Commerce Commission mulls limiting amount credit card companies can charge banks

* This story has been updated for clarity.

The Commerce Commission proposes to limit how much banks can charge merchants for the use of commercial credit cards, saving New Zealand businesses about $40 million a year in fees.

The interchange fees set by Mastercard and Visa on commercial credit cards are not currently subject to regulation, but that would change if the draft changes were implemented.

Commerce Commissioner Bryan Chapple said this was a first step to regulate interchange fees on commercial credit cards, which made up a small share of transactions but generated a disproportionately larger share of interchange fees, which were paid by businesses through their merchant service fees.

The commission estimated New Zealand businesses paid about $170m a year in merchant service fees to accept Mastercard and Visa commercial credit card payments, with interchange fees making up about $125m of the annual costs.

“The current level of interchange fees for commercial credit cards sees businesses paying high costs to fund cardholder benefits like loyalty programmes, insurance, and interest-free periods,” Chapple said.

“We understand these benefits are important for some cardholders, but they shouldn’t be paid for through interchange fees.

“These fees ultimately flow through to retail prices, where everyone pays for benefits only some people receive.

“We don’t think the corner dairy should be forced to absorb additional costs or increase their prices to cover the costs of rewards and benefits only those with commercial credit cards get.”

Chapple said the draft decision built on previous moves to lower interchange fees on personal cards.

“We expect out draft decision will lower barriers businesses and consumers face when adopting alternative payment methods, such as open banking,” he said.

“We want to hear from all stakeholders on our draft, and especially businesses as they hold a unique role as both cardholders and card accepters. We expect to make our final decision later this year,” he said.

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