Commerce and Consumer Affairs Minister Scott Simpson says full surcharge ban would provide better checkout experience for customers, ban could extend to online transactions in future

Commerce and Consumer Affairs Minister Scott Simpson says while business lobby groups' suggestion of capping surcharges instead of banning them is an "interesting proposal," he thinks the current proposed policy of a surcharge ban would provide a better experience for customers at the checkout. 

In July, the Government announced it would be introducing the Retail Payment System (Ban on Surcharges) Amendment Bill at the end of this year.

The ban would apply to surcharges on in-store EFTPOS, Visa, and Mastercard debit and credit payments.

The Finance and Expenditure Select Committee recently recommended by majority that the Bill be passed but it unanimously recommended one amendment - that secondary legislation can be made to extend the scope of the main legislation.

Concerns and criticism

Since the Government first made this proposal, there’s been back and forth - with concerns and criticisms being raised.

While there’s general support for the intent of the Government’s proposal, business leaders and consumer advocates have challenged how transparent and helpful it really is.

Even the ACT Party suggested tweaking the proposal, but Simpson has been steadfast, telling interest.co.nz in October that “ultimately, Cabinet has already agreed to the Bill and we intend to progress it.”

And just last Thursday, business lobby groups asked the Government not to go ahead with its proposed blanket ban on surcharges, and instead, cap them.

Retail NZ, and chambers of commerce including the Auckland Business Chamber, suggested the Government cap the surcharge on debit cards at 0.5%, and cap the surcharge on personal domestic credit cards at 1%.

And this week the business lobby groups pointed to Australia.

The Reserve Bank of Australia, according to the Australian Financial Review, is considering; “the relative merits of the various options on payment card surcharging” after its government planned to ban debit payment surcharges from next year.

Auckland Business Chamber chief executive Simon Bridges said Australia’s shift should ring alarm bells in Wellington.

Reiterating their support for capped surcharges, Retail NZ chief executive Carolyn Young said it was the sensible middle ground.

“Before charging ahead, the Government should look at what’s happening in Australia and listen to Kiwi small businesses who simply can’t absorb another hit."

“Surcharges are a transparent way to recover the high costs of accepting certain payment methods. If the surcharge ban goes ahead, those costs won’t disappear – they’ll just be hidden in higher prices for everyone," Young said.

‘Interesting proposal’

On Wednesday, Simpson told interest.co.nz that while capping surcharges was an "interesting proposal," he thought the current proposed policy would provide a better experience for customers at the checkout.

“Contactless payments are becoming more common, and this change aligns New Zealand with other countries which have already banned surcharging."

“Ultimately, our priority is a system that gives customers and merchants more options, not fewer," said Simpson.

What about online transactions?

With the proposed surcharge ban not including online transactions, representatives from organisations like Consumer NZ and New Zealand Parking Association have previously said this could create confusion and inequality, and there would be different sets of rules - one for online and one for in-store.

Simpson said the proposal to ban surcharges could extend to online transactions in the future - only if it’s needed. He said online transactions carry higher interchange fees due to the higher prevalence of fraud. 

“Surcharges cover some of those costs,” Simpson said.

Interchange fees

Previously, Simpson has said the cost of surcharges to consumers is $150 million a year - with $65 million of that “being over and beyond what is reasonable cost recovery.”

Simpson has also said that the decision to ban surcharges is on the back of the Commerce Commission’s decision to reduce interchange fees - which came into effect on Monday.

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, which also says it costs New Zealand businesses around $1 billion a year to accept Visa and Mastercard payments.

The Commission, in July, determined these costs were too high and had acted to reduce them by $90 million a year.

Previously the business lobby groups said the surcharge cap proposal would also allow fintech and open banking providers to grow and compete.

With interchange fee cuts for businesses commencing on Monday, Simpson said a surcharge ban would ensure businesses pass those savings on to customers.

“Additionally, the introduction of open banking on December 1 is an opportunity for fintechs to develop innovative payment methods which may have lower costs and greater benefits for retailers and consumers.”

With the Bill set to be introduced at the end of this year, New Zealanders could see a surcharge ban in place by May 2026 or earlier.