March 2025
Commerce Commission
PO Box 2351
Wellington 6140
New Zealand
Tēnā koe,
Restaurant Association of New Zealand submission on the Commerce Commission’s Draft Decision and Reasons Paper on Interchange fee regulation for Mastercard and Visa networks
The Restaurant Association of New Zealand (the Restaurant Association) welcomes the opportunity to submit on the Commerce Commission’s dra decision and reasons paper on interchange fee regulation for Mastercard and Visa networks.
Since 1972, the Restaurant Association has worked to offer advice, help and assistance in every facet of the vibrant and diverse hospitality industry, covering the length and breadth of the country. We’re passionate about our vibrant industry, which is full of interesting, talented and entrepreneurial people.
The Restaurant Association’s priority for reforms to New Zealand’s retail payment system is to ensure the system is as simple as possible to understand for those on the frontline of our retail sector – in particular, the merchant and the customer – to ensure that all parties are paying a fee that is fair and reasonable.
In that vein, we commend the Commission for their dra interchange fee caps of 0.20% for all cards across contacted and contactless payments, except foreign issued cards which have a dra cap of 0.60% for both payment types. This consistency will help businesses – particularly small businesses – to more easily understand what they are being charged to accept payments, and more accurately forecast their anticipated costs.
We reiterate that more education is needed for consumers and the general public to understand why surcharging exists, so merchants can focus on their business instead of filling this education gap. There is still an underlying perception among consumers that surcharges are a way for businesses to swindle their customers, and we believe this will only be exacerbated should the final decision of the Commission be to reduce interchange fees without a careful, easy to understand communications effort that explains how these interchange and merchant service fees flow through to consumers.
We also recognise the next stage in this piece of work may include exploring options to regulate the level of surcharges charged by a retailer or merchant. We are supportive of this step, however we recommend that this work takes place no earlier than Q1 2027, to allow at least twelve months for businesses to experience a full trading year under the new level of interchange fees (based on Figure 1.3 in the Draft Decision and Reasons Paper) and collect a more accurate range of data to inform levels of surcharging to cover their costs.
Should the Commission initiate work to regulate surcharges, this should not be initiated without having developed clear guidance for businesses. As many have agreed through the first stage of consultation, the current level of merchant service fees paid by businesses are confusing – with many businesses having to estimate a surcharge fee to cover their costs of accepting payments. This estimate is based on their best assessment of the fees they incur, and it will take time and assistance to transition to a new fee structure, and any enforcement model should recognise the difference between a large business that has access to corporate support staff which surcharges 4% over what would be considered reasonable under the new system, and a small business run by owner/operator who mistakenly charges 0.5% over what would be considered reasonable.
Finally, we recognise that interchange fees are only one portion of merchant service fees, and we reiterate that there must be a regulatory framework that ensures accountability and transparency on the part of financial institutions.
Conclusion
Thank you for the opportunity to provide feedback on your dra decision and reasons paper. We would be happy to discuss any part of this submission in more detail, and to provide any assistance that you may require.