Contactless card fees could cost retailers billions over the next 10 years, says report

  • News
  • November 9, 2015
  • Elly Strang
Contactless card fees could cost retailers billions over the next 10 years, says report

New Zealand’s payment technology has been relatively straightforward in the past.

Cards with strips that are swiped have been around since the 1980s and are effectively fee-free, as are the more recent magnetic chip cards that are inserted into payment terminals.

But that technology has since been disrupted.

Mobile payments, such as Semble and Apple Pay, are now on the scene, as are contactless debit card payments such as Visa Paywave and MasterCard PayPass. Consumers are quick to embrace them.

In a survey in February, MasterCard found one third (34 percent) of respondents use its contactless ‘Tap and Go’ technology whenever they can or frequently.

Over half (62 percent) said they were increasingly using contactless technology because it saves time, while 58 percent said they were using it because it’s convenient and easy.

But not everyone is aware that this convenience comes at a cost.

With every contactless transaction, there’s what’s dubbed “invisible” fees.

A report on contactless card transaction fees was commissioned by Retail NZ and compiled by economic consultancy firm Covec, which surveyed retailers throughout New Zealand.

It found that contactless fees could cost retailers as much as $3.1 billion over the next 10 years.

Retail NZ general manager of public affairs Greg Harford says contactless debit card transactions cost merchants an average of 1 percent in fees, while credit cards cost an average of 1.4 percent.

“For example, a New Zealand retailer taking a $50 payment via a credit card transaction pays, on average, 70 cents in fees, while currently the same transaction would cost a UK retailer 50 cents, and an Australian retailer 42 cents,” Harford says.

The price of these fees has caught retailers between a rock and a hard place.

They can either implement contactless payment technology and pay the fees so shoppers are happy, or not roll them out and get left behind.

Many SMEs, such as dairies or convenience stores, don’t have contactless payment technology because of the prices.

Wellington hair salon Mane’s owner, Janine Weatherly, told Retail News in April she wouldn’t be getting contactless technology in her store.

“PayWave, PayPass, Semble and any new Apple payments platform can only add cost to retail transactions, which will inevitably be passed on to consumers,” Weatherly said.

Harford says it’s hard to understand why Kiwi retailers and consumers are forking out more than their counterparts overseas.

One reason could be because other countries now have agencies that provide oversight of bank and card fees, while New Zealand doesn’t.

Payments NZ provides overall industry-led system governance, but it doesn’t have permission to provide oversight of card fees.

As a result, Retail NZ is proposing an information disclosure regime for greater transparency, so that everyone’s aware of the fees charged and the cost to the economy each year.

“Retailers are keen to work with all parties to see increased transparency introduced as soon as possible,” Harford says.

The report has been presented to the Commerce Commission, Small Business Minister Craig Foss and the Commerce Minister Paul Goldsmith.

Retail NZ says an oversight regime could entail giving an independent body, such as Payments NZ, the Reserve Bank or the Commerce Commission, the responsibility to analyse fee disclosures and compare New Zealand’s market with other countries.

It also means card issuers, acquirers and companies would be required to publicly disclose their fees.

Other suggestions to create a fairer playing field for retailers include not introducing fees on chip or strip debit cards and to grant voting rights to merchant representatives on the Consumer Electronic Clearing System Committee.

View Retail NZ's 'Towards Fairer Payments Fees' full policy paper here.

What do you think of New Zealand’s contactless card fees? Let us know in the comments below.

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