What are transaction costs and when are they payable?

If you buy or sell a product, you won’t just be charged the actual price of the goods or service. You will also incur what are known as transaction costs. This is because, in order to purchase or sell something, information needs to be obtained, agreements need to be made, or processes need to be monitored.

What are transaction costs, who pays them, and how high are they?

Transaction costs are expenses incurred when initiating, executing and monitoring transactions. In other words: every economic transaction comes with transaction costs, both for you as the seller and for the customer. For companies, these costs are key when it comes to deciding whether they are financially better off providing certain services themselves, or paying external suppliers to provide them. The general rule is that transaction costs should not exceed a threshold of 10 percent of the purchase price.

Transaction fees during payment and invoice issuing processes

As far as transaction fees for payment and invoicing processes are concerned, it may appear at first glance that paying by cash, or even by QR-bill, is cheaper. But the fact is these methods incur indirect costs: if a payment is made in cash, you as a retailer will need to obtain change and ensure the money is transported securely to the bank. If you send invoices, you will need to calculate printing and shipping costs. Furthermore, reminder and collection fees may be incurred if invoices are not paid or are paid late. And when paying by card or online, a fee is charged for each transaction.

An example of this is the interchange fee charged for using a credit card. As a retailer, you will pay a service fee to your merchant bank to process credit card revenue. This bank, in turn, will pay a fee to the bank that issues the card as a kind of compensation for continuing to do just that, and to enable the system to accept credit card payments. In Switzerland, it is very difficult to make a blanket estimate of what the fee will be seeing as it is influenced by various factors, for instance the purchase sum amount, the card system and whether the payment is made online or in person. For domestic credit card payments, for instance, the interchange fee is currently 0.44 percent of the purchase amount.

How can you keep transaction fees as low as possible?

One way of reducing transaction costs is to use digital invoices, because sending bills electronically saves time and money above all. If you use eBill to send invoices digitally to business customers’ accounting systems with B2B e-invoicing or private customers’ e-banking accounts, you will save on printing and shipping costs, automate your processes and have a sustainable solution that avoids using paper.

But making cashless payments at sales points via a payment terminal can also reduce your total costs seeing as you avoid the expenses associated with handling cash and cash holdings, and customers can pay quickly and securely.

The transaction fees incurred with the PostFinance Card tend to be lower than for other cards. This is why retailers will especially benefit from their customers paying by PostFinance Card. This is because PostFinance’s independence from card organizations allows it to set its own prices. What’s more, there are no interchange fees or other levies involved, which would increase the prices. PostFinance is both a merchant bank and an issuing bank, and strives to always offer its customers the best value for money when it comes to transaction fees. A separate PostFinance acceptance agreement is needed to benefit from these favourable terms.