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Summary
- Merchant fees to be restricted by NZ Government.
- Customers have increased usage of contactless credit and debit cards amid COVID-19.
- High cost of fees increases financial burden on businesses.
The New Zealand government is planning to reduce merchant service fees, which is charged by banks when customers pay using credit or debit cards. The government has claimed that the new legislation could save businesses $74 million a year.
On Wednesday, Commerce and Consumer Affairs Minister David Clark stated that before COVID-19 pandemic started, the primary method of payment for products and services in New Zealand was Eftpos, which is a fees-free choice for retailers. Consumers, on the other hand, have been increasingly favouring contactless debit and credit cards.
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He noted that merchant service rates in New Zealand were unregulated and even higher than in Australia. This had put a huge burden on retailers, who frequently passed the cost on to customers through higher prices.
Cap being implemented on interchange fee
Merchant fees had been rising since the COVID-19 pandemic started due to a rise in contactless payments. The fees has been costing businesses thousands every year.
Clark noted that lowering merchant service fee paid to New Zealand companies was of primary concern for this government and also vital to the economy's recovery.
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The interchange fee is one of the most important elements of merchant service fee. The government plans to limit it at 0.8% for credit card purchases, which is in line with Australia, Clark stated.
Interchange fee is also being capped for online debit card transactions at 0.6%. Interchange fee for contactless debit cards will remain at 0.2% or less, while swiped and implanted debit cards will remain at 0%.
ASB Bank in favour of the move
ASB has been a proponent of regulatory action to help get the balance right for companies paying merchant service fees. It recognises that card payment networks form a dynamic eco system, comprising various payment and financial services entities.
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ASB’s Executive General Manager, Business Banking, Tim Deane expressed his delight on today’s decision because it will ensure that more capital remains in the hands of business consumers during an another difficult trading year for many due to the COVID-19 pandemic's continuing consequences.
A Bill to be introduced
The Retail Payments System Bill would be presented, which would require interchange fee deductions as quickly as possible and allow the Commerce Commission to oversee participants in the retail payment system directly.
It will also impose a transparency and reporting provision, allowing the Commerce Commission to keep an eye on the retail payment system.
