A potential reduction of more than $250 million in card payment fees each year could be on the cards for New Zealand consumers, with the Commerce Commission initiating consultations over competition and efficiency within the retail payment system.

Consumers spend approximately $95 billion each year on Mastercard and Visa in New Zealand, according to Commission chair John Small. 

When someone uses a card without inserting it in a terminal, the business receiving the payment is charged a ‘merchant service fee’, or interchange fee. This costs businesses, as well as consumers, through higher retail prices and surcharges, of around $1 billion annually.

The Commission is looking into the opportunity to reduce a significant component of the merchant service fee, Small said, adding the reduction should allow businesses to reduce retail prices and related surcharges.

“Surcharges should only reflect the costs of accepting these card payments and we are exploring changes to fees which could see surcharges reduced to 0.7 per cent or less,” he elaborated.

The consultation also covers other issues such as a lack of innovation and pace, which may be barriers to new and more secure payment options made possible through open banking.

“Our focus is on the greatest benefit to consumers and merchants, and we see scope to both reduce fees and increase choice for the long-term benefit of New Zealand consumers and businesses,” Small stated.

The Commerce Commission is seeking feedback from consumers and merchants on the issues via its website.

• Further reading: Card fee cut saves businesses $105 million annually