.svg)
New Zealand’s government decision to prohibit surcharges on most in-store card transactions should reduce consumer costs and improve price transparency, but may trigger disputes over fees between merchants, card schemes and regulators.
The Retail Payment System (Ban on Merchant Surcharges) Amendment Bill, on September 16, amends the Retail Payment System Act 2022.
It will outlaw surcharges on Electronic Funds Transfer at Point of Sale (EFTPOS), as well as Visa and Mastercard debit and credit payments. The ban will cover both contactless and chip-and-PIN transactions.
According to the bill, consumers currently pay an estimated NZ$150m ($90m) per year in surcharges, with up to NZ$65m ($39m) of that likely exceeding merchants’ actual costs of accepting payments.
The country’s Commerce Commission has warned that charges are often disclosed only at the point of payment, making it more difficult for consumers to compare prices.
Under the bill, any surcharge imposed in breach of the ban would be unenforceable and must be refunded to the consumer.
The Commerce Commission would be empowered to enforce the prohibition through corrective notices and financial penalties. It would also retain the ability to set merchant-surcharging standards for payment types not covered by the ban.
The government would also have powers to extend the ban to other payment methods in future, such as online transactions or additional networks.
The proposal brings New Zealand into line with jurisdictions such as the EU, the UK and Malaysia that have already banned most card surcharges, and anticipates similar reforms under way in Australia.
If passed, the new rules would take effect one month after royal assent.
Mixed picture for Visa and Mastercard
The card schemes and acquirers are likely to see a short-term boost from increased card usage. However, over time, they also may find that they face stronger merchant pushback on fees as retailers face the prospect of having to take on costs previously passed to customers.
This could trigger interventions that have been noticeable in jurisdictions such as the EU and UK, where interchange fees have already been heavily reduced through legislative action. Other fees could also come under pressure.
The ban is likely to have a more severe impact on merchants.
Those that currently add surcharges to in-store EFTPOS, Visa or Mastercard transactions would be directly affected by the proposed ban.
They would no longer be able to pass these fees on to customers at the point of sale and would instead have to absorb the cost of accepting such payments.
The reform underscores the government’s determination to prioritise consumers, but it also sets the stage for tougher debates between merchants, card schemes and regulators over who ultimately pays for the cost of payments.
