The rapid pace of the appreciation, and the resulting – at times massive – overvaluation of the Swiss franc, heightened the economic challenges and gave rise to the threat of deflation. On the one hand, the appreciation reduced global demand for goods and services produced in Switzerland, and the associated negative effects on the economy curbed inflation. On the other hand, the appreciation led directly to lower prices for imported consumer goods. Owing to the high share of imports in Switzerland, this weighed additionally on inflation. Page 2/16  This pronounced appreciation pressure was attributable to two specific characteristics of Switzerland. First, the traditionally low level of interest rates in Switzerland meant that there was less leeway to the effective lower bound by international comparison. Interest rates in Switzerland are generally lower than abroad since the Swiss franc is valued as a safe investment given Switzerland’s long-standing political, fiscal and monetary stability. As central banks lowered interest rates significantly due to the global financial crisis, the interest rate differential between Switzerland and other countries decreased, making the Swiss franc comparatively more attractive. Second, when risk sentiment deteriorates globally, our currency typically gains in value owing to its characteristic as a safe haven. This was especially the case during the financial crisis and the European sovereign debt crisis. Heightened uncertainty worldwide following the outbreak of the coronavirus pandemic and Russia’s attack on Ukraine also increased upward pressure on the Swiss franc.
We have moved from a time where cash was king; in 2010 56% of payments were made using cash, this fell to 45% in 2015 and further declined to 17% in 2020.1 It is predicted that by 2028 just 9% of all payments will be made by cash.2 Transitioning through an era that has seen the continued decline in popularity of cheques and a rapid increase in card usage, we are now in a world where many of us today will have paid for a summer iced-coffee or groceries using our smartphones or even watches. This evolution in payments in the UK and globally is delivering transactional capability that is more reliable and quicker than ever before. But customers want more and there is a continuous drive for further improvements in speed, cost, transparency, safety and resilience. In Shakespeare’s A Midsummer Night’s Dream, some characters are transported to a new world and new, not always desirable, experiences. But this was merely temporary, and an illusion 1/6  BIS central bankers' speeches  rather than reality. Here a payments transformation is under way that could render the next decade almost unrecognisable from the transactional landscape of the past: but is a real and lasting change, bringing benefits to many. It is an environment where future generations will benefit from a new world of possibilities: one in which fast, frictionless and future proofed payments “just work” invisibly behind the scenes to unlock individual and commercial potential.