Government's move to lower fees on card transactions passes in Parliament, but effect won't be felt for months

The Government's legislation to lower merchant fees on credit and debit transactions has passed through Parliament with only one party opposed.

As COVID-19 swept New Zealand in early 2020, many Kiwis moved to contactless debit, credit and online payment methods. But some small businesses weren't able to provide the functions due to high merchant fees charged on them. 

While banks eventually stepped in and waived some charges temporarily, the Government last year announced it would move to set limits on interchange fees, the largest component of merchant fees.

Credit card transactions will be capped at 0.8 percent - in line with Australia. For online debit card transactions, the fees will be capped at 0.6 percent. Contactless debit stays at 0.2 percent or less.

"This will have an impact on both Mastercard and Visa and will come into effect six months after enactment. This is the quickest it can be done and is swifter than when similar changes were made in Australia,” Commerce and Consumer Affairs Minister David Clark said

Legislation enabling the changes passed through the House on Wednesday night.

The Retail Payment System Bill also allows the Commerce Commission to monitor the retail payment system and directly intervene to regulate designated networks. The commission will be able to ensure any surcharging by merchants is reasonable.

Clark said the legislation will save New Zealand businesses around $74 million a year. 

"We made a campaign promise in 2020 to reduce merchant fees, and today we deliver on that commitment. It's unfair that retailers, especially small retailers, are constantly stung with high fees for offering a service they need to survive," he said. 

"It's important we see merchants benefit from lower fees as soon as possible. As those overheads drop, I'd expect consumers to benefit from savings."

ACT, which was the only party that opposed the Bill in Parliament, questioned if the savings would be passed on to consumers. 

"To me, it sounds like good politics," ACT MP Damien Smith said. "We're all for saving money for the small-business owner. But, again, we have seen no evidence that it's actually going to get there and that it's actually going to get through to consumers and help them."

Giving the Commerce Commission more powers to enforce doesn't mean there will be actual savings, Smith said.