Should Eftpos and cash-users get a discount?

RNZ News

4 days ago

The government plans to ban surcharges on card payments in-store, saving shoppers from being stung with surprise fees when paying with contactless technology.
Photo:
RNZ / Leonard Powell
Don't expect a discount if you're paying with Eftpos or cash when the new contactless surcharge ban takes effect - but businesses are being put on notice that they shouldn't need to raise prices by more than 1 percent.
It was announced on Monday that legislation would be introduced to Parliament
to ban surcharges for in-store credit card transactions by the end of the year
.
Café and roastery owner Richard Corney said it would prompt him to put up prices because he could not absorb the cost himself. He said he paid $12,000 in merchant fees in 2023.
Retail NZ chief executive Carolyn Young said the cost to businesses could be significant and all customers would end up bearing it, rather than simply those using contactless cards.
"If businesses have to increase their prices to take into account those that pay by contactless and you pay by cash or Eftpos, you're still swiped."
She said it was unlikely that retail businesses would offer discounts to those using other payment methods.
Recommended retail prices were set at a level that took into account all the business's costs, she said.
Small businesses had limited power to negotiate on the card fees they were charged, she said, and they had to be able to accept the payment methods to be able to do business.
Corney said he would not offer discounts to those using cash or Eftpos.
"Given the government is removing a cost recovery mechanism for merchant fees in general, there's still a net cost to businesses like ours, despite the regulated interchange fees."
Infometrics chief forecaster Gareth Kiernan said cash transactions were not free for businesses, either.
"I imagine in today's world where very few people pay in cash, the implicit cost associated with the hassle of needing to have appropriate change, finding time to taking money to the bank is reasonably high as a proportion of each transaction. For a small business, that cost is probably not properly accounted for, and might even be zero in accounting terms because the owner is effectively doing it in their own time.
"The subsidisation by Eftpos transactions is probably more clear-cut, because there is a reasonably obvious gap in the charges for credit/PayWave transactions vs debit/Eftpos, with little or no difference in the associated work for the business receiving payment. I'd expect to see some more retailers reverting to not accepting credit cards, assessing that the possible inconvenience for their customers is outweighed by the cost savings for their business."
But how much can prices reasonably rise?
Commerce and Consumer Affairs Minister Scott Simpson said the change would take effect after interchange fees were capped, so they should not be as high as they have been.
Consumer NZ spokesperson Jessica Walker said the fee reduction that was expected from late November should reduce the cost to business significantly.
"Our stance is that those costs are going to be lower so even if businesses decide to increase prices because of the surcharge ban, that increase should be about 1 percent."
She said that was preferable to some of the complaints Consumer received, which reported surcharges up to 25 percent.
"The current situation is a mess, it's not working."
She said a change in 2022 when the Retail Payment Systems Act took effect was meant to save money but those savings had not been experienced by shoppers.
"The decision to ban surcharges should mean there is more money in shoppers' back pockets. Without a ban, there's no guarantee the savings will be passed on."
But Young said it was likely that the surcharge ban would prompt more people to move to contactless payments, which would increase the costs overall, even if each charge was smaller.
"It would have been great for the minister to let the Commerce Commission go through a proper consultation process."
She said a range of surcharges were being charged at present but it would have been useful to allow the interchange caps to take effect and see what the effect was.
"The Commerce Commission was going to run a consultation around surcharges," he said.
Young said she had expected that could lead to new limits.
Walker said open banking should also help to reduce the cost of payments.