Surcharge ban a win for consumers but will it save them money? – Editorial

The Government plans to ban surcharges on most in-store card payments.

Editorial

THE FACTS

• The Government plans to ban surcharges on most in-store card payments.
• The change follows a decision to reduce bank interchange fees, saving businesses about $90 million annually.
• Retailers warn that the costs may be added to product prices, potentially leading to higher prices.

The move to ban surcharges for most in-store card payments has been promoted as a major win for consumers – and it is.

It will remove the unwelcome surprise or reminder many people have when they discover they must pay extra for using a credit card or making contactless payments in some shops.

It should provide a clearer and smoother experience, removing any confusion.

But will it ultimately save shoppers money? This is the question, after the Government revealed its proposed surcharge ban this week.

The Retail Payment System (Ban on Surcharges) Amendment Bill is expected to be introduced by the year’s end, and the change made by May.

The proposed ban follows the Commerce Commission’s decision to reduce bank interchange fees that businesses pay to accept credit card payments. This change is expected to save businesses about $90 million a year.

Surcharges at the till allow businesses to recoup additional costs associated with providing certain payment methods, such as credit cards and contactless.

New Zealanders are paying up to $150m in surcharges every year. The Government says this includes excessive surcharges of up to $65m.

Commerce and Consumer Affairs Minister Scott Simpson describes them as “a hassle and an unwelcome surprise” for shoppers at the till, and says consumers will be able to “shop with confidence knowing how much they will pay for their purchases”.

The Commerce Commission will oversee enforcement. Consumers will be entitled to a refund if a business applies a surcharge.

Consumer NZ welcomes the change, describing it as “a no-brainer”.

Retail NZ chief executive Carolyn Young is pleased changes are being made but warns that retailers will continue to face costs to accept debit and credit card payments and “these costs will likely be added to product prices in future”.

Hospitality New Zealand agrees, saying the move could result in higher prices because margins are tight.

There was strong criticism from Dairy and Business Owners Group chair Ankit Bansal, who argues the proposed changes unfairly target small retailers instead of fixing the real problem – the banks.

“The reality is that large retailers enjoy significantly lower banking fees, while small businesses – with no power to negotiate – are left paying inflated rates.”

The Government deserves praise for tackling the wider issue of costs associated with people using certain credit cards and contactless cards in shops.

The reduction in interchange fees will help businesses. The surcharge ban will be positive for consumers and mean a more transparent process.

But it’s a fair bet that most businesses, especially those under pressure, will be unable to absorb any extra cost.

Some consumers may well ultimately end up paying higher product prices at the till to compensate.

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