Migration Payment Traffic Switzerland
QR code to replace the currently used payment slips
The Board of Directors of SIX Interbank Clearing Ltd has decided in October 2016 to revise the inpayment slip with data code planned for mid-2018. In order to take account of the progressing digitalization, market needs and upcoming regulatory requirements, the data content of the planned QR code is being expanded. This should ensure its long-term operational sustainability.
You wrote that the QR code is to replace the current payment slips. Does this mean that it will no longer be possible to submit physical payment instructions at banks or to make inpayments at post office counters?
No, it will continue to be possible to submit physical payment instructions at banks or make inpayments at post office counters. Details will be published on 27 April 2017. The expanded QR code, however, will promote the spreading of electronic processes, which means that they will become more established over time.
The current forms of the payment slip will be replaced by the QR code and thus disappear. Will it only be possible to pay with the QR code in the future?
All information needed for the payment is also still legible with the naked eye. And it will continue to be possible to submit physical payment instructions via banks or to make inpayments at post office counters.
The banks announced the QR code five years ago, and in November 2015, published the sample dimensions and designs for the new inpayment slip with data code. Why is it already necessary to make changes?
The most important elements of the new solution, such as the consistent use of the IBAN, the replacement of the encoding line with the QR code, and the reduction to a single solution, shall be retained.
However, additional demands upon the data content of the QR code have been notified. The implementation of these market requirements has led to a situation in which the reserve planned to meet future requirements for the QR code has been exhausted. The data scope of the QR code must be thus expanded to provide reserve space for future needs. More data leads to a need for more space, which requires a new layout. Since the QR code has not yet been introduced, we want to react now – before the start of the migration phase – and to adapt it so that it is also able to meet the future requirements. We are convinced that the new specifications will be sustainable in the long term and that we will thereby create added value for companies.
The banks are setting a face pace. How is it being assured that companies will be involved on time and will be ready?
The financial institutions are supporting their customers during the migration and have worked closely together with the software industry for several years to ensure that updates will be available on time. Numerous ERP software providers have already launched software modules and are actively committed to the on time and successful migration.
How long is "long-term"?
When it comes to designing the QR code, we are emphasizing a high degree of flexibility, with the aim of also making future extensions possible without major adaptations.
The first inpayment slip with an imprinted reference number for mechanical data processing was introduced over 40 years ago and has not been changed much since. This shows that payment traffic works with robust solutions. The pace of development of market needs and of regulatory requirements has accelerated enormously in recent years. New developments call for new solutions. It is no longer possible to provide precise future timespans in the digital age.
You mentioned changed market requirements. What exactly has changed?
For example, various market participants requested that the QR code contain a customer sector which is at the biller's disposal. We added this popular requirement on a short-term basis to the QR code this year, to the extent possible. This adaptation has led to a situation in which there is no longer any reserve, meaning that the data capacity of the current QR code is fully exhausted and offers no further possibility to be augmented with necessary data in the future. Now there are also other payment methods that use the QR code. They should also be enabled to use the Swiss banks' QR code. And finally, there are foreseeable regulatory requirements in the area of combating money laundering, privacy and security that could lead to a need for additional space for data. These three different examples show why the QR code must be expanded.
Why is the adaptation being made now?
We consider it necessary to address the altered circumstances now. We are convinced that making the adaptation now, a considerable period of time before introduction throughout Switzerland, is more economical than a later adaptation after the introduction, which would involve significantly greater effort and costs for all market participants.
QR code as data carrier
Is the QR code even suitable for transporting large data volumes in a small space?
Yes, but to do so, the QR code must be of a certain size, while being suitable for mass use. It must capable of being shared on paper and in electronic documents and read by any smartphone or reader. These are two essential criteria for payment traffic. Furthermore, the QR code is a globally recognized standard that is also used by other payment methods.
What information is contained in a QR code?
The QR code particularly contains all necessary information about the beneficiary and payer, amount and currency, reference number or payment purpose. The biller has a special area available that can be used for dispatch management in logistics, for example. The contents contained in this area are not used during the payment processing.
With what new data shall the QR code be expanded?
The implementation of the new solution is currently being prepared. We plan to be able to provide details about the new solution on 27 April 2017.
Will people without technical skills by disadvantaged with the introduction of the QR code?
The QR code has been used in Switzerland by companies from diverse sectors for many years already. The QR code reader can be easily installed on all smartphones. 80% of the Swiss population owns a smartphone, 60% in the 50 to 74-year-old age group. Those who do not have a smartphone or do not want to use it for payments, can continue to enter payment instructions in their e-banking system by hand or pay bills by mail or at the post office counter.
Adaptation of the roadmap
The new inpayment slip was to be introduced in mid-2018, but this timeplan can no longer be maintained. What is going to happen now?
The publishing of the new roadmap is planned for the 27 April 2017. However, this only affects the QR code as replacement of the payment slips. All other work in the areas of credit transfers, direct debits and notifications & reporting are not impacted by this and will be completed as planned by mid-2018.
Does that mean that the migration to the ISO 20022 standard can be stopped until the new schedule for the QR code replacing the current payment slips is communicated?
No, by no means! The harmonization of payment traffic is being carried out in two stages. The first stage is the migration to the ISO 20022 standard. This must take place independently from the introduction of the QR code to replace the current inpayment slips. It is therefore essential to continue the ISO 20022 migration. The second stage involves the changeover to QR code according to the new roadmap to be published on the 27 April 2017.
Work process and costs
Will the migration costs increase for companies with the planned change?
We are not assuming that they will. We do not see any objective reason for cost increases as a result of this adaptation. The plan is to make things easier for billers by relaxing the design requirements.
The total costs for the switchover for individual companies depend on their current state of digitalization. Many business customers use standard software that can be updated with a new release. Nothing changes in this regard.
What is the regulatory background for the conversion of payment traffic?
The migration of the Swiss payment slips to the ISO 20022 standard is compliant with regulatory requirements. The requirements resulting from FINMA’s revised Anti-Money Laundering Ordinance can be met through the changeover to the QR code replacing the current payment slips. Moreover, ISO 20022 simplifies adherence to the Anti-Money Laundering Act.
Central to the FINMA Ordinance is the enhanced transparency regarding instructing party information in payment traffic. This means that for payment instructions each financial institution must in principle forward the name, account number and address of the debtor as well the name and account number of the creditor to the creditor’s financial institution. The term “debtor” always refers to the holder of the account from which an amount will be deducted, regardless of whether another person is listed as the debtor. This applies both for electronic and paper-based payments.
Since the additionally needed information must be routed throughout the entire processing chain, this conversion not only affects financial institutions and their customers, but also software providers with solutions that offer payment slip functionalities. The pertinent timely and consistent migration to ISO 20022 is therefore mandatory for all participants.