Eftpos provider hopes to launch contactless debit payments in next two years, freeing consumers from shackles of big credit card companies
When Julia Nicol bought tickets to a sports event recently, she was aghast at the transaction fees charged by the e-ticketing company – and with no free alternative available. Another time, a Coromandel Peninsula cafe asked her for a $2 flat fee for contactless payments.
Nicol is the head of public affairs for Worldline, one of New Zealand's two big Eftpos providers – so it's perhaps understandable she would bridle at paying credit card surcharges when this country's pioneering Eftpos system has always been free to consumers.
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But she's not alone: after capping bank interchange fees late last year, the Commerce Commission is to report next month on problems with excessive card payment surcharges. It's been given new regulatory powers – it's focusing on education first, then enforcement.
It's commissioned a Kantar Public survey which shows a big increase in merchants applying surcharges, some as high as 9 percent, and some even applying surcharges to Eftpos transactions that should be free.
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Nick Russ, the commission's general manager of market regulations, reveals it has now written to several large merchants with "seemingly sub-optimal" surcharging practices.
These are across transport, parking, ticketing and telecommunication sectors and local authorities, he tells Newsroom.
"We would find any rate higher than 3 percent to be difficult to justify." – Nick Russ, Commerce Commission
"We would not expect to see surcharges for cash or in-person Eftpos payments. We are aware of a few instances where merchants have passed on surcharges for Eftpos – we continue to monitor whether this a more widespread issue."
The commission has found banks' merchant services average 0.7 percent for contactless debit payments, and 1.5 percent for Visa and Mastercard. Retailers shouldn't be passing on more than that to customers. "We would find any rate higher than 3 percent to be difficult to justify."
Asked if the commission was realistically able to police merchants who buried credit card surcharges in unspecified "admin" and "transaction" fees, Russ points to two key principles under last year's Retail Payment System Act.
First, merchants and consumers should pay no more than reasonable fees for the supply of payment services; second, that there is a reasonable degree of transparency in the payments system.
"Where merchants elect to charge fees that relate to aspects of their business that are not directly payment-related (such as admin fees), then those fees should be clear and transparent and not associated with their cost of providing a means of payment," he says.
"Our expectation is that merchant surcharges must be no more than the additional cost of accepting a particular payment method. In most cases this will be their merchant service fee. Surcharges should not include the costs associated with accepting payments generally – that is, people costs, electricity costs, admin costs, terminal costs.
"Businesses also must ensure they do not give consumers false or misleading information about surcharges. Any surcharges or additional fees added to the price of goods or a service should be clearly disclosed and the reasons for the fees should be accurately described to consumers. For example, if the reason for a surcharge is because it is a public holiday then this must be truthful.
"We are cooperating with the Commerce Commission on a voluntary basis to assist them in the rollout of these changes." – Jackie Antas, Ticketmaster
"Misleading consumers or giving false information about surcharges or additional fees risks breaching the Fair Trading Act."
Russ says the Commerce Commission has not investigated in any detail the rapid increase in the application of point-of-payment surcharges since Covid lockdowns hit.
"Focusing on merchants who surcharge Mastercard or Visa card payments, one third first began applying a surcharge after the initial Covid-19 restrictions in 2020, and almost one in five within the past year," he agrees.
“All fees are reflective of the costs associated with providing the services, which may vary depending on the requirements of each venue or event," – unnamed Ticketek spokesperson
"One observation that may start to explain this is that merchants experienced a sharp increase in merchant service fees for contactless payments when they were reintroduced by payment service providers following Covid lockdowns. Some merchants have chosen to absorb these costs, while more have started to pass on a surcharge rather than turn-off contactless payments."
Newsroom has surveyed some fees and surcharges applied by airlines, hotel booking companies and events ticketing sites like the one Nicol bought her sports tickets from.
Ticketmaster is headlining Disney on Ice at Auckland's Spark Arena. The cheapest ticket is $59.75, but an additional order processing fee of $8, levy of $4.95, and payment processing fee of $1.37 increases the total by 24 percent to $74.07. The company did not reply to an email seeking an explanation for its transaction fees.
Ticketmaster's Australia-based vice-president of communications for the Asia-Pacific, Jackie Antas, says the company is aware of the Commerce Commission changes and is working on a revised fee structure that won't be linked to the payment method. The company is working on this in consultation with venues and event organisers, she says.
"Our fees vary per event and are negotiated individually with each client," she adds. "Two out of the three fees mentioned above are unrelated to the Commerce Commission changes."
"We would like people to have the equivalent of an Eftpos card issued to their phone, and then merchants would be able to accept transactions made by phones or digital wallets." – Julia Nicol, Worldline
In Auckland, Spark Arena charges a "land levy", Ticketmaster says. Eden Park applies a "stadium levy" to each adult ticket, contributing to the maintenance of the stadium. In Wellington, St James Theatre and The Opera House charge a "performing arts levy".
Ticketmaster's "payment processing fee" of no more than 2.3% applies to purchases by credit card, debit card or gift card on selected events. Tickets purchased on the site are typically subject to a per-order "handling fee" to cover the cost of operating an information service and internet site and processing the tickets. And there's a "delivery fee" for sending out the ticket.
The company has been in talks with the Commerce Commission. "Ticketmaster New Zealand is supportive of clear and transparent fees," Antas says. "We are cooperating with the Commerce Commiission on a voluntary basis to assist them in the rollout of these changes."
Ticketek says its cheapest ticket for Dirty Dancing in Concert is $81, but in fact the lowest price available on its website is $149. There's an additional handling fee of $5.50, a booking fee of $2.00, and a payment processing fee of $4.53, hiking the total by 8 percent to $161.03.
An unnamed TEG Australia spokesperson replied by email, saying Ticketek's fees covered the end-to-end service delivery for the company’s venue and event partners. “All fees are reflective of the costs associated with providing the services, which may vary depending on the requirements of each venue or event,” the spokesperson said. (The TEG/Ticketek spokesperson refused a Newsroom request to identify themselves.)
All the main banks say they have lowered the fees they charge merchants, and would expect those reductions to be passed on to customers in reduced surcharges.
"It is vital that a modern domestic debit solution is put in place before the banks stop issuing traditional Eftpos cards altogether." – Worldline
But Julia Nicol is sceptical.
New Zealand and Australia were world pioneers in introducing electronic debit card payment systems. According to media reports, a trial scheme of Eftpos began in New Zealand in 1984. A terminal in a Shell petrol station was connected to a bank computer. The Bank of New Zealand started issuing Eftpos debit cards in 1985, with the first merchant terminals being installed in other petrol stations.
"That was a great example of banks coming together to create something that really helped New Zealand," Nicol says.
Worldline (previously known as Paymark) has been working on contactless debit payments that don't rely on Visa and Mastercard – the only firms allowed to provide the service at present. Nicol says they've recently surmounted a Payments NZ regulatory hurdle that now allows the company to press ahead.
Free Eftpos and other non-chip cards are being swamped by contactless cards, despite the heavy fees charged to merchants and ultimately passed on to shoppers. Nicol says people don't want to be shackled to Visa and Mastercard for contactless payments.
"We would like people to have the equivalent of an Eftpos card issued to their phone, and then merchants would be able to accept transactions made by phones or digital wallets. You go out for a run, you've just got your watch on, you want to get a coffee or a water afterwards so it would be great if there was an alternative out there."
"We’re working with our merchant customers to ensure they understand the costs for accepting different payment types, should they wish to pass on any of these costs to consumers." – Sarah Hearn, Westpac
She acknowledges there's no guarantee the new contactless debit payments will be free like Eftpos. When Eftpos was introduced, banks decided not to charge because they were saving money on cash-handling. But, Nicol says, that imperative has changed.
Again, she believes New Zealand and Australia can be pioneers.
Worldline is seeking the agreement of the payments system regulators and policy-makers, the Reserve Bank and Payments NZ, then buy-in from the banks to issue the new cards, or "tokens".
"Everybody has to want to get on the bus at the same time, going in the same direction," Nicol says.
The company has warned the Commerce Commission of a danger to consumers if it doesn't regulate the companies effectively. It argues capping interchange fees may not be enough – around the world, banks have responded to similar caps by simply raising other fees that aren't regulated. "It is vital that a modern domestic debit solution is put in place before the banks stop issuing traditional Eftpos cards altogether."
Westpac product general manager Sarah Hearn says the bank introduced a simplified merchant service fee structure for small businesses in October last year, in advance of the Commerce Commission legislation capping domestic interchange rates in November. "We believe this is leading to cost savings for the majority of our small business customers."
"The 2022 changes to the retail payments system permit merchants to recoup the costs of receiving payments. Specifically, the regime says that merchant surcharges can be no more than the cost of payments." – Kristy Martin, ANZ
For credit cards, these are 1.59 percent for in-person transactions, and 1.99 percent for transactions where the card's not present, such as online purchases. "We’re working with our merchant customers to ensure they understand the costs for accepting different payment types, should they wish to pass on any of these costs to consumers," Hearn says.
ANZ spokesperson Kristy Martin confirms that it, too, has lowered interchange rates and merchant service fees, and automatically passed through the interchange reductions to merchants when they came into effect in November. "We would expect to see lower surcharges applied by merchants as a result," she says.
"The 2022 changes to the retail payments system permit merchants to recoup the costs of receiving payments. Specifically, the regime says that merchant surcharges can be no more than the cost of payments."
ANZ charges merchants a maximum of 0.7 percent for contactless debit transactions, to cover the cost of the transaction to the bank and reflect investment in digital and fraud initiatives. "Visa and Mastercard credit card transactions usually have a higher merchant fee, which can vary based on the factors above."
ASB external communications manager Holly Ryan says the bank has been an active supporter of regulation that helps Kiwi businesses through reduced merchant fees, and led the way in December 2020 by introducing a substantial fee rebate for small and medium businesses, before the outcome of the Government’s review on merchant fees.
Most of ASB's merchant service fees are set on an 'Interchange Plus' structure, she adds, and all customers on this plan automatically received the interchange fee reductions which came into effect in November 2022.
"While surcharging is not set up or managed by ASB, through our new customer onboarding and ongoing support, we share best practice on accepting cards, helping merchants to understand what a surcharge is and how to manage these appropriately," Ryan says.
This article has been updated to incorporate a response from Ticketmaster NZ to Newsroom's queries about fees and surcharges.
