The Commerce Commission of New Zealand has released a draft decision that could lead to savings for businesses and consumers by reducing the merchant service fees associated with Visa and Mastercard payments.
This move could potentially save New Zealand businesses over $260m a year, translating into lower costs for consumers.
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Commission Chair John Small said: “We’re proposing a reduction of around $260 million a year to the largest component of the fees charged to New Zealand businesses to receive Visa and Mastercard payments. We’re also setting the clear expectation that payment providers and businesses should pass these savings on to customers.”
In July, the Commission highlighted that consumers spend an estimated $95bn annually using Visa and Mastercard products, with New Zealand businesses incurring around $1bn in fees to offer these payment methods.
When customers pay using a credit card or contactless methods such as Paywave, the business is charged a ‘merchant service fee’, which is generally passed on to consumers through higher prices or surcharges.
Small added: “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.
“If our draft decision is implemented, we’d expect to see consumers benefit from lower surcharges of around 0.7% to 1.0%, or through prices of goods and services that reflect the lower fees. We’ll be doing more work next year to determine whether, and to what extent, regulation of surcharges is necessary.”
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By GlobalDataSome businesses set their surcharges above the actual merchant service fees, either due to a lack of understanding or to increase their margins.
The average merchant service fee for small businesses ranges from 1.2% to 1.5%.
The Commission has advised businesses paying over 1.5% to seek better deals from their payment providers and expects surcharges not to exceed the actual costs.
It is open to feedback on this draft decision until 5 pm, 18 February 2025.
