Swiss Are Frank About Their Love of Cash
Posted by hkarner - 4. Januar 2017
Source: The Wall Street Journal
While cashless and electronic transactions are the trend globally, Switzerland’s affinity for bills shows no signs of abating
A bundle of 1000 Swiss franc bank notes. Amid a a global trend toward cashless economies and electronic payments, the Swiss keep far more paper money on hand than citizens of other nations.
ZURICH—Not long ago, Tom O’Hara walked into a used car dealership in Ponte Tresa, Switzerland, and forked over the equivalent of nearly $13,000 in cash for a 1999 Porsche Boxster. It was just one of three cars that Mr. O’Hara, a onetime American and current Swiss citizen, paid for in cash in 2015.
“You could do it by bank transfer,” said Mr. O’Hara, a 57-year-old electrical engineer. “But most people just take the cash out, and bring it over.”
The Swiss love cash, and use it regularly to pay for purchases large and small—monthly utility bills can be paid in cash at post offices. Their affinity shows no sign of abating, and flies in the face of a global trend toward cashless economies and electronic payments that can better track potential fraud.
“It certainly seems that the Swiss are out of kilter with the dominant trend around the world,” said Michael Levi, a professor of criminology at Cardiff University.
At the beginning of 2016, Switzerland bowed to pressure from international anti-money-laundering organizations and implemented a cap on the amount of cash a person can use on a single purchase without raising red flags and requiring extra paperwork. In Spain, that limit is equivalent to about $2,600 per purchase, above which other means such as a bank transfer must be used, while France limits taxpayers to an amount in cash equal to about $1,050 per purchase, according to the European Consumer Center Network.
Switzerland opted for a cap of 100,000 Swiss francs, or about $97,700. For cash deals above 100,000 francs, a Swiss retailer must now confirm customers’ identities and report suspicious transactions.
In a report published in December, the Paris-based Financial Action Task Force said the Swiss limit “seems very high, even for Switzerland,” adding that it was too soon after implementation to measure the cap’s effectiveness. The FATF, created by the Group of Seven nations, sets global anti-money-laundering standards and assesses how well countries comply.
The rule only went into effect after spirited debate among lawmakers, who weighed what they described as Swiss citizens’ inherent right to use paper money against warnings that resistance to a restriction might lead to the country being blacklisted by international watchdogs.
Some countries, such as Germany, don’t impose limits on single cash payments.
Experts cite a number of reasons for the Swiss affection for cash. It is a relatively safe country, making robbery or mugging less likely; it is also a predominantly rural place, where transactions have tended to be face-to-face, and money may be seen as a tangible thing to keep on hand.
To that end, the Swiss keep far more paper money on hand than citizens of other nations. The value of bank notes and coins in circulation per Swiss inhabitant reached $9,214 in 2015, compared with $4,433 in the U.S., and $3,571 in the euro area, according to data from the Bank for International Settlements.
Christian Weiss, who supervises the coin and bank-note collection at the Swiss National Museum, said the Swiss favor cash even when traveling abroad. Still, he said, cash usage has declined since 1990, when about 90% of the money used in Switzerland was in cash: “In 2015, it was merely 60%.”
The circulation of one of the largest denomination bills in the world, the 1,000-franc note, also makes it a lot easier to carry and use significant amounts of cash in Switzerland.
Circulation of the big bill has increased recently, according to the Swiss National Bank—reaching 45.4 billion francs of the notes in October (the most recent data available), or a 6% gain compared with the same month in the previous year. Use of the thousand-franc note typically jumps in the month of December.
That contrasts with a mounting skepticism of cash in other countries, as they try to reduce corruption, counterfeiting and money laundering. In November, India abruptly announced plans to make nearly 90% of its bills in circulation invalid, by replacing large notes with newly-designed versions.
The European Central Bank said in May it would cease production of the 500 euro note, its biggest, citing concerns that it could “facilitate illicit activities.”
In the U.S., anyone accepting a cash payment over $10,000 must file a form with the Internal Revenue Service, identifying who made the purchase.
In contrast, the Swiss expect a high degree of flexibility to use cash. “It is still a widely used and popular option in Switzerland,” SNB Chairman Thomas Jordan said in April when the central bank unveiled its new 50-franc note. The Swiss use it in shops, restaurants and for train travel, he said, and “it is also widely used for automobile purchases and in agriculture.”
A spokeswoman for Switzerland’s Federal Department of Finance defended the high ceiling for a single cash payment. “So far, we think it’s adequate,” she said, adding that the idea of any limit on cash payments in Switzerland became “quite a touchy subject.”
Indeed, during the parliamentary debate on the Swiss cash-payment cap in 2014, one lawmaker argued that it was “arbitrary,” and could create a slippery slope leading to tighter restrictions.
Others defended it as more than reasonable. “Try going abroad and paying for something with 100,000 francs in cash,” another lawmaker said. “You’ll have some problems.”