This is part of the Commission’s responsibility to promote competition and efficiency within the retail payment system – the most used financial service in Aotearoa New Zealand.

Commission Chair, John Small, says consumers spend approximately $95 billion using Mastercard and Visa each year in New Zealand which costs businesses – and ultimately consumers through higher retail prices and surcharges – around $1 billion 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,” says Dr Small.

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.”

Dr Small says the Commission also believes these 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. 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.”

He says 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.”

The Commission is seeking views on the issues covered in the paper which affect nearly all businesses – large and small – and consumers, to inform its next steps by 4pm on 20 August 2024. The paper can be found here. Feedback can be provided via this form which is tailored to consumers and merchants. Alternatively responses can be submitted to retailpaymentsystem@comcom.govt.nz using the submission template found here.