The Commerce Commission has issued its draft decision to reduce fees paid by Kiwi businesses for accepting Visa and Mastercard payments.
In July, the Commission revealed that consumers spend approximately NZD 95 billion annually on Visa and Mastercard products. New Zealand businesses incurred around NZD 1 billion in fees to provide these payment options to their customers.
These fees are passed on to consumers through the cost of goods, services, and surcharge.
“We’re proposing a reduction of around NZD 260 million a year to the largest component of the fees charged to New Zealand businesses to receive Visa and Mastercard payments. We’re also setting the clear expectation that payment providers and businesses should pass these savings on to customers,” said Commission Chair John Small.
“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.”
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 likely seek to recover this fee through surcharge or higher retail prices.
Some businesses, whether due to difficulty understanding the fees they have been charged or seeking to make a margin on their cost of payments, set their surcharges higher than the actual merchant services fees.
“We’ve been clear businesses should not be surcharging their customers more than the cost to them of accepting that payment. Excessive surcharging is not easy to spot.”
Dr Small added that different businesses paid different fees, and the Visa and Mastercard fees were complex and variable. Simplifying these fees was also part of the Commission’s focus.
If the draft decision were implemented, consumers would benefit from lower surcharge of around 0.7 percent to one percent or from the 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.”
Small businesses' average merchant service fee is around 1.2 percent to 1.5 percent. This meant costs for some businesses would be higher, and for other businesses, they would be lower.
The Commission has expected surcharge not to exceed costs. It encouraged businesses paying more than 1.5 percent to check if they can get a better deal from their existing or new payment provider.
The Commission has sought feedback on this draft decision by the 18th of February 2025.
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