I’ve just paid $6.30 for a coffee. Actually, that’s not quite right. I’ve paid $6.47 for a coffee because the café added a ‘card payment surcharge’. Seventeen cents to use my own money. Multiply that across every transaction, every day, and you start to understand why New Zealanders fork out $150 million a year just for the privilege of accessing our own bank accounts.
Yes, the Government is banning these surcharges for in-store payments by May 2026. The Retail Payment System (Ban on Surcharges) Amendment Bill passed its first reading in September. On the surface, that sounds like a win.
But before anyone starts celebrating, we need to talk about what’s really going on here. Because if you think the banks and payment providers are going to roll over and accept lower profits without a fight, I’ve got a harbour bridge to sell you.
Across the Tasman, there’s an almighty stoush brewing that shows us exactly what’s coming our way. The Australian banks are already mounting their defence, and it’s the same playbook we’re about to see in New Zealand. Watch closely – this is how billion-dollar industries protect their goldmine.
Reserve Bank of Australia Governor Michele Bullock recently fronted a parliamentary committee and delivered what can only be described as a verbal haymaker to the banking lobby. The Australian Banking Association had warned that cracking down on payment surcharges would somehow undermine fraud prevention. Their argument? Less revenue means less money to fight scams.
Bullock wasn’t having a bar of it. She said she was “surprised” – and you could practically hear the quotation marks dripping with sarcasm – that a former coalition finance minister would draw such a correlation. Her point was simple: banks have a legal obligation and a commercial interest in preventing fraud. Suggesting they’d compromise security because they’re earning slightly less is, quite frankly, insulting to everyone’s intelligence.
When Liberal MP Aaron Violi tried the same line about banks having to pass costs on to consumers, Bullock was even more direct: “There’s so much in there which is misleading and sometimes wrong that I don’t even know where to start.”
Ouch!
This is the playbook we’re going to see in New Zealand. The banks and payment providers will warn of dire consequences. They’ll predict price rises, service cuts, and the collapse of civilisation as we know it. Don’t believe a word of it.
And just in case you think I’m being paranoid, the lobbying is already well underway. The Retail Payment System (Ban on Merchant Surcharges) Amendment Bill is currently before the Finance and Expenditure Select Committee. Submissions closed on 12 October, and guess what? The industry is fighting hard.
Retail NZ, representing nearly 70% of New Zealand’s domestic retail turnover, has submitted strongly against the ban. Their survey found 65% of their members oppose it. Their chief executive called it “poorly targeted, rushed and risks significant unintended consequences.”
Sound familiar? It’s the exact script Michele Bullock was dismantling in Canberra.
Retail NZ argues that the bill “targets retailers – who are simply passing on the costs imposed on them – rather than addressing the root cause: the payment scheme providers.” They warn that “if surcharges are prohibited, we will inevitably see prices rise in-store.”
Let’s pause here because this deserves scrutiny. Why would retailers fight to keep charging their own customers extra fees?
Retail NZ’s submission to the select committee runs to 10 pages of arguments. They claim surcharges are “not a means of profiteering, but a transparent mechanism for cost recovery.” They argue customers have “choice” – just use cash or EFTPOS to avoid the fee. They warn that banning surcharges will force price rises and hurt small businesses.
It all sounds reasonable until you look at their own numbers and contradictions.
First, their own survey shows only 44% of their members currently surcharge. That means the majority – 56% – already absorb payment processing costs as a normal business expense. So the claim that businesses can’t operate without surcharges is demonstrably false. Most already do.
Second, they admit the merchant service fee structure is “extremely complex” with more than 18 different fee types, and that “retailers are not aware of the type of transaction that is going through their terminals until their fees are detailed on their statements.”
Think about that. They’re arguing for “transparent” surcharging while simultaneously admitting they don’t actually know what their costs are when they set the surcharge. So a retailer might charge you 2% when their actual cost was 0.7%. That’s not transparency – that’s a lucky dip.
Third, look at what their own members revealed in the survey responses. One business said surcharging “reduced this annual cost by around 50%.” Another pays $16,000 per year in fees, another $36,000. These aren’t tiny costs, but here’s the thing: every other business expense gets built into pricing. Rent, wages, electricity, insurance – all factored into the price you see.
The surcharge is brilliant blame deflection. When customers complain, retailers can point at the payment terminal and say, “That’s the bank’s fee, not ours.” It keeps their advertised prices lower and makes someone else the villain.
It’s also a competitive pricing game. A café can advertise a $6.30 coffee while its competitor down the road advertises $6.50. Both end up costing $6.47 after surcharges, but the first café looks cheaper until you get to the till.
And here’s what really gives the game away: Retail NZ acknowledges that large retailers “do not apply surcharges” because they have “market power to negotiate favourable terms at significantly lower fee levels.” So the big players absorb the costs without drama, but small retailers insist they can’t?
The truth is simpler. That $45 million to $65 million in excessive surcharges the Commerce Commission identified? Some retailers have discovered that surcharging can be a profit centre. Charge 2% when your actual cost is 1.2%, and suddenly you’re making money from the payment system itself.
Retail NZ’s submission even includes this telling quote from a member: “Only 20% of customers’ purchases through our store choose to use payWave or credit. The surcharge ban will create a larger expense to our business, as that 20% will increase to 100%, so our bank charges will go up by another 80%.”
Read that again. They’re admitting that customers are actively avoiding the surcharge by using other payment methods. The moment the surcharge disappears, usage will soar, which tells you customers were being discouraged from using their preferred payment method. That’s not “choice” – that’s a penalty.
So when Retail NZ says the ban will “inevitably” lead to price rises, what they’re really saying is: “Our members have been hiding their true prices behind surcharges, and now they’ll have to be honest about what things actually cost.”
Eighty per cent of businesses already manage this just fine. They build payment processing into their prices like every other operating cost. The 20% who surcharge aren’t doing anything special – they’re just itemising one specific expense while hiding all the others.
That’s not transparency. That’s theatre.
Here’s what really grinds my gears: New Zealand businesses have been paying significantly more for card payment processing than their counterparts in Australia and the UK. And guess who owns most of our major banks? That’s right – Australian parent companies.
The numbers tell the story. Before recent reforms, Kiwi businesses were paying merchant service fees of 1.2% to 1.5% for contactless debit payments, and 1.5% to 2.5% for credit cards. Some were being slugged up to 4%. Compare that with Australia and the UK, where total merchant fees typically sit under 1%.
One Auckland café owner told RNZ he pays between $2,000 and $4,000 per month in merchant fees. Some restaurants are forking out $60,000 a year. Just to accept payments. Just so customers can pay for their meals.
The Commerce Commission found that of the $150 million New Zealanders pay in surcharges annually, between $45 million and $65 million is pure excess – retailers charging more than their actual costs. Whether that’s intentional profiteering or confusion about what they’re actually being charged is almost beside the point. The whole system is opaque, complicated, and designed to extract maximum fees from everyone involved.
The technical term is “merchant service fees” – the cost businesses pay to accept card payments. These fees include charges from Visa and Mastercard, costs from the banks processing the payments, and the bit that gets passed between banks for each transaction.
In countries with proper regulation, these fees are transparent and reasonable. In New Zealand? Not so much. We’ve been the wild west of payment processing, with fees that would make an Australian banker blush – right before they deposited the profits from their New Zealand subsidiary.
Now, retailers are crying poor. The Hospitality and Restaurant associations are warning that businesses will have to raise prices to cover the cost of processing payments. Café owner Richard Corney told RNZ his business paid $17,000 in merchant fees in 2023 and insisted he’d have to pass that cost on somehow.
Here’s what nobody wants to say out loud: he already has.
Every business factors its operating costs into its pricing. Rent, wages, electricity, insurance – and yes, payment processing fees. The surcharge was just a way to make one specific cost visible while hiding everything else in the base price. It created an illusion of lower prices while hitting customers with unexpected extras at the till.
It’s the Ryanair model of retail: advertise a cheap fare, then nickel-and-dime customers to death with add-ons. Except, instead of charging extra for luggage, we’re charging extra for the basic act of paying.
Price transparency matters. Customers need to know what they’re actually paying before they commit to a purchase. These surcharges destroyed that transparency.
You’d select items, get to the checkout, and only then discover you’re being slugged an extra percentage. Sure, there was usually a faded sticker on the payment terminal, but good luck reading it in fluorescent lighting while juggling your shopping and corralling children.
The worst part? The inconsistency. One café charges 1.5%, another charges 2%, and a third absorbs the cost entirely. Online, the surcharges are even wilder. Some retailers are clearly using them as a profit centre rather than a cost recovery mechanism.
This isn’t about being anti-business. I understand margins are tight, especially in hospitality. But if your business model only works by hiding costs until the last possible moment, you don’t have a viable business – you have a bait-and-switch operation.
And let’s be clear about who’s really profited from this mess: the banks and payment providers. They’ve built a system so complex that even retailers don’t fully understand what they’re being charged. That opacity is a feature, not a bug. It’s how you extract maximum fees from a captive market.
The Commerce Commission has started capping some of the fees that get passed between banks, which theoretically should lower overall costs for businesses. The surcharge ban will theoretically force price transparency. On paper, these look like steps in the right direction.
But here’s what actually needs to happen for this to benefit consumers:
The banks need to actually pass on the savings to merchants. History suggests they’ll find creative ways to maintain their margins – new account fees, higher transaction minimums, “technology upgrade” charges. The Commerce Commission needs to be watching like a hawk, and they need teeth to enforce compliance.
Merchants need to compete honestly on price instead of simply raising everything by 1.5% and pocketing the difference. Without public scrutiny and competitive pressure, many will take the easy route.
And we need to address the massive loophole: online transactions are still exempt from the surcharge ban. Does anyone want to bet where retailers will push customers? “Order online for pickup” suddenly becomes very attractive when you can still clip a 2% surcharge.
There’s a bigger question nobody in Wellington seems willing to ask loudly: why have Australian-owned banks been allowed to charge New Zealanders so much more than they charge their own Australian customers? That’s not just market dynamics – that’s exploiting a less-regulated market because they can.
The real test isn’t whether the law passes. It’s whether it actually delivers lower costs for Kiwis, or whether the savings just get absorbed by businesses and banks finding new ways to extract the same money.
The surcharge ban sounds like a win. But wins on paper don’t always translate to wins in your wallet.
Right now, as you’re reading this, the bill is sitting with the Finance and Expenditure Select Committee. Industry submissions have just closed, and the lobbying machine is in full swing. The banks will squeal. The payment providers will warn of doom. Retail groups are already warning prices will rise.
And then they’ll all quietly work out how to maintain their profit margins through other means – whether that’s raising base prices, introducing new “service fees”, or finding creative ways around the regulations.
The RBA’s Michele Bullock showed us how to respond to these complaints: with facts, clear reasoning, and a healthy scepticism of self-serving arguments. We need that same scepticism here in New Zealand, right now, while the select committee is deliberating.
Yes, we’re catching up with the UK and EU, where payment surcharges have been banned for years. But those jurisdictions also had stronger regulatory frameworks and more competition in their banking sectors. We’re dealing with an oligopoly of Australian-owned banks that’ve been happily gouging us for decades.
If the bill passes – and that’s still a big “if” given the intensity of industry opposition – implementation is set for May 2026 or earlier. When that happens, watch carefully. Watch whether businesses actually lower their prices or whether they quietly adjust everything upward to compensate. Watch whether the Commerce Commission follows through on monitoring compliance. Watch to see if banks introduce new fees.
And if a business claims they’re raising prices to “cover” their card processing fees, call them out. Eighty per cent of businesses already absorb these costs without surcharging. Those fees were always part of doing business. They’re just being forced to be honest about it now.
This isn’t progress until we see real savings. Until then, it’s just promises from an industry with a track record of protecting profits over people.
The select committee process is happening now. The lobbying is happening now. Our vigilance needs to happen now, too.
Steve Baron is a New Zealand-based political commentator and author. He holds a BA with a double major in Economics and Political Science from the University of Waikato and an Honours Degree in Political Science from Victoria University of Wellington. A former businessman in the advertising industry, he founded the political lobby group Better Democracy NZ. https://stevebaron.co.nz