Consumer NZ wants more done to bring PayWave surcharges down

Consumer NZ says New Zealanders are still paying PayWave or contactless card payment fees as high as 30 percent - and it wants more done to bring charges down.  

The organisation is concerned a law brought in by the last Government, designed to get Kiwis a fairer deal, hasn't reached everywhere people shop.  

A common PayWave charge is 2.5 percent but they vary with card type, retailer and payment provider. The problem is the percentage should have come down lower than that by now.  

The Labour Government, while still in power, figured retailers and consumers had been paying way too much for contactless payments. 

"Merchant fees are costing our retailers on average $13,000 more than Australia," then-Small Business Minister Stuart Nash said in 2022. 

That year, Labour brought in a law that capped the cost banks and other providers pay each other when they buy something - hoping their savings would filter down to the consumer. 

The Commerce Commission estimates the law is now saving banks and other providers about $130 million per year - but only $105 million of those savings are being passed on to retailers. And the commission is not yet sure how much of the retailer's savings are being passed on to consumers at the till.   

Many retailers and online sellers have reduced their charges post law-change, but Consumer NZ said some are still charging too much.   

Gemma Rasmussen, the organisation's head of research and advocacy, said it's received excessive surcharging complaints ranging from 2.9 percent to 30 percent. 

Consumer NZ believes any fee more than 2.5 percent for a credit card and 1 percent for a contactless debit card is likely excessive. 

The organisation gets the most complaints about taxis, cafes, accommodation providers and parking. 

One parking machine used by Newshub charged a flat $0.50c fee when paying contactlessly.

We only selected $1 to park for half an hour - but that $0.50c fee meant a third of Newshub's total purchase price went on card fees.

The Commerce Commission said that's not on.  

"That is a serious problem and we've seen also in taxis where they have a flat fee of $3 or $4 dollars so if it's a cheap ride, that's a massive percentage," commission chair John Small said. "So, no, that's not OK and those are the kinds of merchants we are getting onto directly."  

Meanwhile, at the Butlers Chocolate Cafe in central Wellington, owner Peter Kelly doesn't impose a card fee at all.  

"Tap and go" makes up the bulk of his transactions, so he became obsessed with how to get a better deal.  

"We brought our charges down from about $50,000 a year to under $25,000 a year - so it's a... big saving," Kelly said.   

He switched to a non-bank provider called Windcave and, instead of paying 2 percent for contactless fees, he's now paying 0.28 percent for Visa and Mastercard fees - which is the vast bulk of the credit card market.    

"The banks are really good at saying, 'OK, we'll match it if you get a good deal from somebody else.' They're not so good at being proactive and saying, 'Hey, would you like this deal from us"? 

More from the Commerce Commission 

Small said the organisation is actively looking at ways to make sure consumers get a better deal.  

He believes some retailers or merchants are knowingly taking advantage of consumers.  

"There are some merchants in the middle who have a bit of market power at the point of sale and they're using it. And we're trying to pick them off one at a time," he said.  

The Commission has had some success so far, pressuring Jetstar and some telcos to lower fees.  

Small said smaller merchants or retailers usually pay more to their banks or providers for the cost of contactless payments, as they have less negotiating power.  

"For example, supermarkets often don't often charge a surcharge, because it doesn't cost them very much and they can't be bothered. Then, at the other end of the scale, you've got small or medium-sized business.  

"What we've found there is many of them don't actually know what they're being charged by their bank... so what we're doing there is working hard on the banks and terminal providers to get that information into the hands of the merchants."  

Small wants to find new ways to bring consumer costs down.  

"There are potentially some technological fixes, such as providers that put a cap on the surcharge, that's equal to the merchant service fee. So, we've got our minds open to what might work here."  

He said it's not a complete solution because of the huge variety of cards that attract different fees.  

"It's a slightly blunt tool, it puts one maximum in there - but it might be better than nothing." 

The commission estimates banks and providers are saving $130 million annually, while retailers only save an estimated $105 million, after the Retail Payment System Act (2022) capped the fees banks or other providers pay each other when transactions occur.

On the difference of $25 million, Small said: "There could be a bit of profit-taking, or it could be a difference in timing to do with when merchants or retailers got new prices from their bank or other provider. There's a bit of a gap we are working to explain.  

"We are concerned, we are interested in it."  

His top tip while the commission works on it? If in doubt, swipe or insert your card.

"I hate to put this back on consumers but they are the ones on the front line of this. Just remember, in many cases you can use your debit card and that's going to be the cheapest option. As long as you insert it, don't just tap it. "