The Commerce Commission says Kiwi consumers have options to avoid merchant surcharges – and retailers should be more transparent about how consumers can do this.
Commission Chair, John Small, says it's concerning that many consumers may think they have no option but to the pay the surcharge at the end of their transaction. He says consumers should have the informed choice of which payment method best meets their needs and budget where surcharges are applied.
"In most cases of in-person card payments, you have the option of inserting or swiping your debit or Eftpos card, rather than using the contactless function, and this should not incur a fee."
The Commerce Commission is responsible for promoting competition and efficiency within the retail payment system – the most commonly used financial service in Aotearoa New Zealand. This includes debit and credit card networks, bank transfer networks, digital wallet networks and Buy Now Pay Later (BNPL) networks.
The Commission has today published materials to assist merchants who are surcharging to do so appropriately and ensure consumers know their options – highlighting that in most cases surcharges should be in line with the costs of the transaction to the business.
"We want to be clear that we are not against surcharges that are in line with the costs of accepting the payment. The ability to surcharge may make the difference between a retailer accepting a form of payment or not. Surcharges also mean that only those consumers using more expensive payment methods are impacted, as opposed to all consumers paying through higher retail prices," Dr Small says.
As well as issuing the educational materials, Dr Small says the Commission has written to a number of large merchants – raising concerns about the level of their surcharges.
"Not only do businesses need to remember that any surcharges added must be clearly disclosed and that any reasons for the surcharge are accurately described to avoid breaching the Fair Trading Act, but they should consider the levels of their surcharges as they may be in excess of their costs of accepting the payment.
"It is vital that businesses read the material we have issued and use them as a tool to understand how to suitably surcharge, even if they can only select a single surcharge due to terminal limitations or other factors."
Dr Small says businesses should contact their payment service provider if they do not clearly understand the costs they are paying. In some cases, there will be cheaper or more appropriate plans for businesses with their current provider.
In addition to information for merchants, the Commission has published an open letter to payment service providers to set its expectations that they assist merchants to surcharge appropriately.
This includes enabling merchants to have different surcharge rates where costs to merchants vary, for example, contactless debit compared with contactless credit. If payment service providers make these changes consumers should start to see surcharges for contactless and online debit Visa and Mastercard payments reduce.
Role of the Commission
The Retail Payment System Act 2022 (the Act) requires the Commission to monitor the retail payment system, and regulate designated retail payment networks, for the long-term benefit of New Zealand businesses and consumers who rely on it every day to buy and sell goods and services.
Visa and Mastercard networks have initially been categorised as 'designated networks' by the Act. Where a network is designated, this means the Commission has powers to:
- determine how prices can be set or expressed – an 'initial pricing standard' has already been set under the Act that limits 'interchange fees'
- require greater transparency of certain information
- allow other participants to access aspects of the network.
The Commission also has powers to issue merchant surcharging standards for any network to ensure surcharges for payment services such as credit cards or contactless payments reflect the actual cost of providing that payment option.
