The Commerce Commission has proposed cutting the interchange fees businesses pay to accept company card payments. The draft decision is expected to save retailers about $40 million a year.
The proposal targets fees on company cards, also known as commercial credit cards. Businesses pay these fees on non-EFTPOS card transactions through their merchant service providers, often banks. The Government says the cards account for only a small share of transactions but generate about $125 million a year in interchange fees.
The move is part of a broader effort to reduce payment costs for merchants. Earlier interventions lowered interchange fees for other card types twice, and the latest proposal would extend that approach to commercial credit cards.
Commerce and Consumer Affairs Minister Cameron Brewer said the draft decision confirmed long-held concerns about the charges facing merchants.
"When a retailer gets charged too much to accept a payment, that cost doesn't just sit with them. It gets passed on to all of us as consumers through surcharges and higher prices at the counter," Brewer said.
He linked the proposal to a wider review of how payment costs are distributed across the retail system.
"Last year the Government asked the Commission to focus on where the costs of payments lie for businesses.
"We knew that businesses were getting charged too much, and this decision confirms that. The draft decision today from the Commerce Commission on company cards builds on the earlier work to twice reduce interchange fees for businesses for other card types.
"Thanks to the work done by the Commission, businesses will be expected to save up to $290 million a year," Brewer said. "Reducing these costs benefits consumers, as it is expected businesses will pass these savings through."
The $290 million figure includes the expected effect of previous reductions and the latest draft recommendation. The Government argues that lower merchant costs should ease pressure on prices and surcharges for shoppers.
Fee gap
Brewer also pointed to a gap between New Zealand and Australia in the level of these charges. He said interchange fees on company cards in New Zealand were close to double those in Australia, adding to costs for local retailers.
"New Zealand businesses are paying around $125 million a year in interchange fees for company cards, despite these cards only making up a small share of transactions. That's not fair, and local businesses shouldn't be wearing the cost," Brewer said.
"These fees are close to double what they are in Australia. Capping them means fairer costs for the businesses we rely on, and less pressure pushing up the price you pay at the checkout."
The payment chain for card transactions involves several layers of costs, including charges from banks, card schemes, and terminal providers. Merchants typically face those charges through a single provider, which can make interchange fees difficult for smaller businesses to isolate or challenge.
Retail pressure
For retailers, card acceptance costs have been a longstanding issue as electronic payments have expanded and cash use has declined. Merchant surcharging has drawn scrutiny because businesses often say they have limited room to absorb payment costs, while consumers increasingly expect to pay by card for everyday purchases.
The draft decision suggests the regulator believes current charges on commercial credit cards exceed the underlying cost of processing those payments. That would strengthen the case for tighter limits on interchange fees in a segment that has remained relatively expensive.
"This decision reinforces that the fees retailers currently pay are well above what it actually costs to process payments.
The Commission is consulting on the draft decision before making a final ruling. If adopted, the lower cap would add another restraint to a payments market that has already faced several rounds of intervention aimed at reducing costs for merchants and, indirectly, consumers.
"This is all part of the Government's plan to fix the basics, build the future, and ensure Kiwis are getting a fair deal at the checkout."