The Commerce Commission (Commission) has launched a consultation on the retail payment system that could give rise to savings of hundreds of millions of dollars a year for New Zealanders paying for products with Mastercard or Visa. The consultation provides an opportunity for retailers (big and small) and consumers to give their views on the fees associated with card payments in New Zealand.

The Commission’s consultation

Following the introduction of the Retail Payment System Act 2022, the Commission has been monitoring and investigating the system that allows New Zealanders to buy things, get paid, and transfer or withdraw money. The aim of this ongoing work is to promote competition and efficiency in the retail payment system for the long-term benefit of New Zealand businesses and consumers.

The Commission has noted that of the approximately $95 billion New Zealanders spend using Mastercard and Visa each year, around $1 billion is charged to businesses in ‘merchant service fees’ (and often passed on to consumers through surcharges or higher prices). This is higher than a lot of New Zealand’s international peers, and the Commission is now consulting on the issue with the aim of reducing the fees paid by retailers and consumers, potentially by more than $250 million each year.

The consultation focuses on the merchant service fees charged by card providers like Mastercard and Visa on each payment and, in particular, the ‘interchange fees’ which make up a large proportion of the merchant service fees. Merchant service fees currently sit at around 0.70% for contactless debit card payments and can be anywhere from 1.5% to over 2.5% for online debit and in person and online credit transactions.

Retail NZ and Hospitality New Zealand have welcomed the consultation, and the Commission’s wider work on improving the retail payment system, noting that it provides an opportunity to simplify what is a complicated area for retailers and businesses to navigate. The Commission has noted that there is the potential for merchant service fees and surcharges to be simplified and reduced to approximately 0.70% across the board, making it easier and cheaper for retailers to do business and consumers more generally. Such reductions could also ultimately support new payment options (such as open banking payments) for New Zealanders and increase competition within the retail payment system.

 Feedback on the consultation

The Commission is seeking views on the issues outlined above and detailed in its consultation paper.  Responses to the consultation are due by 20 August 2024, and the Commission will consider all submissions received when determining its next steps. For more information see the Commission’s consultation page.

Please reach out to our experienced Consumer Markets team to answer any questions you might have about the retail payment system and the consultation.