Retailers and buyers are likely to share the spoils of ‘cap caps’ on bank card fees

Banks could have avoided looming regulation of the fees they charge retailers for processing credit and debit card transactions if they had “done the right thing,” says Small Business Minister Stuart Nash.

The government started consultations on regulating commercial fees on card transactions on Thursday, predicting that it would lower costs for retailers and in some cases flow to cheaper products for consumers, particularly when shopping with smaller businesses. .

Speaking at a Victoria University bookstore in Wellington, Nash said that if banks were “proactive” in cutting fees without regulation, they probably would have done so by now.

“We didn’t need to regulate this if they had done what I consider ‘the right thing to do,’” he said.

“They have not done it. We are stepping in, so my message to the banks is ‘send a presentation, but you have already heard what we want to do and we are determined to ensure that our New Zealand retailers do not pay exorbitant prices compared to our overseas competitors’. “

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Jessica Godfrey, general manager of Vic Books, said she paid a 1.85 percent fee on each sale when customers used a credit card to buy books, and a 0.7 percent fee on credit card transactions. debit.

“As a small business, we just don’t have the power or influence to change our mind about those rates, so I think it’s entirely appropriate for the government to step in,” he said.

The review complies with a manifest commitment assumed by Labor.

Retail NZ CEO Greg Harford said the review was good news for retailers “and ultimately for consumers.”

“Rates in New Zealand have been higher than other markets for a sustained period of time,” he said.

“We’ve seen some movement in the last 18 months or so from card companies and banks to cut rates on the margins, but we still think they are out of place where they should be.”

Bankers Association executive director Roger Beaumont said it was “a complex area.”

“We will consider the consultation document to determine our response on behalf of the industry.”

ASB welcomed the inquiries and said it had “moved immediately to implement a substantial rebate” for small and medium-sized business clients, dated prior to December 1, until completion.

But its general manager for commercial banking, Tim Deane, said that a large portion of merchant fees were related to interchange fees over which ASB had “little control.”

Concerns about business fees have risen over the years as eftpos cards, which have a different fee structure, have become a less common way to pay for goods and the popularity of debit and credit cards Visa and Mastercard has increased.

Commerce and Consumer Affairs Minister David Clark said New Zealand businesses paid twice the rate paid by their Australian counterparts on business service fees and credit card fees.

That had put additional financial pressure on companies at a time when they were dealing with the economic impact of Covid-19, he said.

Businesses were passing those costs on to consumers through higher prices for goods and services, he said.

“Interchange fees, which banks charge for credit and debit transactions, make up a large part of business service fees.

“We are looking at ways to regulate these rates by introducing caps, targeting different classes of retailers,” Clark said.

Nash would not be drawn to what the ceiling might be, and said that was a reason for inquiries.

Clark acknowledged the concern that banks may find other ways to offset any drop in regulated fees.

“That is precisely why we are going to publish this consultation document… because it is complex, there are a number of different things that make up the commercial service fee.

“We want to make sure we are seeing the big picture, do it right, do it once, and do it right,” he said.

Ultra Shoes owner Don Wearing was skeptical that rate caps will improve the situation across the board.

“I am sure the money will be recovered in some other way,” he said.

Wearing said companies that felt they were being overcharged should shop around.

“This is not a monopoly, there are options.”

Consumer NZ has previously said that the fees are too high and that New Zealand is out of step with other countries that have stepped in to regulate.

But banking expert Claire Matthews has said that the benefit to consumers from lower fees would likely be quite small and would depend on the extent to which retailers passed on the reductions.

The ministers will report to the Cabinet in April with the result of the consultations, “before moving forward with the regulatory changes through Parliament.”

Consultations will close on February 19.

Clark said the recent surge in consumers switching to contactless payments to protect against Covid-19 meant that there was an even greater need to lower fees for business services.

Nash said that smaller companies were predominantly bearing the brunt of the fees, which were on average $ 13,000 more per year per company than their Australian counterparts were paying.

“Because small businesses rely heavily on credit and debit card transactions, they are at the mercy of banks when it comes to receiving payments for goods and services,” he said.

“Reducing the overhead of this business would mean that businesses can keep more of their own money and pass the savings on to consumers.”

That, in turn, would help it recover from the pandemic by “putting more money back into the economy,” he said.

Nash said he was pleased that banks had temporarily waived fees for contactless debit card transactions during the Covid-19 crisis.

“This showed empathy and understanding for New Zealand businesses and consumers. There is nothing stopping banks from starting to change their fee structure at this time for card payments. “