The Commerce Commission is investigating the potential to reduce costs to New Zealanders by hundreds of millions of dollars a year using the Mastercard and Visa payment networks, which affect nearly all consumers and businesses.
In a consultation paper released this week, the Commerce Commission shared that NZ$95 billion (A$85.53 billion) of card payments in Aotearoa are processed by Mastercard and Visa each year, with New Zealand businesses spending approximately NZ$1 billion each year to accept these payments.
“We think this cost is too high, especially when compared to our international peers, and see the potential to reduce these fees by more than NZ$250 million per annum,” Commission chair Dr John Small said.
When someone uses a Mastercard or Visa card without inserting it in a terminal, the business receiving the payment is charged a ‘merchant service fee’.
“We see the opportunity to reduce a significant component of the merchant service fee, which should in turn allow businesses to reduce retail prices as well as surcharges, for the benefit of their customers.”
Dr Small said the Commission also believes these fees are unnecessarily complex which could be increasing the surcharges that consumers face.
Digital payments involve a broad set of participants, including customers, retail and hospitality businesses, the payment networks processing the transactions, technology companies providing point-of-sale infrastructure, and the banks that issue cards to their customers and work with retailers.
“Reducing and simplifying these fees could reduce surcharges or even remove the need for surcharging altogether in some cases. This would also make it easier for consumers, the Commission and industry to identify where surcharges are excessive,” Dr Small said.
“Surcharges should only reflect the costs of accepting these card payments and we are exploring changes to fees which could see surcharges reduced to 0.7 per cent or less.”
The consultation also probes into other related areas such as a lack of innovation and pace, creating possible barriers to new and more secure payment options made possible through open banking, Dr Small said.
“Our focus is on the greatest benefit to consumers and merchants, and we see scope to both reduce fees and increase choice for the long-term benefit of New Zealand consumers and businesses.”
The Commission is seeking views on the issues covered in the paper from any stakeholders who may be affected, from consumers to businesses and peak bodies.
Peak body Retail NZ and Hospitality New Zealand have teamed up to voice their support for the consultation, with both calling for simplification of the card payments system and the way surcharges should be calculated.
Retail NZ is also calling for an overhaul of Buy Now, Pay Later schemes, an area not yet regulated by New Zealand, as well as some reform of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, which the peak body claims is making it more challenging and costly for retailers to get a merchant facility from either a non-bank provider or a bank where they do not hold their main banking relationship.
“Retail NZ has advocated strongly for the Government to take action on retail payments so we’re pleased to see the Commerce Commission has opened a consultation on this issue,” Retail NZ CEO Carolyn Young said.
Hospitality New Zealand CEO Steve Armitage added that the card payments system is a very complex area for customer-facing businesses to navigate.
“We believe there is an opportunity for consumers to keep more money in their pockets if the system is improved and surcharges are reduced or removed.”