The Commerce Commission has released (18 December) a draft decision that could lead to significant cost savings for Kiwi consumers and businesses by reducing the fees associated with Visa and Mastercard payments. The proposed changes aim to lower costs by an estimated $260 million annually, a move that could result in reduced surcharges and lower prices for goods and services.
Targeting Merchant Fees
Commission Chair Dr. John Small highlighted the financial burden currently placed on businesses and consumers, explaining that New Zealanders spend approximately $95 billion annually using Visa and Mastercard products, generating $1 billion in merchant fees for businesses.
“These fees are often passed on to consumers through surcharges or higher retail prices. Our proposal would cut the largest component of these costs, and we expect businesses to pass these savings directly to their customers,” said Dr. Small.
The proposed changes are part of the Commission’s broader efforts to simplify and reduce payment costs for businesses, which are typically charged merchant service fees for processing card transactions, including credit card payments and contactless services like Paywave.
Addressing Excessive Surcharging
The draft decision also sets a clear expectation that businesses should not overcharge customers for using card payment options. Some businesses, either due to confusion over their own payment costs or a desire to profit from surcharges, set fees higher than their actual expenses.
“We’ve been clear that businesses should not be surcharging customers more than what it costs them to accept payments,” Dr. Small emphasized.
Consumer Savings in Sight
If the draft decision is implemented, consumers could see surcharges drop by 0.7% to 1.0%, resulting in substantial savings. Alternatively, businesses may reduce retail prices to reflect lower operating costs.
The Commission also noted that excessive surcharging is difficult to detect due to the complexity and variability of Visa and Mastercard fees, which vary across businesses and payment providers.
Supporting Small Businesses
For small businesses, the average merchant service fee is currently 1.2% to 1.5%. Dr. Small encouraged businesses paying above 1.5% to negotiate better terms with their payment providers.
“We expect any surcharges to not exceed costs and encourage businesses to shop around for better deals if they’re paying more than 1.5%,” he said.
Public Feedback Invited
The Commission is seeking feedback on its draft decision until 5pm on 18 February 2025. Submissions can be made via email or through an online form tailored for consumers and merchants.
This draft decision is part of the Commission’s ongoing work to regulate payment costs and simplify fee structures. Additional measures, including potential regulations on surcharging, will be explored next year to ensure fairness and transparency in payment practices.
For more details on the draft decision and how to provide feedback, visit the Commerce Commission’s website.
