In recent years, the profits of Swiss banks have fluctuated and have even declined since 2019; nevertheless, the financial institutions achieved a substantial profit of 6.52 billion Swiss francs in 2022.
A major reason for the high profits of Swiss banks is the rise in interest rates. The Swiss National Bank (SNB) has raised its key interest rates several times in recent months to combat inflation, which is currently at 7% worldwide. And it's been successful! In Switzerland, the inflation rate is just 2.1%. However, this has also led to higher interest rates on loans. The banks, however, have not passed this increase on to their customers to the same extent.
Most Swiss banks still offer very low interest rates: On average, the current return is around 0.5% p.a.
Why can't the banks keep up with the interest rate hikes?
Domestic banks generate 75% of their profits from interest income. This means that virtually all market participants currently have a strong interest in increasing their interest margins. And they can even influence this themselves, as they have the power to slow the rate of interest rate increases on the liabilities side compared to the liabilities side.
The fact that Swiss banks are increasing their profits without rewarding their customers is drawing nationwide criticism. Consumer advocates and politicians are calling on the banks to adjust interest rates for savers and borrowers.
Crowdlending as an alternative
The beauty of the financial system is that you have the opportunity to seek other, more lucrative options. One alternative to traditional banks is crowdlending platforms. With crowdlending, private individuals or companies jointly finance loans to other private individuals or companies.
Crowdlending offers several advantages over traditional banks: Because no bank acts as an intermediary, interest rates for crowdlending loans are generally significantly higher than those offered by conventional banks. Furthermore, another advantage lies in the greater flexibility and the ability for investors to participate in deciding which loan projects they can invest in.
Investors are pleased: Interest rates of up to 10 percent for peer-to-peer loans are not uncommon. That is significantly higher than the average interest rate for bank investments.
Positive example: Cashare AG
Cashare AG is the first Swiss crowdlending platform specializing in various types of loans and has since successfully established and positioned itself in the market. The platform was founded in 2008 and is headquartered in Zurich.
Whether for SMEs or private individuals, whether a mortgage or another type of consumer loan: Cashare AG has developed into one of the leading crowdlending platforms in Switzerland in recent years. With over 50,000 members and nearly 4,000 facilitated loan projects, the platform has already achieved great success and can proudly hold its own in the highly competitive crowdlending market. Even during the COVID-19 pandemic, it delivered consistently stable key performance indicators and further solidified its position at the forefront of the crowdlending market.
Cashare AG can indeed be considered a positive example for borrowers who are embarking on their projects and seeking the necessary financial boost. The platform offers its customers attractive interest rates and also impresses with its reliability and transparency towards its investors and borrowers. In addition to higher interest rates, crowdlending platforms offer a number of other advantages over traditional banks. For example, loans are often more flexible and, despite intensive review of all loan applications, can generally be approved more quickly than at banks.
Conclusion
The high profits of Swiss banks at the expense of customers are a pressing problem. Consumer advocates and politicians across the country are calling on banks to adjust interest rates for savers and borrowers.
Crowdlending is a smart alternative to traditional banks. It represents a modern form of lending that has gained significant importance in recent years. Investors and borrowers alike benefit from the success and increasing popularity of crowdlending platforms. Cashare AG has made a name for itself in this field and, as a Swiss fintech pioneer, is far ahead of traditional financial institutions.
Warm regards
Sabine Borter
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