The Commerce Commission has issued its final decision today to reduce interchange fees paid by Kiwi businesses, saving them about $90 million a year in payment costs.
It costs New Zealand businesses about $1 billion a year to accept Visa and Mastercard payments, which is often passed on to customers through surcharges and higher product costs.
Today’s decision builds on initial fee caps set in 2022, which led to $140m in annual savings for businesses.
The commission hasn’t ruled out further regulation to curb excessive surcharging.
“This is an important step in our continued work to cut costs for businesses and consumers,” Commerce Commission chairman Dr John Small said.
“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.”
Consumers can expect these cost savings to flow through to fewer and lower surcharges, the commission said.
“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.”
Small said the commission was careful to balance lower costs for merchants with keeping incentives for new fintechs to innovate and challenge the established incumbents.
“That meant leaving enough money in the system to keep it competitive and safe from fraud and scams over the long term.”
The commission expects payment providers to support businesses to understand their costs when accepting these payment types, so surcharges accurately reflect any costs.
However, the commission decided not to regulate the fees for commercial credit card or prepaid debit card payments.
“We’re looking to understand more before deciding if these payment types should be regulated,” Small said.
Speaking to Ryan Bridge on Herald NOW, Small said consumers will benefit at the till.
“Ultimately, what this is going to do is keep a pressure on retail prices, keep a pressure on surcharges, and that’ll benefit consumers at the till.
“It’s about $100m of revenue coming off, and we expect businesses to end up with $90m of that … after the pass-through effect that we expect.”
Jessica Walker, Consumer NZ’s acting head of research and advocacy, said there is no guarantee reducing and simplifying interchange will reduce costs for consumers.
“That’s because, we currently only have guidelines encouraging merchants to ensure surcharges are transparent, avoidable and reflect the cost of acceptance.
“Without clear surcharging laws, merchants are getting away with hidden, inconsistent and excessive surcharges every day.”
Walker said the Reserve Bank of Australia was currently consulting on removing surcharging on Eftpos, Mastercard and Visa cards.
“We want a similar ban to be considered for New Zealand.
“We have received several hundred complaints showing merchants are not complying with the current guidelines so it’s clear more needs to be done to fix the surcharging mess that New Zealand is now in.”
The Restaurant Association welcomed the commission’s decision, calling it a significant win for small businesses, many of whom operate on tight margins.
“This is a very welcome move for our industry,” said Restaurant Association CEO Marisa Bidois.
“Hospitality businesses have long been burdened by some of the highest card payment fees in the OECD. This decision puts money back into the hands of operators at a time when every dollar counts.”
Bidois said they were 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.”
Phil Wicks, founder of Small Business NZ and a director of BSP Advisory Group, said interchange fees have historically placed an unfair burden on small businesses across New Zealand.
“While large retailers have had the leverage to negotiate lower rates, smaller operators have often been stuck paying a premium just to accept card payments.
“Any step that levels the playing field and reduces these hidden costs is a win for small business owners. That said, we’ll be watching closely to ensure these changes do result in real savings at the till, not just technical compliance.”
Retail NZ chief executive Carolyn Young said the organisation supported the commission’s decision but was disappointed that commercial credit cards and prepaid cards are not currently included in the new pricing standards.
“The focus on Mastercard and Visa was too narrow and only partially addressed the issues faced by retailers and the flow-on effects for customers.
“Retail payments are a contentious area for retail businesses … we will be working with Retail NZ members to respond appropriately to today’s decision.”
Anthony Watson, country manager for Visa New Zealand and Pacific Islands, said he was pleased the commission had taken on board some of the evidence provided by the payments industry.
“But 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.”
A Mastercard spokesperson said: “We welcome the Commerce Commission’s clarity on interchange settings.
“It’s important to note that these changes will not address surcharging, which has been consistently highlighted as a primary concern for consumers.
Conversely, previous cuts to interchange in New Zealand have corresponded to an increase in excessive surcharging at the checkout.”
The spokesperson also said the proposed inclusion of cross-border transactions is concerning.
“In a tourism-driven economy like New Zealand, international spending plays a vital role in supporting local businesses.
“Interchange helps balance the benefits and risks across the ecosystem, and 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.”
Cameron Smith is an Auckland-based business reporter. He joined the Herald in 2015 and has covered business and sports. He reports on topics such as retail, small business, the workplace and macroeconomics.