactless function logo

Period of validity (expiry date)

Card number

Cardholder

name

International Bank

Account Number

SignatureFred Smith

Fred Smith

IBAN / Account No.

CHxx xxxx xxxx xxxx xxxx x

VALID THRU

xx/xx

Card No.

xxxxxxxx

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1.1.4 Mobile

Payment

Further details to mobile payment:

To combat the competition from other countries, SIX has joined forces with the banks and Post-

Finance to pool their efforts into further developing the TWINT app. Unlike international competi-

tors’ products such as Alipay or Apple Pay, TWINT can be linked directly to a client’s bank account,

meaning a credit card is not necessary. The client can pay with TWINT in a shop or on the internet.

In addition, the user can use the app to send money to other users or request money from them.

This is done using the TWINT user’s phone number.

As well as for making payments in shops, TWINT can also be used for internet purchases. The app

user can also send money directly to other people via their phone number, provided the payment

recipient also has an appropriate app.

The following figure shows how a payment is made via the TWINT app:

New figure 6: Payment process with the TWINT app

1. The client holds his smartphone to the payment terminal (beacon) at the cash desk.

2. The signals from the seller (via beacon) and the client (via smartphone) go to TWINT, in the

seller’s case via the acquirer (e.g. SIX) and in the purchaser’s case via his bank (issuer).

3. TWINT checks whether the client has that amount of money available. If so, the payment is

approved.

4. The seller receives notification of the approved payment via its acquirer and the amount owed

is set aside in the client’s account. The purchase is thus concluded and the client can take his

goods.

5. The amount is debited from the client’s account and transferred to the seller.

Comment

The purchase process (steps 1–4) is completed within 1–3 seconds. It takes a few days for the

money to be actually credited to the seller’s account. TWINT can also be linked to a credit card

instead of an account.

By the additional figure 6, all subsequent figures move one more point.

1.1.5 Travellers

cheques

The subchapter to travellers cheques is now identified as additional information for the purposes

of an excursus.

1.1.6 Travel Cash In Figure 7: Cash Services and Cash Facilities (see Figure 8), the column on Travel Check is now

marked as a excursus.


$

$

ClientSeller

Seller’sbank

Client’s bank(issuer)

Acquirer(e.g. SIX)

TWINT(payment

validation andapproval)

➀

➂

➄

➃

➃

➃➁

➁

➁

➁

BankingToday


1.2 Payment

transactions

The structure of the subchapter has been adjusted:

Private and commercial customers have similar payment needs. Therefore, it is no longer differen-

tiated according to customer type. This leads to a new chapter structure according to the needs

“Issuing bill”, “Collecting payments” and “Paying bills”:

In general the contents remain basically the same.

The following topics can be found in subchapter 1.2.1 Issuing bill:

• Payment slips for clients’ own use

• Payment slips with a reference number (ISR)

• New QR bill with payment part

• Electronic invoicing (eBill)

The following topics can be found in subchapter 1.2.2 Collecting payments:

• Direct debit system (LSV+/BDD)

The following topics can be found in subchapter 1.2.3 Paying bills:

• Payment orders

• Standing orders

• Direct debit system

The adjustments to the structure lead to a new numbering of the figures:

• Figure 9 Requirements of invoicing party and payer and suitable bank products (new figure)

• Figure 10 Orange and red payment slips

• Figure 11 Invoice number and code number

• Figure 12 The new payment slip

• Figure 13 Advantages of direct debit

• Figure 14 Debit authorisation form given by Gina Hunziker to her health insurance company

• Figure 15 A payment order

• Figure 16 The standing order: for regularly scheduled payments of a fixed amount to a single

payee


Requirement Products

Invoicing party

(creditor)

Issuing bill Red / orange payment slip,

QR bill or eBill

Collecting payments LSV+ or BDD

Payer (debtor) Paying bills Payment order, standing order,

LSV+ or BDD

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1.2.1 Issuing bill Note on QR bills added

The QR bill will replace the current orange and red payment slips on 1 January 2019. The QR bill

makes it easier for companies and consumers to handle invoices and transfers.

It is made up of a text part and a payment part with integrated QR code, which contains all the

key payment information (e.g. reference number, payee details, amount, etc.). The account

number is given in IBAN format. The payment process in Switzerland is thus being digitised and

made significantly more efficient and economical for all market participants

Further details to QR bill:

No end date has yet been set for the use of red and orange payment slips. However, from 30 June

2020, anyone needing to make a payment must be able to process their payments using the new

QR bill – either via e-banking or with payment orders in line with the ISO 20022 standard.

The features of the new QR bill:

• QR bills can be issued in Swiss francs and euros.

• As with the current red payment slips, further information (messages) can be added for the

payee.

• QR bills are available in paper form or electronically as a PDF.

• Alternative payment methods such as eBill or TWINT can be included in the payment in-

formation contained in the QR code.

Further details to electronic invoicing (eBill):

The methods of issuing a bill presented so far have one thing in common: they are available in

paper form. However, a client can also issue bills in digital form only. This form of billing is becom-

ing increasingly popular.

The creditor requires invoicing software with which to issue an electronic bill, which is then sent

as an eBill to the debtor’s e-banking account. To make the payment, the debtor checks the bill in

e-banking and then approves it. This dispenses with the need to enter long reference numbers or

other details. The eBill therefore saves time and paper.

Likewise the creditor (e.g. an SME) can reduce the manual work involved, allowing it to meet its

clients’ actual requirements. As clients process electronic bills quicker than paper ones, the credi-

tor receives its money quicker too.

The eBill payment process is extremely straightforward and efficient for the debtor. The latter must

enable eBill in his e-banking account in advance:

1. Log in to e-banking – the debtor logs into his e-banking account.

2. Enable eBill / e-invoicing – the debtor selects “eBill / e-invoicing” from the menu in e-bank-

ing and enables the service.

3. Registering with companies – the debtor selects the companies from which he wishes to

receive bills digitally.

1.3 Cheques The subchapter to cheques is now identified as additional information for the purposes of an

excursus.


BankingToday


Chapter 1 summary The summary of checks is no longer displayed, because checks are now considered a excur-

sus.

By contrast, the summary of new texts and the new structure of subchapter 1.2 is as follows:

Payment methods

Electronic, or bank money is increasingly becoming the norm. The Maestro card is the most pop-

ular debit card on the market today. It can be used for the following transactions:

Credit cards are used to make non-cash purchases and withdraw cash anywhere in the world.

Mobile payment

A digital wallet on a smartphone or tablet that lets clients send, request and receive money via an

app depending on who their provider is. Unlike international competitors’ products, TWINT allows

a client’s bank account to be linked directly to the app, meaning a credit card is not absolutely nec-

essary.

Payment transactions

Clients have different needs when it comes to payment transactions. They want to issue bills, col-

lect payments or pay bills.

The following products are suitable for issuing bills:

• Red or orange payment slip

• QR bill

• Electronc bill (eBill)

The following product is available for collecting payments:

• Direct debits (LSV+/BDD)

If clients want to pay bills, they can use the following products:

• Payment order (with payment slip)

• Standing order

• Direct debits (LSV+/BDD)

Chapter 1 task 3 und

answer 3

Updated task 3:

What is the main difference between a debit card (e.g. Maestro card) and a credit card?

Updated answer 3:

Unlike a debit card, a credit card payment is not debited from the client’s account immediately, but

only at the end of a billing cycle.

2.1 Payment pro-

cessing in Switzer-

land

From 2018, existing standards for payment processing by ISO 20022 will be harmonized. Uniform

processing leads to cost optimization for the participating banks.

3.2.1 Online banking Figure 27 Typical online banking services, is extended by another e-banking service, the

financial assistant. It can be used to analyze personal expenses, plan the budget and manage sav-

ings goals.

The safety precautions are extended by the photoTAN. During this process, a pixel image or QR

code is displayed and checked during the login process.


Maestro cards can be used:

to withdraw cashfrom ATM machinesor over the counter

to pay for products and services

without using cash

to pay for petrol without using cash

Four major credit card types

MasterCard Visa American Express Diners Club

19BankingToday

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Section The Swiss National Bank


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