The decision will cut costs for businesses, the Commerce Commission says. Photo: 123RF
The Commerce Commission has moved to lower interchange fees paid by businesses to accept Visa and Mastercard payments.
The regulator has issued a final decision, saying the cost was too high, and their decision would save businesses around $90 million a year.
It said the average business would save around $500 each year in lower fees, but individual businesses could save more or less, depending on the mix of transactions they accept.
The commission put the overall cost of interchange fees at around $1 billion for businesses, which were often passed onto customers through surcharges and higher product costs.
"This is an important step in our continued work to cut costs for businesses and consumers," Commerce Commission chair John Small said.
"Our latest decision builds on the initial fee caps set in 2022, which led to $140 million in annual savings to New Zealand businesses.
"This decision cuts the cost for businesses accepting payments made through credit cards and foreign-issued cards, which are often the most expensive for businesses to accept."
The commission said it would also explore what regulations may be needed to address excessive surcharging.
The commission expected payments providers to support businesses understand their costs to accept these payment types.
It has also decided not to regulate fees for commercial credit card or prepaid debit card payments.
Photo: Unsplash
Commerce Commission chair John Small told Nine To Noon the interchange fees were too high and they were bringing them down on a product by product basis to suit different types of payment, such as domestic or foreign cards, personal or corporate, in person or online.
"That's going to result in merchants having $90 million a year more in their pockets in aggregate," Small said.
Small said it had exempted commercial and pre-paid cards from the fee cap because it did not have enough information about them at this stage, but it did have concerns.
He said it had not lowered the cap as much as indicated in a draft decision, which had suggested annual savings of $260m.
"The reason that number has come down to $90 million is because we listened carefully to the feedback we received on that proposal and decided we needed to leave a bit more money in the system to incentivise new entry and dynamic competition we really want to see."
However, the commission has not moved on surcharges on consumers for using paywave in shops.
Small said it had wanted to first tackle the intercharge fees which set the cost base for the system, but consumer surcharges were on its agenda.
"We still believe that some regulation is needed for surcharging, and that is the next step in this process ... so we're coming to that."
He said the changes made would take a lot of the heat out of the issue because merchants would not be paying so much and so surcharges would be lower anyway.
Restaurant body welcomes initiative
The Restaurant Association said the Commerce Commission's decision to regulation interchange fees on credit cards offered much-needed cost relief for hospitality businesses.
Association chief executive Marisa Bidois said the regulation would save industry members about $90m a year.
"Hospitality businesses have long been burdened by some of the highest card payment fees in the OECD," Bidois said.
"This decision puts money back into the hands of operators at a time when every dollar counts."
Bidois said concerns about excessive surcharges at the point of payment was something that should be kept under review.
"Our recommendation was to allow the new fee structure to bed in before taking further steps. We're pleased to see ComCom acknowledge this."
The association was also urging payment providers to be transparent about their fees and not shift the cost burden elsewhere.
"We'll be watching closely to ensure payment providers don't undermine this win for businesses by increasing fees in other areas," Bidois said.
Lukewarm response from Visa and Mastercard
The two major card payment companies, Visa and Mastercard, were lukewarm in response to the commission's moves.
Visa's country manager, Anthony Watson, said the regulator had taken on board some of the payments industry's evidence, but left consumers with little.
"The steps the commission is taking still fall short for consumers, and risk long-term negative effects for the health of the payments system in New Zealand.
"It's vital that payments regulation encourages competition, protects consumer value, and preserves essential investment in New Zealand's digital infrastructure."
And Mastercard said the clarity on intercharge policy was welcome, but it was not a given that savings would be passed on to merchants nor anything to tackle surcharges on consumers.
"There's no guarantee that a reduction interchange will result in lower cost for merchants, as while it's encouraged in the paper, it's at the payment service provider's discretion to pass it on," a spokesperson said in a statement.
It also noted previous cuts to interchange had corresponded to an increase in "excessive" surcharging in retail outlets.
"These changes will not address surcharging, which has been consistently highlighted as a primary concern for consumers."
Mastercard also warned that including transactions with foreign cards in the country could be negative for tourism.
"International spending plays a vital role in supporting local businesses ... real-world evidence suggests that limiting it in this context could result in approximately $600m in declined sales if international issuers are not appropriately compensated."
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