Huge frustration among businesses: almost half of retailers complain about rising card fees
The amount of fees that merchants have to pay payment service providers varies greatly. This is what a new study shows. The trade association advises taking a closer look.
Cash isn’t free either: This is the central argument of companies that process cashless payments.
Bild: Getty Images
Urs Furrer, director of the trade association, speaks to CH Media of a “pain point”. The medical term refers to parts of the body that are particularly sensitive. Doctors often use them for diagnostic purposes.
Urs Furrer.
Image: Annette Boutellier
The top trader also wants to make a diagnosis. However, he is not concerned with a medical problem, but with an economic one: excessive fees for cashless payments in stores. According to Furrer, the payment service providers, known in jargon as acquirers, are pressing this pain point of SMEs ever more tightly. Some have increased fees in recent years. That hurts and puts pressure on margins.
The trade association, together with the Swissdebitpay association and the consumer forum, supports its diagnosis with a statement new representative study. For this purpose, researchers from the University of St. Gallen and the ZHAW surveyed small and medium-sized companies about the conditions of their payment solutions. The results indicate a certain level of dissatisfaction: 44 percent of companies stated that debit and credit card fees had increased in the last two years.
In order to understand this frustration, it is necessary to take a look at the cost structures in cashless payment transactions. Today, hardly any company can afford to refuse card money. That’s why various providers of card terminals and acquirers are vying for the business. They are called Worldline, Postfinance, Nexi, or Sumup and ensure that a café, for example, can easily process debit, Twint or credit card payments.
The acquirers charge a fee for this. When you pay 46 francs with a debit card – which corresponds to an average purchase in Switzerland – you spend an average of 41 centimes, or 0.9 percent. They have to pass on the interchange fee to the banks, and part of it goes to Visa or Mastercard as a license fee. In the end they are left with an average margin of 0.7 percent.
At first glance this doesn’t look like much. But the average case is misleading. Acquirers can apparently achieve significantly higher margins, especially for small retailers.
Comparing is worth it
This is at least suggested by a study that reveals a considerable range in fees. This can best be illustrated with the most popular product, the debit card. Most of the 87 retailers surveyed have a contract with a fixed model. The acquirers charge either a fixed centime amount or a defined percentage per transaction.
There are significant differences depending on the provider. If you look at the Visa and Mastercard debit cards, the fees to be paid range from 0.3 to 2.5 percent. For postcards it is 0.1 to 1.5 percent, for Twint it is 0.4 to 1.5 percent.
The fees are also steep for those companies that have concluded a contract with a fixed centime amount. With the debit cards mentioned, you have to pay between 5 cents and 30 cents per payment, and with the post office between 10 and 50 cents. If you take all payment methods into account, the retailers surveyed spend an average of 27 cents per payment. But there are also merchants who pay almost one franc per transaction, especially if a credit card is used.
Image: Excerpt from the study.
A mixed model is also widespread, in which the acquirer charges a base amount plus a percentage. While the basic amount of 10 centimes hardly varies among the providers examined, the variable component is different: it fluctuates between 0.3 and 1.3 percent per transaction. So if a customer pays for a single croissant at the bakery for 1.50 francs with a debit card, their earnings decrease by up to 11 centimes, mainly because of the fixed fee. In the long run, however, the variable percentage of this type of billing can also be significant.
Why doesn’t a restaurant or bakery take advantage of the leeway and switch to a cheaper provider? Ultimately, he can choose from different acquirers. The French company Wordline dominates the business here. But there are now competitors, including Nexi, Postfinance and Sumup. As the study shows, there are definitely providers who charge significantly lower fees.
“It is now practically impossible for small businesses to navigate the jungle of fees,” explains Michèle Lisibach, head of the trade department at SGV. The acquirers’ fee sheets not only included dozens of items. The language is also difficult to understand for laypeople. Given this lack of transparency, it is difficult to even compare the different offers. In the study, a majority rated the transparency and comprehensibility of the cost structures as “poor”.
Nevertheless, SMEs’ hands are not tied. Anyone who renegotiates their existing contract can often get better conditions. The trade association also recommends concluding a framework agreement through the industry association. This would allow SMEs to pool their negotiating power. An example: With a framework agreement, the Gastrosuisse association was able to achieve that the acquirer Nexi not only eliminated the basic amount of 10 centimes per transaction. The industry was also able to reduce the percentage fee for its members per transaction from 0.95 to 0.45 percent.
The service providers are fighting back
When asked, the criticized acquirers explained that they attached great importance to transparent prices and customer-friendly solutions. Sumup, Twint and Postfinance emphasize that they have not increased prices in the last two years. Twint describes its fees as “moderate” and questions the validity of the study.
Nexi justifies its price adjustments with the introduction of the interchange fee for the new debit cards. The company also emphasizes that it invests a lot in security and technology. Industry leader Worldline has implemented two price increases this year. These reflect the increased interchange and license fees, it is said. However, costs were not passed on either.
Worldline understands that the “different fee structures for cards and acquirers could be confusing for businesses”. “Similar to the various telecommunications providers, where the prices for the same offer vary, different fee models are also common in the market.” Worldline’s goal is to “make payment transactions as simple and comprehensible as possible for everyone involved.”
Special case Twint
The popular Swiss payment solution Twint often has a direct contract with a retailer. A customer can then pay directly via Twint using a QR code. The fees here amount to 1.3 percent per transaction. This makes Twint different from other payment methods such as debit or credit cards, which are processed via an acquirer. This comes into play with Twint when a merchant has a terminal that accepts Twint. Here it is the acquirer who sets the fees. (mpa)
