Point: Retailers support fair surcharges, want more clarity on other fees they pay

Friday, 13 December 2024

Carolyn Young is the chief executive of Retail NZ , a membership organisation that represents the views and interests of New Zealand’s retail sector, comprising around 27,000 businesses that employ about 220,000 people.

OPINION: Nobody likes surcharges.

Consumers don’t like to pay for the ‘privilege’ of making contactless debit or credit payments.

Retailers don’t like to charge extra and create a poor customer experience. But they have to cover the costs of accepting these types of payments.

It’s a very complex area for retail (and hospitality) businesses to navigate. We believe consumers could keep more money in their pockets if the system is improved, and surcharges are reduced or removed.

Retail NZ surveyed our members earlier this year and found that only 25.6% of respondents apply surcharges.

Retail NZ’s Carolyn Young says the organisation is concerned that current fees charged for payment services are higher in New Zealand than in other countries.

Almost half of retailers calculate a rate that covers their costs, while 39% take advice from their terminal provider or rely on information from their bank statement. About 5% look at what other retailers are charging.

Our members have told us that the complexity of the Merchant Payment System prevents them from fully understanding the charges and fees they pay. These fees include interchange fees, scheme fees, switch fees, other external costs, internal costs and an acquirer margin!

So Retail NZ is pleased that the Commerce Commission is looking to lower the fees that retailers incur when accepting contactless and credit payments. We are looking forward to Wednesday when the Commission will release its draft decision.

Demand for secure, fast and convenient digital payments is increasing. Consumers want to make payments via tap and go methods, using chip-based contactless cards, smart phones and watches. Contactless payments are quicker, simpler and more secure, as well as being easier for those with a disability.

We appreciate there is a cost to develop, maintain and upgrade these technologies but are concerned that the current fees charged for payment services are higher in New Zealand than in other countries around the world.

Retail NZ wants the Commerce Commission to investigate regulation for all components of the merchant service fee, as well as for all card schemes and all payment types.

We welcome intervention by the Commerce Commission to ensure that fees are set at a reasonable level – sufficient to support the necessary investments and provide a satisfactory return on that investment, without super-profits being made.

We support the Commerce Commission’s proposal to set much lower fee caps for the interchange component of the MSF (merchant service fee). However, interchange fees account for a little over half the total cost of the MSF and retailers have legitimate concerns about the cost of other components.

Retail NZ would like the Commerce Commission to investigate regulation for all components of the MSF, as well as for all card schemes and all payment types.

Higher interchange fees may be justified for credit card transactions, which have different cost drivers, including credit risk, and greater investment in security and fraud mitigation. Nonetheless we would like to see greater justification for the fees charged and ideally a significant reduction in line with the Commission’s proposal.

We support retailers’ legitimate right to apply a surcharge to recover payment costs. Those who choose to surcharge should be able to easily calculate an appropriate surcharge rate or rates, and all retailers should be charged only fair and reasonable fees.

You can now tap and go with a credit or debit card on Auckland public tranport.

To do this accurately, they require greater clarity from their banks about the fees they pay for different services. Greater simplification and standardisation of fee structures would assist retailers in meeting this objective, as would guidance or regulation addressing how banks communicate fees in their customers’ bank statements.

More nuanced surcharging would have multiple benefits, allowing consumers to opt for lower cost options, and encouraging payment service providers to compete more strongly on the cost of their services.

We would also like the Commerce Commission to consider how it might encourage or require terminal providers to offer the functionality for multiple surcharge rates to better reflect the costs of different transactions.

Making the cost structure of payments simple and easy to understand is critical to support ongoing uptake of new technologies, and to ensuring that payments on retail transactions are safe and seamless. It is essential that all parties involved in the end-to-end payments process work together for the best outcomes for all parts of the sector.