Fair fees for payments
New Zealand is increasingly a nation where payments for everything, from groceries to airline tickets, are paid electronically. Unlike most developed economies, there is no explicit regulatory regime covering the costs of payments systems in New Zealand, and there is little transparency regarding fee levels. This means that New Zealand consumers pay substantially more in hidden charges for debit and credit card payments than consumers in other markets such as Australia.
In 2015, economic consultancy Covec estimated that, the hidden cost of payment systems to shoppers was currently approximately $380 million per annum. This stet forecast to rise to as high as $711 million by 2025 - an estimated total cost of $3.1 billion over the next 10 years.
The costs are expected to rise substantially over coming years as customers are increasingly moving away from traditional EFTPOS, which is free for merchants and consumers, towards new forms of contactless payments. These come at a substantially higher acceptance cost for the merchant, which translates into higher prices for consumers, and a wealth transfer from New Zealanders to foreign-owned banks and credit card companies.
Our research shows that New Zealand merchants pay substantially more for credit and contactless debit transactions than merchants in Australia & and the UK, and that fees in New Zealand are static or increasing, while they are going down in these other markets.
We're asking for greater oversight and transparency over the fees and changes banks and schemes charge in New Zealand.
- See the results of our 2018 Payments Survey here.
- See the results of our 2016 Payments Survey here.
- Download our policy paper 'Towards Fairer Payments Fees' including the results of our 2015 Payments Survey.
- See our backgrounder on the value of payment cards, unbundling and surcharging here.
In October 2016, in response to Retail NZ's advocacy on behalf of the sector. The Government released a discussion paper on retail payment systems. The paper identifies that market dynamics suggest cause for concern in both the credit and debit card markets, and that:
- there is economic inefficiency in the credit card market;
- all consumers are paying higher prices, but only higher-income consumers benefit from rewards;
- there is emerging economic inefficiency in the debit card market;
- there are barriers to entry in the debit market; and that
- there are systematically higher costs being imposed on small businesses.
In August 2017, the Minister of Commerce wrote to Payments NZ saying that she "expects to see improvements to the transparency and usefulness of information provided to merchants by both banks and schemes, to enable them to assess their options for negotiating better merchant service fees". She has asked Payments NZ to report back to her on this and other matters by April 2018, and indicated that better information from banks and card schemes will "contribute to the Goverrnment's assessment of whether further regulation is warranted".
This is a really significant move, and clearly signals that the Government expects to see change from the banks. Retail NZ, along with its Payments Working Group is engaged in discussions with Payments NZ and you can see what we've asked for here.
- Read the MBIE discussion paper here.
- Read Retail NZ's submission here.
- Read the background BERL paper here.
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