Kiwi retailers will need to cut surcharges in the near future as the Commerce Commission works on related regulations following its decision to reduce interchange fees.

The ComCom has issued its final decision to reduce interchange fees paid by businesses to accept Visa and Mastercard payments.

The regulator expects the cuts to result in fewer and lower surcharges for customers, but specific regulations will be needed.

“We’ll be exploring what regulation may be needed to address excessive surcharging, which we consider to be anything more than the cost businesses face to accept Visa and Mastercard payments,” said Commerce Commission chair John Small.

According to the commission, interchange fees related to Visa and Mastercard payments cost New Zealand businesses around $1 billion a year, which is often passed onto customers through surcharges and higher product costs.

As the cost is too high, the regulator decided to reduce it by around $90 million a year.

The move builds on the initial fee caps set in 2022, which resulted in $140 million in annual savings for local businesses.

“We expect our latest decision to see the average small business save around $500 each year in lower fees. Individual businesses could save more or less, depending on the mix of transactions they accept,” Small said.

“In making this decision, we were careful to balance lower costs for merchants today with keeping incentives for new fintechs to innovate and challenge the big established incumbents,” he added.

The commission expects payment providers to help businesses understand their costs to accept these payment types, so where businesses choose to surcharge it accurately reflects their cost.

The interchange fee caps apply to domestic and international debit and credit card transactions. Commercial credit card or prepaid debit card payments are not affected for the time being.

Retail NZ CEO Carolyn Young welcomed the ComCom’s decision, but said reducing interchange fees alone will not address the overall costs that retailers pay via merchant service fees (MSF).

“We called for the commission to regulate the total MSF to provide ongoing certainty for our members,” she added.

The organisation also supports the Commerce Commission’s intention to regulate surcharges, providing a level playing field for all retailers and consumers.