The Commerce Commission wants to introduce a cap on interchange fees for Mastercard and Visa credit cards, with peak body Retail NZ calling the move a welcome relief for retailers.
New Zealand businesses currently pay approximately NZ$125 million each year in interchange fees to accept Mastercard and Visa commercial credit cards.
Commissioner Bryan Chapple said the current level of interchange fees for commercial credit cards sees businesses paying high costs to fund cardholder benefits like loyalty programmes, insurance, and interest-free periods.
“We understand these benefits are important for some cardholders, but they shouldn’t be paid for through interchange fees,” Chapple said. “These fees ultimately flow through to retail prices, where everyone pays for benefits only some people receive.
“We don’t think the corner dairy should be forced to absorb additional costs or increase their prices to cover the costs of rewards and benefits only those with commercial credit cards get.”
Chapple said he expects the Commission's draft decision will lower barriers businesses and consumers face when adopting alternative payment methods, such as open banking.
Over time, he added, this is expected to support more effective competition between payment methods and improve incentives for issuers and consumers to consider lower cost or more innovative alternatives.
Retail NZ CEO Carolyn Young said retail payments remain a major pain point for retailers.
"These transactions are nearly a fifth of all interchange fees paid but make up only 8 per cent of the total value of transactions," Young said. "This disparity leaves local businesses picking up the bill for corporate card rewards, and ultimately they pass these costs on to the consumer."
Despite the peak body's support of the move, Young said she and her team are disappointed that the draft decision proposes domestic commercial caps that sit 0.20 percentage points higher than standard personal credit cards.
Retail NZ think fees should be identical.
"Whilst the 0.20 per cent premium for commercial cards is an improvement, retailers are facing rising costs from every angle and shouldn’t be paying additional fees."
This draft decision builds on previous moves to lower interchange fees on personal cards, which, once all the changes have taken effect, is estimated to save businesses up to $290 million each year. This also represents the first step in New Zealand to regulate interchange fees on commercial credit cards.
Commercial credit cards make up a small share of transactions but generate a disproportionately larger share of interchange fees, which are paid by businesses through their merchant service fees.
“We want to hear from all stakeholders on our draft, and especially businesses as they hold a unique role as both cardholders and card accepters. We expect to make our final decision later this year,” Chapple said.
Retail NZ added that regulating the interchange component alone solves only part of the problem. Interchange accounts for nearly three quarters of the total Merchant Service Fees (MSF) businesses pay, and the peak body continues to call for full regulation of the total MSF to provide absolute certainty for its members.
"Retail NZ will be working closely with our members to submit formal feedback by the July 13 deadline," Young said.