Worldline NZ chief executive says growing dominance of contactless payments ‘risks undermining local payments infrastructure and the resilience' of NZ’s financial system as increasing number of transactions are processed overseas

While organisations generally support the intent of the surcharge ban bill, it has come under criticism - with business leaders and consumer advocates challenging just how transparent and helpful it really is at a Finance and Expenditure Committee hearing.

Since the announcement of the Retail Payment System (Ban on Surcharges) Amendment Bill in July, business groups have been consistently vocal about their concerns, saying the Bill has unintended consequences.

Despite this feedback, the Government has been unwavering in its stance. With the Bill set to be introduced at the end of this year, if given the green light, it would see a surcharge ban in place by May 2026 or earlier.

Speaking to the Committee on Wednesday, Business Canterbury’s chief executive Leeann Watson said: “If the goal is to make payments fairer and more transparent, [the surcharge ban bill] creates risks and it creates an ‘everyone pays system’ where customers using low-cost payment methods end up subsidising those using higher-cost options like credit cards or payWave."

With payware uptake increasing, Watson said businesses will be left with two options - absorbing additional costs or passing them on to consumers.

“Neither of those supports fairness or transparency, which we understand is what the Bill is aiming to achieve.”

‘Targeted reforms aimed at root causes’

Simon Bridges, chief executive of the Auckland Business Chamber, urged the Committee to think about recommendations from the New Zealand Chambers of Commerce.

The groups called for more targeted reforms that balance fairness and transparency with businesses’ financial sustainability and a stronger focus on transparency from banks and payment providers.

“How much is cost and how much is just pure cream when it comes to those banks and payment providers like Mastercard?”

The groups also called for continued work on interchange and merchant service fee reform - this includes things like capping merchant service fees as a percentage of transaction value, prohibiting hidden markups by payment providers or point of sale operators, and enabling merchants to compare providers based on total cost.

Issuers of Mastercard and Visa cards - usually banks - receive an interchange fee every time someone uses their card to pay for something.

“We don’t believe this is the best way to reduce costs for customers here in New Zealand, targeted reforms aimed at the root causes of surcharging would go further in making the system fairer and more transparent - and genuinely, rather than artificially reduce costs for both businesses and consumers.”

Bridges said a proposal from ACT’s commerce and consumer affairs spokesperson Parmjeet Parmar was really worth considering. This aims to make the ban more targeted by allowing businesses offering a fee-free alternative to customers (such as cash or EFTPOS) to be able to surcharge customers.

However, Commerce and Consumer Affairs Minister Scott Simpson said last week: “It is my belief that the price on the shelf should be the price at the checkout."

“The proposal would, in my opinion, worsen and over-complicate the current issues we face in our retail payment systems.”

“Ultimately, Cabinet has already agreed to the Bill and we intend to progress it,” Simpson said.

The end of EFTPOS?

Worldline New Zealand’s payment network links EFTPOS machines to banks and card issuers. It was formerly known as Paymark.

While most consumers would welcome the surcharge ban because they prefer to use cards contactlessly and have certainty of cost, Worldline New Zealand was concerned about the unintended consequences, its chief executive Maxine Elliott said.

When a customer ‘tapped’ their Visa or Mastercard debit card to pay, Elliott said that transaction is routed through international card schemes to the merchant’s bank and then offshore - bypassing the country’s domestic payments network.

“The growing dominance of contactless payments means an increasing number of everyday transactions are processed overseas. This trend risks undermining our local payments infrastructure and the resilience of New Zealand’s financial system.”

“What’s more,” Elliott said, “each contactless debit transaction costs merchants more … Even with fee regulation, despite the payment coming directly from a New Zealand bank account to a New Zealand business.”

“If this continues unchecked, digital wallet and contactless transactions will dominate, and our domestic EFTPOS system - once a cornerstone of low-cost payments - may disappear altogether."

Competition

Elliott said: “Our concern is that all regulatory hope seems to be on open banking, delivering competition for payments - but the customer and product data regime and the current application programming interface standards fall short of delivering a viable alternative for scheme payments or EFTPOS."

"To sustain real competition and payments, a robust regulatory environment is critical and one that ensures fair access and a level playing field for all participants in open banking. Without this, consumers and merchants will be left without any meaningful choice to Visa and Mastercard.”

Retail NZ’s chief executive Carolyn Young said it’s going to be much harder for fintechs to come into the market if surcharges are banned.

With international players already having the lion’s share of the market, it’s only going to increase, Young said.

As soon as surcharges are banned, people’s behaviour will change. Those using EFTPOS or inserting their debit cards now will transition to contactless transactions, Young said.

“And that’s grabbing a higher and higher percentage of the market.”

With the cap on interchange fees starting in December, Young said: “What we’ll see is that the variance between the potential fee for a debit transaction and a potential fintech or open banking transaction, narrows down.”

“So their point of difference in competition is very difficult. It’s a very fine line.”

“If we lose this opportunity now, we’re just going to be dominated by international players. There’ll be no place for local initiatives,” Young said.

Surcharge ban for all payment providers?

The ban does not apply to cards issued by other networks like American Express (Amex).

Country manager of Amex New Zealand Robert Bourne told the Committee that while it supported the intention of the Bill, it was concerned the Bill’s intent would not achieve this intent unless it is amended to apply to all payment providers from the beginning.

“A selective ban would undermine that by allowing merchants to surcharge on some networks while not being able to surcharge on others. And that creates confusion at the point of sale and ultimately erodes trust."

From a competition perspective, Bourne said the risk is that a selective surcharge ban would “reinforce the dominance of the major must-take schemes of Visa and Mastercard, and it would disadvantage the smaller non must-take players like American Express.”

“Once the larger schemes become surcharge free, customers naturally gravitate to those surcharge free methods of payment, and that, as other submitters have mentioned, would further entrench [their] already dominant position in the market, with over 90% market share.”

Bourne said a universal ban would preserve merchant choice and support a diverse, competitive payment system.

The UK and most European member states have surcharge bans that apply “uniformly across all payment methods”, Bourne said.

“New Zealand should align with that proven model to avoid being an anomaly in the global payments regulation.”

Online surcharges would still be around

The surcharge ban bill does not include online transactions, which has also raised concerns from the likes of the New Zealand Parking Association and Consumer NZ.

New Zealand Parking Association deputy chairman John Strawbridge said it observes that the Bill excludes apps and online transactions.

“We believe that could create confusion and inequity."

Strawbridge said there should be a consistent framework across all payment types.

“Operators face mandatory fees, gateway charges, merchant fees and hardware costs - and these, of course, are not discretionary and must be recoverable.”

“Removing surcharges forces uniform tariff hikes so an increase right across all tariffs as we need to be able to recover the costs. Cash users are unfairly subsidising digital payment costs … Our recommendation there is that we link cost recovery to payment method to avoid cross subsidisation,” Strawbridge said.

The Association supports transparency and fairness but urges the Bill to “enable sustainable cost recovery”, he said.

“Without targeted mechanisms, the legislation risks harming consumer trust and the viability of parking services.”

Consumer NZ’s senior legal and policy adviser Aneleise Gawn said in the past three years, the organisation has received hundreds of complaints from consumers “who have been stung by excessive, hidden and unavoidable surcharges”.

“It’s the Wild West and something needs to change. Although a ban on in-store surcharges is a step in the right direction, unfortunately we don’t think the Bill in its current form works well in practice,” Gawn said.

Consumers would still be stung with surcharges online and there would be two sets of rules - one for online and one for in-store which is likely to be confusing for consumers and merchants, Gawn said.

Merchants could continue to apply in-store charges by giving them another name such as a dining-in service charge, Gawn said. 

Consumer NZ’s communications and campaigns manager Jessica Walker said the Bill would create a strange situation for consumers in which the same product or service from the same merchant or provider could vary in price depending on where it's bought. 

For example, someone paying for food on a restaurant’s app would incur a surcharge versus someone paying at the counter wouldn't.

“We don’t think this makes sense.”

Consumer NZ called on the Committee to introduce a complete ban on card payment surcharges like in the European Union and the UK.

It also asked the Committee to consider including all inclusive pricing rules so payment surcharges are not renamed and still charged to the consumer.