ComCom Saves Businesses $90 Million A Year In Payment Costs
It costs New Zealand businesses around $1 billion a year to accept Visa and Mastercard payments, which is often passed onto their customers through surcharges and higher product costs.
The Commission has determined this cost is too high and has acted to reduce this cost for businesses by around $90 million a year.
'This is an important step in our continued work to cut costs for businesses and consumers. Our latest decision builds on the initial fee caps set in 2022, which led to $140 million in annual savings to New Zealand businesses,' Commerce Commission Chair Dr John Small says.
'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.
'We expect our latest decision to see the average small business save around $500 each year in lower fees. Individual businesses could save more or less, depending on the mix of transactions they accept.
'In making this decision we were careful to balance lower costs for merchants today with keeping incentives for new fintechs to innovate and challenge the big established incumbents. That meant leaving enough money in the system to keep it competitive and safe from fraud and scams over the long term,' Dr Small says.
Consumers can expect these cost savings to flow through to fewer and lower surcharges, but regulation may still be needed to curb excessive surcharging.
'We'll be exploring what regulation may be needed to address excessive surcharging, which we consider to be anything more than the cost businesses face to accept Visa and Mastercard payments,' Dr Small says.
The Commission expects payments providers to support businesses to understand their costs to accept these payment types, so where businesses choose to surcharge it accurately reflects their cost.
'We have decided not to regulate the fees for commercial credit card or prepaid debit card payments at this time based on feedback we received during consultation. We're looking to understand more before deciding if these payment types should be regulated,' Dr Small says.
Background
The Commission prioritised addressing the costs businesses face to accept different payment types to ensure regulation of surcharging didn't have unintended consequences of moving costs for consumers from one area to another.
Without action to lower the fees, limitations on surcharges could see businesses forced to absorb these fees and recoup the money elsewhere, like in higher product costs. Alternatively, it could lead to some businesses not offering certain payment methods, like contactless or credit, as they are too expensive.
When someone uses a Mastercard or Visa credit card or makes a contactless payment, such as Paywave, the business receiving the payment is charged a 'merchant service fee'. It will most likely seek to recover this fee in the form of surcharges or higher product prices.
This latest decision relates to interchange fees, which make up about 60% of merchant service fees. Mastercard and Visa card issuers (usually banks) receive an interchange fee every time a card holder uses their card at a business to make a payment. The remaining portion of the merchant service fees include fees that are paid to Mastercard and Visa, and to providers of payment services to businesses.
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