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Elevate Magazine
October 31, 2024

Retailers in New Zealand Express Frustration Over Rising Merchant Fees

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Image Resource: Ivan Samkov

Many retailers in New Zealand are increasingly frustrated by soaring merchant fees, particularly those linked to contactless and card payments, as they struggle to deal with the burdensome financial pressure. The fees can exceed 2.5% for certain transactions, which have ignited intense scrutiny as the Commerce Commission reviews the country’s retail payment system, critically assessing the impact on both businesses and consumers.

New Zealand’s retail sector reportedly spends nearly $1 billion annually on fees for processing card payments, a substantial cost that hits small businesses hardest and often leads to higher consumer prices to cover these expenses. For many retailers, these fees erode profit margins and limit pricing flexibility, therefore creating a pressing problem amid an already burdensome cost-of-living crisis.

Retail NZ, the industry body representing retailers, has long advocated for change, calling for lower fees to relieve businesses from what it describes as an unsustainable expense. According to several retailers, in contrast to other regions like Australia and the European Union, New Zealand lacks the fee caps that could provide much-needed relief.

Retail NZ is now urging the government to follow international examples by introducing measures such as limits on interchange fees, given that the portion of merchant service fees paid to card providers accounts for an estimated 59% of the total.

In the meantime, the Commerce Commission is actively reviewing the payment system and considering regulatory actions to cap or restructure fees in response to these concerns. Several banks and payment providers contend that these merchant fees are essential for maintaining a secure payment infrastructure. They assert that these fees cover vital transaction security, processing, and continuous system improvements, which are deemed critical for sustaining a secure payment environment.

There are companies like the Bank of New Zealand (BNZ) exploring lower-cost alternatives such as Payap, a new contactless system designed to alleviate merchant costs. Therefore, it is showing hints of the growing interest among organisations in adopting more cost-effective solutions within New Zealand’s payment system.

The Commerce Commission’s findings will result in major changes that will alleviate costs for retailers and create a more competitive pricing environment for consumers. Any regulatory decisions must balance affordability with the demands for reliable and secure transaction services. For New Zealand’s retail sector, meaningful reform in merchant fees is essential for achieving a more sustainable future in an increasingly digital marketplace.