How much are we saving thanks to the Govt’s crackdown on Visa and Mastercard fees?

Commerce Commission understands many payment providers have cut their merchant fees on the back of new regulations. Photo / 123RF

It’s a question of high interest: How much are businesses and their customers benefiting from a government crackdown on debit and credit card processing fees?

New regulations, which took effect on November 13, cap the fees that retailers’ banks can charge their customers’ banks for processing Visa and Mastercard transactions.

Commerce and Consumer Affairs Minister David Clark estimates capping these interchange fees could save merchants $74 million a year.

Nonetheless, the Herald heard from a merchant whose payment provider – Stripe – hadn’t reduced its fees.

Stripe, in an email to the merchant, explained it had in fact cut its prices. But because the merchant had already negotiated a fee below that of the new fee, it wouldn’t receive a further reduction.

The merchant told Stripe he’d take the matter to the Commerce Commission, which said it had received three complaints alleging payment providers of not passing on reduced interchange fees to businesses.

The regulator said it would investigate the complaints as a part of a monitoring programme it’s doing to assess the impacts of the new regulations.

Nonetheless, it said it understood many payment providers (which also include banks) had reduced their fees.

Retail NZ chief executive Greg Harford said it was still early days in terms of understanding the impact of the Government capping interchange fees.

However, he noted that because interchange fees only make up one part of the fees that payment providers charge merchants, merchants won’t necessarily experience savings.

For example, a payment provider could charge a merchant more to cover fraud or foreign exchange costs, all the while charging less to cover interchange fees.

Harford said it was for this reason that Retail NZ wanted the Government to cap the total fee payment providers charge merchants, not just the interchange component.

However, Clark argued there are a number of payment providers that offer a range of services and fees. So, while there’s no limit on the total fee charged by payment providers, “competition is delivering a range of options for merchants”.

Indeed, the Commerce Commission said, “We would encourage businesses to ask their payment providers about whether they are on the best deal, or alternatively shop around for a better deal with other payment providers.”

Clark noted, “Under the Retail Payment System Act 2022, the Commerce Commission has a suite of powers to monitor and, if required, intervene in the retail payment system to impose further regulation on designated retail payment networks. These powers are aimed at promoting competition and efficiency.

“The maximum penalty for a contravention of a pricing standard is $500,000 for an individual and, in any other case, $5m.”

Consumers may be wondering why, despite new regulations, they may still be charged fees by some merchants for using Visa or Mastercards.

Merchants are allowed to do this, but the surcharge can’t be more than the cost to the business of accepting the payment.

So, consumers should start to see surcharges reduce, the Commerce Commission said.

However, Harford admitted some businesses might not have adjusted surcharges in accordance with the fees they’re charged by their payment providers possibly falling.

“They will need to go back and have a look,” he said.

The Commerce Commission said it hadn’t received any complaints over merchants over-charging debit and credit card users.

“We are currently designing our workplan regarding merchant surcharging,” it said.

“While there are currently no rules (under Retail Payment System Act) governing this, this work will aim to promote an environment where surcharges are no more than the cost that a business is charged for accepting the payment.”