Ban on payment surcharges risks backfiring for everyone
Saturday, 9 August 2025
Carolyn Young is chief executive of Retail NZ.
OPINION: The Government’s proposal to ban surcharges on in-person domestic debit and credit card transactions may sound like a win for consumers. But in reality, it is a misguided intervention that risks hurting both shoppers and the businesses that serve them.
Retail NZ represents retailers across Aotearoa, from large chains to small family-run stores. Our members have deep concerns that this policy is likely to create more problems than it solves.
Let’s start with the facts. Only around 25% of Retail NZ members currently apply surcharges. That means the majority – three out of four – choose not to pass on the cost of accepting credit and contactless payments. This is clear evidence that the market is functioning, and businesses are making their own decisions based on what works for them and their customers.
A blanket ban on surcharging removes that choice. It’s a one-size-fits-all solution to a complex problem.
When a customer chooses to pay with a credit card, the cost to the retailer is significantly higher than if they use eftpos (which is free to a retailer) or a debit card. Surcharges simply reflect this reality. They are not about profiteering, they are about cost recovery.
Customers should be able to see the cost of their choices, and businesses should be able to recover those costs transparently.
Unfortunately, removing surcharges does not make the costs disappear, it just hides them. If retailers cannot recover payment processing fees directly, they will have no choice but to build those costs into their prices. That means everyone pays more, regardless of how they choose to pay.
This cross-subsidisation is inherently unfair. Customers who use low-cost payment methods will end up subsidising those who use high-cost credit cards with rewards programmes.
Ironically, this policy could accelerate the decline of eftpos, leaving retailers facing rising costs as consumers shift toward contactless and credit payments. Banks and credit card companies will collect more fees.
The short-term benefit of lower interchange fees will be quickly eroded, especially for small and medium-sized businesses.
It’s important to note that excessive surcharging is already prohibited. Businesses can only pass on the actual cost of processing a payment. It is the role of the Commerce Commission to oversee this to ensure that consumers are not treated unfairly.
What we need, instead of additional regulation, is greater clarity and transparency from banks and payment providers. Many retailers struggle to understand the complex web of fees they are charged – interchange fees, scheme fees, switch fees and more. Simplifying these structures and improving communication would go much further in supporting fair outcomes.
Retail NZ supports efforts to reduce the cost of payments. We approved of the Commerce Commission’s recent move to cap interchange fees. However, interchange fees account for a little over half the total cost of merchant service fees (MSF). Reducing the interchange fees alone will not address the overall costs that retailers pay via MSF.
But banning surcharges is not the answer.
Instead, we urge the Government to:
encourage terminal providers to invest in technology that enables retailers to set; surcharge fees at correct levels that correspond with different payment types;
embrace innovation across the payments life cycle, including the availability of lower-cost acceptance infrastructure like tap to phone solutions;
maintain transparency so consumers understand the cost of their payment choices;
regulate all credit cards equitably, including international credit cards, finance cards and “buy now – pay later” services. Online sales must also be included.
Retailers want to deliver great customer experiences. But they also need fair, flexible tools to manage their costs. A surcharge ban strips them of that flexibility and risks unintended consequences for everyone.