Govt proposes ban on in-store payment surcharges
'By May 2026 at the latest, we will ban surcharges for in-store payments," Simpson said.
"Shoppers will no longer be penalised for their choice of payment method, whether that's tapping, swiping or using their phone's digital wallet.'
Transactions made through the Visa and Mastercard networks, and by EFTPOS, were the main method of card payment in New Zealand, and Simpson said surcharges on some purchases were "a hassle and an unwelcome surprise when shoppers get to the till".
"That pesky note or sticker on the payment machine will become a thing of the past," he said. "We're banning surcharges so consumers can shop with confidence knowing how much they will pay for their purchases.
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Scott Simpson. (Source: Getty)
The Retail Payment System (Ban on Surcharges) Amendment Bill was expected to be introduced by the end of this year.
Kiwis paid an estimated $150 million in surcharges annually, including $45-$65 million in excessive surcharges.
Simpson said this was "money that could be saved or spent elsewhere". However, retail and hospitality groups have cautioned that businesses might raise total prices to pass fees on.
Earlier this month, the Commerce Commission moved to lower interchange fees paid by businesses to accept Visa and Mastercard payments, citing high costs for businesses.
The commission put the overall cost of interchange fees at around $1 billion for businesses, which were often passed on to customers through surcharges and higher product costs.
Visa and Mastercard logos on credit cards (File image). (Source: istock.com)
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"Surcharges cover the fees businesses pay for accepting contactless payments and credit cards, but we know these are often excessive," Simpson said.
"In some cases, the retailer doesn't even make it clear what the percentage is.
"A ban on surcharges means no more surprises for people who currently feel like they're being charged to use their own hard-earned money. It means they can make a purchase knowing exactly what they'll pay, and how they'll pay it."
The ban would not apply to online payments, foreign-issued cards, prepaid gift or travel cards, or cards issued by other networks like American Express or UnionPay.
Surcharges may be absorbed into total prices — groups
Reacting to the announcement, business groups were positive that it would improve customer experiences at the checkout.
But they noted businesses could pass the costs on through higher prices.
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BusinessNZ advocacy director Catherine Beard welcomed the change and said it was "the way the rest of the world is regulating".
"We used to pride ourselves on being early-adopters of new technology, but surcharges felt like a step back for New Zealand."
Hospitality NZ chief executive Steve Armitage said consumer savings would depend on how businesses responded and "whether cost recovery mechanisms remain viable."
"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," he said.
(Source: istock.com)
"Margins across the hospitality sector remain very tight. Some operators may be able to absorb the cost, but for many, particularly smaller businesses, that won't be realistic. These businesses may have no option but to reflect those costs in their pricing."
Retailers 'have no choice but to pass the costs on'
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Dairy and Business Owners Group chairperson Ankit Bansal said the big banks were to blame for high transaction fees for small businesses.
"If these changes go ahead, small retailers will have no choice but to pass these costs on to consumers through higher prices," he said in a statement.
"If the Government wants to eliminate surcharges, then it should start by fixing the root cause — the banking sector's lack of competition and its unfair pricing model."
But Consumer NZ advocacy head Jessica Walker said she was "thrilled" at the change.'
"The ban is a no-brainer. These new rules will bring an end to a very messy situation."
Walker said the cost of products "shouldn't increase by that much" if at all.
"Any increase should be very minimal because interchange is being lowered which will reduce the cost to businesses of accepting payments."
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A Mastercard spokesperson "welcomed" the changes, at a time when the multinational giant said "payment acceptance costs have never been lower".
Retail NZ chief executive Carolyn Young said work would be needed to ensure terminals had the ability to distinguish between domestic debit and credit cards, and commercial or international credit cards, and charge differential surcharge rates.
Paying for a doctor's appointment (file image) (Source: istock.com)
Young said Retail NZ wanted certainty around the Commerce Commission's ability to monitor and enforce both the new interchange fees and the ban on surcharging.
"The Commerce Commission will need to ensure that the fees being charged to merchants reflect the new legislation, that the savings are passed on to retailers and that other fees are not increased.
"We will be seeking more detail on the surcharge changes, particularly around commercial credit cards which are not mentioned in today's announcement, and possible future changes to online transactions," she said.
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