Editorial: New Zealand needs stricter rules around tap-and-go fees

Paywave has exploded in popularity. Photo / Emma Houpt

Opinion

OPINION

The lack of transparency around Paywave fees has led to Consumer NZ dubbing contactless payment fees a “surcharging swindle”.

The Commerce Commission has previously said that these charges, which businesses charge customers to recoup what Visa and Mastercard charge them, are often higher than the actual cost to the business and said that it is currently monitoring the situation.

Last week, the Herald’s technology editor Chris Keall looked into the wide range of Paywave fees charged by businesses and organisations across New Zealand and found that Kiwis are charged “overwhelmingly high” percentages to use contactless payments.

Consumer NZ has fielded more than 80 complaints about payment fees since the Retail Payment System Act, designed to lower fees, was passed in November 2022. The Commerce Commission told the Herald it had fielded 96 complaints over the same period.

Commerce and Consumer Affairs Minister Andrew Bayly told the Herald: “I am aware of the issue with overcharging contactless payment fees. It is wrong and it’s something I am encouraging the Commerce Commission to pursue with their full might.”

Currently, despite the new rules introduced in 2022, the surcharge for contactless payments can vary widely from one business to the next. Some may charge you 2 per cent while others charge 5 per cent. Some have done away with percentage altogether and opt for a flat fee that can be as high as $5.

These disparities in the amounts show that, in some cases, someone, somewhere, is pocketing more than they should.

According to the Commerce Commission, an appropriate surcharge for a contactless debit card used in-store or online should sit around 0.7 per cent, whereas the surcharge for tapping a local credit card, online or in person, should be be around 1.5 to 2 per cent of the total purchase.

The ComCom says there are valid reasons for charging up to 2 per cent, though it notes that some retailers, from the big supermarket chains to corner stores, have chosen to absorb the costs.

“We consider that any surcharge above 2 per cent is hard to justify,” Commerce Commission acting market regulation general manager Simon Thomson told the Herald.

Consumer NZ’s Jessica Walker said the surcharge should never be more than 2.5 per cent.

“We’ve done some maths and after conversations with the Commerce Commission where we’ve landed is 2.5 per cent,” she told First Up.

Those are mere guidelines and the reality appears to be much different. Flat fees also cause issues because they can be exorbitantly high in relation to the purchase price. One Wellington cafe’s flat fee translated into a 26 per cent surcharge for a customer. Council-controlled Auckland Transport charges a flat 50c per contactless transaction. If you pay its $4 rate for an hour of parking at AT’s Upper Queen St carpark, that works out to a 12.5 per cent surcharge. If you pay $3 to park in Ponsonby while you shop for an hour, it’s 16.5 per cent.

In his piece, Keall goes into great detail about all the issues with contactless payments in New Zealand and what possibly solutions there may be on the way.

While we wait for these solutions, it would be good to see some consequences to businesses found to be using contactless payments as an excuse to overcharge New Zealanders during a cost of living crisis.