Government paper on retail payment systems out for public consultation
The Government is calling for public input into its investigation credit card charges and will be seeking greater transparency around the fees paid by merchants.
It is looking into the fees charged by banks and card companies for retail payments systems and whether the charges may be rorting New Zealand retailers, unfairly adding millions of dollars to business costs.
Minister for Commerce and Consumer Affairs Paul Goldsmith said it was a "fine line" but the Government did not want New Zealanders excessively charged.
Concerns had been expressed around the cost of credit card payment fees in New Zealand, particularly in comparison to Australia, and in the context of a decline in the use of EFTPOS.
Retail payment systems are the platform through which transactions (including credit cards) between consumers and merchants are processed.
Fees for use of these systems are charged to businesses by banks and often passed onto consumers either through an extra surcharge or as part of the cost of goods and services.
Goldsmith was cautious about regulation that could affect innovation in a sector that experiencing rapid technological change.
"But the government is watching this area closely and is prepared to consider regulatory options if competition fails to moderate costs. As an initial step we will be seeking greater transparency around the fees paid by merchants."
An issues paper on retail payment systems has been released to get a better understanding of how retail payments operate in New Zealand, with particular regard to innovation and efficiency, he said.
The paper would help the Ministry of Business, Innovation and Employment (MBIE) decide if regulation was needed to ensure a fair distribution of costs between banks, businesses and consumers.
Internationally, there were a variety of policy responses to retail payment fees, ranging from caps on charges such as in Australia, to minimal regulation as seen in Canada.
"In most markets, we expect competition between providers to keep costs down. The issues paper raises the question of whether or not that is happening in practice."
Retail NZ general manager for public affairs Greg Harford said retailers were closely watching progress on the issue and many would be providing feedback to the Government.
Retail NZ had been calling for more transparency and oversight of payments systems, producing a discussion paper on the issue.
Its research showed New Zealand merchants paid substantially more than merchants in other markets for accepting credit and contactless debit cards, which ultimately translated into higher prices for consumers.
"On average, New Zealand merchants pay 1.7 per cent for credit card transactions and 1.0 per cent for contactless debit transactions, compared to 0.89 per cent and 0.36 per cent in the UK, and 0.78 per cent and 9 cents per contactless debit transaction in Australia," Harford said.
Fees in New Zealand were continuing to increase rapidly as customers transitioned from traditional EFTPOS to contactless debit, while in other comparable jurisdictions, costs were going down over time, he said.
Mastercard New Zealand and Pacific Islands manager Peter Chisnall said cards guaranteed businesses got paid – irrespective of whether cardholders repaid their bank, as well as boosting sales.
"For consumers, interchange helps to pay for safety and fraud prevention measures, as well as the interest free days so many New Zealanders rely on. In addition, all parties have benefited from the significant investments made into payments security and innovation."
Evidence from markets where interchange had been reduced through regulation showed consumers and small businesses were worse off, he said.
"Our goal remains to ensure New Zealand comes away from this process with the best possible policy settings."
MBIE is seeking written submissions by 5pm on December 13, 2016.