Consumer NZ campaigns manager Jessica Walker told the Herald in May that, despite the new law, “the charges in some places are overwhelmingly high”.
The ComCom’s goal is a 1.5% to 2% surcharge for domestic credit card contactless or online payments (or, ideally, a retailer absorbing the cost).
But Consumer said many retailers still charged 2.5, 3 or even 5% – while some charged a flat fee that could equate to a much higher percentage of a purchase.
The act has provision for the ComCom to recommend tighter direct regulation. It is due to send a recommendation to Commerce and Consumer Affairs Minister Andrew Bayly by the end of the third quarter.
Bayly would then take that recommendation to Cabinet on an open timeline.
Bayly earlier told the Herald he would keep his powder dry until he saw the regulator’s final recommendation.
0.7% target
The regulator gave a clear indication of its thinking this morning.
ComCom chairman John Small said fees are unnecessarily complex, which could be increasing the surcharges consumers face.
“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,” 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% or less.”
Fees have a place
The Commerce Commission says Visa and Mastercard’s scheme fees have a purpose – they help fund networks that are crucial for Kiwis making an international purchase, or travelling overseas.
Scheme fees also help buoy Visa and Mastercard’s anti-fraud measures, and their policies to issue a full refund if your card details are swiped and used for a fraudulent transaction (unless you’ve been negligent with your security, such as revealing your pin). That’s been a bacon-saver for many Kiwis.
$1b in charges annually
But the commission also implied today that scheme fees are too high.
Small said consumers spend about $95 billion using Mastercard and Visa each year in New Zealand which costs businesses – and ultimately consumers through higher retail prices and surcharges – around $1b annually.
“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 $250 million per annum,” 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,” Small said.
Open banking also in focus
Small said this consultation also asks questions about other issues the commission considers may require attention such as a lack of innovation and pace, which may be barriers to new and more secure payment options made possible through open banking.
“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,” he said.
The Customer and Product Data Bill, driven by Bayly and introduced to Parliament in May, has the aim of promoting open banking. It seeks to make the landscape easier for third-party apps to provide alternatives to paying through today’s eftpos and credit card networks – with the competition serving as as further pressure on the traditional players to lower fees.
But some of the “when” and the “how” is still down to industry self-regulation. The major banks (apart from Kiwibank, which is on a two-year lag) say they will have their systems ready for open banking by the end of November.
Consumers and businesses can chip in to the Commerce Commission’s consultation process here. The deadline is August 20.
Visa responds: ‘Unlikely to be useful’
“In New Zealand, Visa has met its obligations under the retail payment systems act and reduced interchange fees to be in line with the regulatory caps in place. Interchange fees play an important role in balancing the interests of all participants in the payments ecosystem and ensuring its sustainability,” a Visa spokesperson said.
“As a payments network, Visa does not set fees for businesses or consumers. Interchange and scheme fees are just two components of the merchant service fees that a business pays to their acquirer. In our view, the data published in the Commerce Commission paper will not assist it to meet its objective of helping businesses better understand overall merchant service fee costs. It could create confusion and is unlikely to be useful or beneficial to businesses.
“Scheme fees are charged to financial institutions that issue Visa cards and acquire Visa transactions, and these fees enable us to invest in and deliver the highest level of security protections, resilience and payment innovation for businesses and consumers alike.
“From 99.999% network availability and AI powered technology that, in a year, helped prevent more than $273 million in fraud from disrupting New Zealand businesses, to Visa tokenised transactions shown to reduce payment fraud rates by 58%, and mobile and online payment innovations such as Tap to Phone and Click to Pay – we are continually investing in the New Zealand payments ecosystem, for the benefit of consumers, businesses of all sizes, and the broader economy.
“Although permitted under New Zealand law, Visa’s view is that surcharging – especially excessive surcharging - can have a negative impact on businesses as well as consumers. With the rapid acceleration of digital payments, Visa’s view is that there needs to be clarity around what constitutes excessive surcharging, and open discussion about the impacts on consumers and businesses.”
Mastercard has been asked for comment.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
