ban surcharges<\/a> on card payments for in-person payments.<\/p>\nLegislation is expected to be introduced to Parliament by the end of the year, with the ban to kick into effect no later than May 2026.<\/p>\n
But advice released to RNZ under the Official Information Act shows Ministry of Business, Innovation and Employment officials warned there could be problems with the ban.<\/p>\n
They also recommended the ban be limited to only in-person debit card payments, not credit cards.<\/p>\n
Ministry officials said they were not aware of any other jurisdiction that had banned surcharges across all payment methods.<\/p>\n
The Commerce Commission has estimated that 30% of merchants apply a surcharge, for a combined $150 million a year.<\/p>\n
Officials said surcharging could be efficient, particularly if it steered consumers to use lower-cost payments methods such as eftpos, or put pressure on payment schemes to lower their fees.<\/p>\n
The Commerce Commission is bringing in new rules for interchange fees, which are expected to reduce what merchants must pay.<\/p>\n
“Surcharging also ensures that users of no cost payment methods are not cross-subsiding users of higher-cost payment methods through paying higher prices for goods and services,” the Ministry of Business, Innovation and Employment said.<\/p>\n
It noted in a briefing that Visa and Mastercard had campaigned for a ban on surcharging, and it was likely to mean more demand for card payments on their networks.<\/p>\n
The key potential drawbacks outlined in a briefing at the end of May were weakened price signals between payment methods, because there would no longer be a way to encourage people to use cheaper payment options.<\/p>\n
“This could increase these merchants’ total payment costs of the same volume of sales.”<\/p>\n
Chief executive Carolyn Young said these payments were a contentious and complex area for retail businesses. (Source: Breakfast)<\/p>\n
Prices could go up if shops that had previously surcharged had to cover the costs.<\/p>\n
“Consumers of these goods or services that use lower-cost payment methods would be partially cross-subsidising those that use higher-cost payment methods.”<\/p>\n
There could be more pressure on small businesses who were less able than larger shops to absorb the cost.<\/p>\n
They said Visa and Mastercard could also have their market power entrenched. The surcharge ban could “accelerate the decline of eftpos”, they said.<\/p>\n
It could also discourage people from switching to new digital payment technology.<\/p>\n
They said the competition impact assessment found it challenging to identify the marginal impacts of a surcharge ban.<\/p>\n
“So much of the competition impacts are a function of the interchange fee caps that are already in place and subject to review by the commission\u2026 the effects of a ban will be concentrated and mainly fall on smaller business merchants in competitive, low-margin sectors.”<\/p>\n
But hidden fees would be removed, excessive surcharges would be addressed, there would be lower compliance costs and it would be easier to enforce the rules, they said.<\/p>\n
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