Paymark is celebrating 30 years of Eftpos use in New Zealand, during which time Kiwis have spent nearly a trillion dollars by swiping their cards.
But New Zealand retailers, consumers and tourists are increasingly frustrated that, at the end of 2019, contactless payments – now commonplace overseas – are lagging behind due to higher bank fees.
Thanks to Eftpos, New Zealand was an early adopter of electronic payments three decades ago. In the Nineties and early 2000s Kiwis travelling overseas were smug – and shocked – to find Eftpos was not used in countries like the UK. Customers still had to sign a docket to authorise a payment instead of entering a four-digit pin number. Britain’s equivalent card payments system, known as “chip and pin”, was only introduced in 2004.
In Aotearoa the first Eftpos transaction took place in 1984, at a terminal installed in a Shell petrol station and connected to a bank computer.
But Paymark CEO Liam Reilly says that it wasn’t until 1989 that major banks and retailers “really started to get on board with it”. New Zealand’s four banks at the time joined forces to set up Electronic Transaction Services Limited (ETSL), which is now Paymark.
The rise of Eftpos was a particularly “Kiwi success story”, he adds. “No country in the world embraced Eftpos in quite the same way. By 1989 we were conducting a million transactions every year and then things really started to get going.”
Today there are 1.6 billion transactions every year. “Every second of the day sees more than 150 transactions take place and Kiwis swipe their cards for everything from coffee or groceries through to the purchase of televisions or even cars.”
Crucially for customers using Eftpos it is free, while retailers pay a small flat fee. Paymark estimates that Kiwis have saved around $8 billion in terms of fees that would have been applied if Eftpos didn't exist.
The Paymark network now offers contactless payments, too, whether from a card (Paywave is Visa’s contactless debit card while Paypass is Mastercard’s), a smartphone (using Apple Pay or Google Pay) or a smartwatch (via Fitbit Pay and Garmin Pay).
Time-poor consumers love contactless payments and the ease of ‘tap and go’.
Retailers also embraced the system when it came in earlier this decade – until they got hit by the bank fees.
Contactless debit cards have average fees of about two percent per transaction and, unlike in many other countries, these aren’t regulated or capped.
As Newsroom’s Bernard Hickey noted in October, “Debit payments that had once been virtually free Eftpos transactions or slightly more expensive Visa or Mastercard debit payments suddenly became contactless credit or debit transactions with double or quadruple the fees.”
Overnight, retailers stopped using contactless almost immediately, Hickey says. Several years on, those original, now-familiar ‘No Paywave’ signs are looking “tatty” and even “manky”.
Kiwi retailers offering contactless pay almost twice as much as retailers pay in Australia for the service, and almost four times as much in Britain.
In those countries, all cafes, restaurants and retailers accept contactless Visa and Mastercard payments, particularly through Apple Pay and Google Pay phones. Retail in the UK is around 70 percent contactless, in Australia it’s a staggering 90 percent.
It’s not surprising then, that many visitors to New Zealand are frustrated they can neither wave their cards or their phones with Apple Pay and Google Pay to pay like they do at home.
Commerce Minister Kris Faafoi has warned banks they face regulation unless they show more urgency in changing the system. At the moment retailers are paying almost $400 million a year in bank fees for contactless payments.
Retail NZ CEO Greg Harford also wants the banks to move faster to unbundle fees so retailers can use the technology more widely.
“Ultimately, consumers love the convenience and we’re out of step,” he told Newsroom. “And ultimately it costs merchants sales if they don’t have that facility available.”