Action on credit card fees
The Commerce Commission has issued a draft decision to cut fees paid by Kiwi businesses for accepting payments via Visa and Mastercard.
The charges are then passed on to consumers through the cost of goods and services and surcharges.
“We’re proposing a reduction of around $260 million a year to the largest component of the fees charged to New Zealand businesses to receive Visa and Mastercard payments,” says commission chair John Small.
“We’re also setting the clear expectation that payment providers and businesses should pass these savings on to customers.”
In July, the regulator revealed consumers spend about $95 billion annually using Visa and Mastercard products. Businesses incur some $1 billion in charges to provide these payment options to their customers.
“This work is the next step to further reduce and simplify payment costs for New Zealand businesses, and to save merchants and consumers a considerable amount of money,” adds Small.
When someone uses a Mastercard or Visa credit card or makes a contactless payment, such as PayWave, the recipient is charged a “merchant service fee”. It will most likely seek to recover this amount in the form of surcharges or higher prices.
Some businesses, whether due to finding it difficult to understand the fees they are being charged or because they seek to make a margin on their cost of payments, set their surcharges higher than the actual merchant service fees.
“We’ve been clear businesses should not be surcharging more than the cost to them of accepting that payment,” says Small.
“Excessive surcharging is not easy to spot. Different businesses pay different fees, and the Visa and Mastercard fees are themselves quite complex and variable. Simplifying these fees is also part of our focus.
“If our draft decision is implemented, we’d expect to see consumers benefit from lower surcharges of around 0.7 per cent to one per cent, or through prices of goods and services that reflect the lower fees. We’ll be doing more work next year to determine whether and to what extent regulation of surcharges is necessary.”
The average merchant service fee for small businesses is 1.2-1.5 per cent. This means costs for some companies will be more and less for others.
The commission expects any surcharges to not exceed costs. It encourages companies paying more than 1.5 per cent to check if they can get a better deal from their existing or new payment provider.
The regulator is seeking feedback on this draft decision by February 18. Feedback can be emailed to PaymentsTeam@comcom.govt.nz using a submission template found here.
