Merchants denounce the “jungle” of card payments

The amount of fees that Swiss merchants must pay to payment service providers varies widely, according to a new study. And that doesn’t sit well with SMEs.

Pascal Michel / ch media

Urs Furrer, director of the Union of Arts and Crafts (USAM), notes that payment service providers, called acquirers in the jargon, are pressing harder and harder on the heads of SMEs. Some have increased fees in recent years, which weighs on merchant margins.

The Swiss Union of Arts and Crafts, in collaboration with the Swissdebitpay association and the Konsumentenforum, supports its diagnosis with a new representative study. For the latter, researchers from the University of St. Gallen and ZHAW surveyed small and medium-sized businesses about the conditions of their payment solutions. The results show some discontent: 44% of businesses reported that debit and credit card fees had increased over the past two years.

To understand this frustration, we need to take a look at cost structures. Today, almost no business can afford to refuse cards. Different card terminal providers and acquirers compete for business. They are called Worldline, Postfinance, Nexi or Sumup and ensure that a café, for example, can easily process payments by debit card, Twint or credit card.

For this, buyers ask for a commission. For a payment of 46 francs with a debit card – which corresponds to an average purchase in Switzerland – they charge on average 41 cents, or 0.9%. Of this amount, they must pass on the interchange fee to the banks and part of it is paid to Visa or Mastercard in the form of a license fee. In the end, they are left with an average margin of 0.7%.

At first glance, this doesn’t seem like much. But the average case is misleading. Because it is precisely from small traders that buyers can apparently impose significantly higher margins.

Comparing is worth it

In any case, this is what the study suggests, which reveals a great diversity of costs. The most popular product, the debit card, is the best illustration of this. Most of the 87 merchants surveyed have a contract with a fixed package. Acquirers charge either a fixed amount per cent or a set percentage per transaction.

In percentage models, there are considerable differences depending on the provider. If we consider Visa and Mastercard debit cards, the fees to pay range from 0.3 to 2.5%. For the Postfinance card, they are 0.1 to 1.5% and for Twint 0.4 to 1.5%.

Fees are also high for companies that have concluded a contract with a fixed cent amount. For the debit cards mentioned, they must pay between 5 and 30 cents per payment, for Postfinance cards between 10 and 50 cents. If we take into account all payment methods, the merchants surveyed pay an average of 27 cents per payment. But there are also merchants who pay almost one franc per transaction, especially when a credit card is used.

A mixed model is also very common, in which the buyer charges a basic amount plus a percentage each time. While the basic amount of 10 cents hardly varies among the providers studied, the variable component is different: it varies between 0.3 and 1.3% per transaction. So, if a customer pays 1.50 francs for a croissant at the bakery with their debit card, around 11 cents will be deducted, mainly because of the fixed tax.

Not so easy to change provider

But then why doesn’t a restaurant or baker decide to use a cheaper payment provider? After all, he can choose from different buyers. In our country, it is the French group Wordline which dominates the market. But there are now competitors, including Nexi, Postfinance and Sumup. As the study shows, there are indeed providers who charge significantly lower fees. However:

In fact, the buyers’ price lists list dozens of positions and the language used is almost incomprehensible to the uninitiated. Faced with this lack of transparency, it is difficult to compare the different offers. In the study, the majority of participants rated the transparency and understandability of cost structures as “poor”.

However, SMEs have room to maneuver. By renegotiating their existing contract, they can often obtain better terms. The Union of Arts and Crafts also recommends concluding a framework contract through the sector association. SMEs could thus pool their negotiating power. For example, the Gastrosuisse federation was able to obtain from the acquirer Nexi the removal of the basic amount of 10 cents per transaction. The branch also managed to lower the percentage of fees per transaction from 0.95 to 0.45% for its members.

Service providers defend themselves

The criticized buyers explain that they attach great importance to price transparency and user-friendly solutions. Sumup, Twint and Postfinance emphasize that they have not increased their prices in the last two years. Twint calls its fees “moderate” and questions the relevance of the study.

Nexi justifies its price adjustments by the introduction of the interchange commission on new debit cards. The company further emphasizes that it invests heavily in security and technology. The industry leader, Worldline has made two price increases this year. These reflect the increase in interchange and licensing fees, he explains.

Worldline understands that “different card and acquirer fee structures can be confusing for professionals. As with different telecommunications operators, where prices vary for the same offer, different fee models are common on the market. Worldline’s objective is to “make payment traffic as simple and understandable as possible for all parties involved”.