New Zealand could soon see lower prices and fewer surcharges for credit card users as the country’s regulatory authority, the Commerce Commission, proposes slashing fees for accepting Visa and Mastercard payments.
This initiative could potentially save businesses and consumers around $260million annually.
According to the Commerce Commission, consumers spend approximately $95billion each year using Visa and Mastercard products, while New Zealand businesses incur around $1billion in fees to provide these payment options to their customers.
“We’re proposing a reduction of around $260million a year to the largest component of the fees charged to New Zealand businesses to receive Visa and Mastercard payments,” said Dr John Small, chair at the Commission.
“We’re also setting the clear expectation that payment providers and businesses should pass these savings on to customers.”
How fees work
Merchant service fees, which businesses pay whenever a customer uses a Visa or Mastercard or makes a contactless payment like Paywave, are typically recouped through surcharges or higher retail prices.
However, the complexity and variability of these fees have led some businesses to charge surcharges that exceed the cost of the service fees themselves.
The draft decision aims to simplify these fees and lower surcharges to between 0.7 per cent and 1.0 per cent, reflecting the reduced costs. For small businesses, the average merchant service fee ranges from 1.2 per cent to 1.5 per cent, with variations depending on the size and type of business.
The Commission advises businesses currently paying more than 1.5 per cent to seek better deals from their payment providers to ensure surcharges do not exceed the actual costs incurred.
“We’ve been clear businesses should not be surcharging their customers more than the cost to them of accepting that payment,” says Dr Small. “Excessive surcharging is not easy to spot. Different businesses pay different fees and the Visa and Mastercard fees are themselves quite complex and variable. Simplifying these fees is also part of our focus.”
The Commerce Commission is now seeking public feedback on its draft decision until 5pm, 18 February 2025, inviting both consumers and merchants to contribute their views. This feedback will play a key role in finalising the decision.
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