Twint double commissions: open war with merchants

Context

In brief

• Small retailers pay 1,3% in Twint fees, large retailers only 0,59%
• Swiss Retail Federation has reported Twint to COMCO for abuse of a dominant position
• COMCO has not yet launched a formal investigation

Key facts

• What: Disparity in Twint fees between small and large retailers
• When: Expert report submitted to COMCO last year
• Where: Switzerland, at the Federal Competition Commission
• Who: Swiss Retail Federation and Twint (controlled by 7 shareholders)
• Fees: 1,3% for small retailers vs 0,59% for large retailers
• Comparison: Debit cards 0,33%, credit cards 0,68%

An expert report drawn up by the Swiss Retail Federation documents a systemic injustice affecting tens of thousands of small Swiss shopkeepers: twice the fees compared with large retailers when they accept Twint, the most widely used digital payment method in the country.

Last year, the retail association filed a formal complaint with the Competition Commission (COMCO), the federal authority responsible for unfair commercial practices. The report, seen by national media, documents a clear disparity. Small retailers that enter into a direct contract with Twint and receive a QR code normally pay 1,3% of the amount of each transaction. Large retailers that work through an external payment service provider and receive a dedicated terminal pay Twint an average of 0,59% for the same transaction. The small retailer therefore pays more than twice as much.

The imbalance is even more evident when compared with other payment methods. The retailers examined in the report have to pay an average of 0,33% of the transaction amount for debit card payments and 0,68% for credit cards. These amounts represent the benchmark for standard interchange fees across Europe: Mastercard and Visa in fact charge fees between 0,12 and 0,15%.

Who controls Twint and how the fee chain works

Twint is jointly controlled by seven companies: the banks BCV (Banque Cantonale Vaudoise), Postfinance, Raiffeisen, UBS and Zürcher Kantonalbank, the payment services provider Worldline and the infrastructure operator Six. This ownership structure creates a complex chain in which the Twint fee paid by the retailer is divided among three beneficiaries: the external provider (if involved), Twint itself and the bank linked to the service.

Retailers do not know which of these three actors is primarily responsible for the high costs, but the Swiss Retail Federation suspects that the banks are the main beneficiaries. Supporting this theory: Twint's general terms and conditions allow the system to charge up to a 2% fee, double the 1,3% currently charged to small shops, and significantly higher than standard interchange fees for credit cards.

The association's director Patrick Erny has called for an in-depth examination of the fees and a review of the fee structure. However, COMCO has not yet launched a formal investigation in the case. Twint, for its part, says through a spokesperson that the comparison of the fees is "completely wrong and misleading" and claims to be one of the most affordable providers under direct contracts.

Operational details

Why this disparity is a problem for Switzerland

The issue goes beyond simple banking fees. If small Swiss retailers pay payment providers twice as much, those costs are passed directly on to the end consumer in the form of higher prices in local commerce. The paradox is clear: while the pandemic accelerated the digitalization of payments and many customers now prefer or require contactless methods such as Twint, small businesses find themselves economically penalized for adopting the same technologies as large retailers.

The Swiss Retail Federation accuses Twint of abusing its dominant position. In competition law, this term means exploiting market control to impose unfair conditions on those with less bargaining power. Twint, controlled by a cartel of Swiss banks, has no direct competitors of comparable strength in the Swiss digital payments market. Consequently, small retailers have no realistic alternatives: Twint has become almost a de facto monopoly for mobile payments in Switzerland.

Scenarios if COMCO opens an investigation

If the Federal Competition Commission decided to examine the case in greater depth, the consequences could be significant. A COMCO ruling could:

• Force Twint to equalize fees between small and large retailers (bringing the large ones down to the level of the small ones, or both to an average rate)
• Impose a transparent, non-discriminatory pricing structure based on objective parameters
• Penalize Twint's owners for abusing their dominant position

However, COMCO operates according to federal timelines, which can be slow. An expert report was submitted last year, but to date no formal proceedings have been initiated. The case file remains under review.

The suspected role of Swiss banks

The Swiss Retail Federation's suspicion falls directly on Twint's owner banks. Their general terms and conditions allow them to charge a commission of up to 2%. Small retailers currently pay 1,3%. If the banks were the main beneficiaries of the pricing structure (as the Swiss Retail Federation suspects), this would constitute a potential conflict of interest: the owners of the payment system also set the final rates.

For context: interchange fees for Mastercard and Visa cards in the European market range between 0,12 and 0,15% of the amount. The fact that Twint allows up to 2% in its general terms and conditions raises questions about the reasonableness of the pricing structure in the Swiss context. Worldline, the payment provider involved, argues instead that a direct comparison of fees is not appropriate, given the different cost structures, performance promises and service levels of the various payment methods.

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Key points

What Swiss small merchants can concretely do

If you are a small Swiss merchant using Twint, your options depend on your canton and your trade association. The Swiss Retail Federation has already taken action at the national level by filing a complaint with COMCO, but individual merchants can also report practices they consider unfair toward them.

Reporting to COMCO

The Federal Competition Commission (COMCO) is the authority responsible for abuse of a dominant position and unfair business practices. If you believe you are being discriminated against in terms of fees compared with larger competitors, you can:

• Gather documentation: a copy of your contract with Twint, bank statements showing the fees charged for each transaction, comparisons with competitors receiving different rates
• Contact the relevant COMCO office or your cantonal trade association
• Submit a formal complaint describing the discriminatory practice, with supporting documentation

COMCO receives hundreds of complaints each year and filters the cases that have a sound basis and significant market impact. The fact that the Swiss Retail Federation has already submitted a detailed expert report increases the likelihood that the case will receive careful consideration.

Assessing the concrete impact on your margin

A small merchant who accepts 10.000 CHF in Twint payments per month pays approximately 130 CHF in fees (at the current rate of 1,3%). If the same transaction volume were charged at 0,59%, as it is for large retailers, the cost would fall to approximately 59 CHF per month: a difference of 71 CHF per month, equivalent to approximately 850 CHF per year. Multiplied across thousands of small Swiss shops, the aggregate impact on the sector is substantial and directly affects the competitiveness of small businesses.

You can calculate the exact effect on your business using calcolatore di costi e margini, entering your monthly transaction volumes and checking how a possible reduction in Twint fees would affect the profitability of your retail business.

What to expect in the coming months

COMCO will probably conduct a preliminary assessment of the case in the coming months. If it decides that there are grounds to suspect an abuse of a dominant position, it will launch a formal investigation. In that case, Twint and its owners will have to respond in detail to questions about the reasonableness of the current fee structure and the economic justification for the disparity between small and large merchants.

In the meantime, check with your cantonal trade association whether it offers advisory services on digital payment contracts and fees. Also stay up to date on federal developments via the COMCO website or through press releases from the Swiss Retail Federation.

Source: tio.ch