The Commerce Commission has issued an Open Letter to participants of New Zealand's retail payment system setting its expectations of the industry to deliver a more competitive environment that can give Kiwis new options to pay for goods and services.
Commission Chair, John Small, said the regulator had observed a lack of innovation in payments between bank accounts, one of the cheapest payment methods available to Kiwis.
"More efficient payments between bank accounts will reduce both merchant and consumer reliance on the likes of Visa, Mastercard, and American Express and the costs associated with these types of payment methods," Dr Small says.
Bank transfers are not new and many consumers pay bills this way – but the Commission wants to see this system used to support better ways to pay online and in-person.
Dr Small says there are numerous examples of this working successfully overseas with the use of QR codes and mobile applications that facilitate new in-person payments, and that this approach is complementary to the Government's development of a Consumer Data Right (CDR) regime.
"Through our work to date, we have realised the value of a regulatory backstop to help create an environment where new entrants can innovate. Freeing up payments between bank accounts is key to enabling this.
"For smaller businesses who are subject to higher fees to accept card-based payments this is particularly appealing. It means they could enjoy lower payment costs and reduce – or even remove – the need to surcharge to recoup fees – a win-win for both them and their customers.
"We acknowledge that the industry has demonstrated some progress in the payments space, but are concerned about the length of time it's taking to see this realised for the benefit of Kiwi consumers and businesses. Banks need to pick up the pace and we think a regulatory backstop would encourage them," Dr Small says.
Next month the Commission will begin formal consultation on whether to recommend to the Minister the need to exercise powers that would enable it to ensure this innovation happens in a timely manner.
Background
In July 2023, the Commission announced it was looking at ways to remove barriers to more innovative payment options using application programming interface (API) enabled payments that would allow Kiwis to make payments securely and rapidly between bank accounts, as a lower-cost alternative to current card payment options. It sought industry views on its characterisation of the issues and opportunities in this space which it has since reviewed.
The Commission sees itself as having a role in influencing industry to deliver the minimum requirements that are needed to support the development of a thriving API-enabled payments eco-system. API-enabled payments will provide new ways for consumers and businesses to make and receive payments that better suit their needs.
Next month the Commission will begin formal consultation ahead of considering if a recommendation should be made to the Minister about exercising powers under the Retail Payment System Act to address these concerns.
The Commission is also currently considering an application from Payments NZ seeking authorisation to work with API providers and third parties to further develop its open banking framework, while its draft report into competition into personal banking services will be published on 21 March 2024.
