With the introduction of the Retail Payment System Act 2022 in May 2022, credit card merchant fees are set to be restricted to decrease the burden on businesses moving forward.
The initial pricing standard for the Mastercard and Visa credit and debit networks will come into force on 13 November 2022.
The Association supports the effort to ensure New Zealand’s retail payment systems are equitable and promote long term economic growth for business owners across Aotearoa, particularly those in the hospitality sector who now face a steep road to economic recovery.
As noted in the Association’s submission in response to the Regulating to reduce Merchant Service Fees consultation (Merchant Service Fees consultation), submitted to the Ministry of Business, Employment and Innovation (MBIE), 99.26% of our members either agreed or strongly agreed merchant fees should be regulated and 69% of them indicated they would prefer direct regulation.
Well before the pandemic, the prominence of contact debit cards and online transactions had increased. Merchants of all sizes have largely had to absorb these costs, particularly smaller businesses who do not possess the bargaining power to negotiate lower fees. These costs were further compounded as businesses were faced with no other choice but to adopt contactless payments due to public health concerns while dealing with the debilitating financial pressures brought upon by COVID-19.
You can read the associations reccommendations and our full submission here.
What’s going to change?
‘Interchange fees’ are a significant component of the fees businesses pay to accept payments on Visa and Mastercard networks.
The initial pricing standard for the Mastercard and Visa credit and debit networks will come into force on 13 November 2022. The initial pricing standard limits the interchange fee for credit and debit transactions.
This legislation will cap the amount banks can charge retailers on interchange fees for customers using credit ,debit cards, and contactless payments in-store. This should make a material impact on the cost’s hospitality businesses pay banks for different payment types – meaning reduced costs.
The legislation caps the following interchange fees:
- Debit network in person contacted payment interchange fee cap – 0.0 per cent.
- Debit network in person contactless payment interchange fee cap – 0.2 per cent or 5 cents per transaction or 1 April 2021 level if lower.
- Debit network all other payment methods including online – 0.60 per cent or 1 April 2021 level if lower.
- Credit Card interchange fee cap – 0.80 per cent or 1 April 2021 level if lower.
Your bank will also add it’s fees to these interchange limits to make up your total fee structure.