‘Businesses may have no option but to reflect those costs in their pricing’: Retailers and hospitality sector say Government’s surcharge ban raises wider issue of pricing

The Government's plan to ban surcharges for in-store payments has raised concerns among some organisations about pricing. 

Commerce and Consumer Affairs Minister Scott Simpson made the surcharge ban announcement on Monday afternoon, saying shoppers would no longer be "penalised" for their choice of payment method. 

The ban will apply to most in-store payments made using domestic Mastercard, Visa, debit, credit cards and EFTPOS.

The Government would be introducing the Retail Payment System (Ban on Surcharges) Amendment Bill at the end of this year and expects the surcharge ban to be in place by May 2026 at the latest.

Issue of pricing

While removing surcharges from in-store purchases is a positive move for domestic consumers, Retail NZ’s chief executive Carolyn Young says the wider issue of pricing will need to be considered. 

Retail NZ is the country's lobby group for retailers. 

In a media release, Young says retailers continue to face costs to accept debit and credit card payments.

"These costs will likely be added to product prices in the future."

Retail NZ also raised concerns about seeing a decline in EFTPOS payments by customers. 

EFTPOS doesn't come with transaction fees but some businesses still charge extra for it - including EFTPOS is a way for the Government to make it clear there won't be charges for this payment method. 

But Retail NZ foresees that as consumers move from EFTPOS to contactless debit and credit cards, there will be a corresponding increase in the fees paid by retailers. So any benefits from reducing the interchange fee (something the Commerce Commission is focused on), according to Retail NZ, would be short-lived. 

"Considerable work" will also need to be done to make sure terminals have the ability to distinguish between different types of cards from domestic debit and credit cards to commercial or international credit cards - and charge differential surcharge rates, Young says.

Retail NZ's position is that all cards should be treated equally.

The organisation is calling for more certainty around the Commerce Commission's ability to monitor and enforce the new interchange fees and the ban on surcharging. 

Interchange fees

Recently, the Commerce Commission announced it would reduce interchange fees paid by New Zealand businesses in order for them to accept Visa and Mastercard payments. 

Issuers of Mastercard and Visa cards - usually banks - receive an interchange fee every time someone uses their card to pay for something. Interchange fees make up about 60% of merchant service fees, according to the Commerce Commission.

According to the Commerce Commission, it costs New Zealand businesses around $1 billion a year to accept Visa and Mastercard payments - these costs are often passed to consumers through surcharges and higher product costs.

The Commission believes this cost is too high and will reduce this cost for businesses by around $90 million a year. 

In a statement about the Government’s surcharge ban announcement, a Commerce Commission spokesperson says its “monitoring of surcharging found that approximately $150 million (or 15%) of the fees merchants pay to receive card payments is recovered through surcharges”.

“Of that, approximately $45 million to $65 million is what the Commission would classify as excessive.”

The spokesperson says the Commerce Commission has concentrated on first lowering the $1 billion in fees New Zealand businesses pay to accept Visa and Mastercard payments. 

“This in turn reduces the need for businesses to recover their costs through surcharging or higher prices. The Commission’s regulation of interchange fees to date will see New Zealand businesses save as much as $230 million each year in fees for Mastercard and Visa card payments.”

The Commerce Commission will work with the Ministry of Business, Innovation, and Employment on the implementation of the ban, the spokesperson says.

Prices will have to adjust

Hospitality New Zealand’s chief executive Steve Armitage says it appreciates the intent behind the change and sees simplifying the checkout experience for consumers as a positive step.

“But at the same time, it’s important to recognise that electronic payments come with real costs to businesses. If surcharges are removed, many operators will have to adjust their pricing to reflect that - particularly for small hospitality operators already under pressure.”

Hospitality New Zealand represents more than 2500 hospitality and accommodation businesses across Aotearoa.

Armitage says margins across the hospitality sector remain tight - while some operators may be able to absorb the cost, for many other operators, especially smaller businesses, that won’t be realistic.

“These businesses may have no option but to reflect those costs in their pricing.”

While supportive of the Commerce Commission’s decision to reduce interchange fees, Armitage is calling for more transparency in how those savings are shared. 

“Our priority is to make sure that any changes introduced are sustainable for hospitality businesses and ultimately deliver a fair outcome for both consumers and operators.”

'The way the rest of the world is regulating'

Catherine Beard from business lobby group BusinessNZ, says the Government’s decision is a step in the right direction for consumers and for businesses that issue the cards. 

"We used to pride ourselves on being early-adopters of new technology, but surcharges felt like a step back for New Zealand," Beard, BusinessNZ's director of advocacy, says.

"While interchange fees will need to be absorbed by retailers or passed on to consumers, ultimately these changes will lead to a better shopping experience with a no-fuss payment process at checkout, and consumers knowing the costs up front.

"This is the way the rest of the world is regulating."

Consumer advocacy organisation Consumer NZ says the Government’s ban will put an end to surcharges that are excessive, hidden and unavoidable. 

“We’ve received close to 300 complaints about excessive surcharges (over 2%) in the last few years. In some cases, card payment surcharges were as high as 25%. We’ve even had complaints about surcharges being applied to EFTPOS transactions,” Consumer NZ’s acting head of research and advocacy, Jessica Walker says. 

"The whole surcharge situation here in New Zealand is currently a mess. Surcharges for debit and credit cards are banned in the United Kingdom and European Union, and the Reserve Bank of Australia recently proposed a surcharge ban – so this brings us nicely in line with other countries.”

“The ban is a no-brainer."

"These new rules will bring an end to a very messy situation,” Walker says.