ComCom proposes new interchange fee caps to save businesses $40million

New Zealand businesses currently pay approximately $125m each year in interchange fees to accept Mastercard and Visa commercial credit cards. 

“We expect our proposed interchange fee caps would reduce costs for businesses by $40m annually,” Commissioner Bryan Chapple says.

“The current level of interchange fees for commercial credit cards sees businesses paying high costs to fund cardholder benefits like loyalty programmes, insurance, and interest-free periods.

“We understand these benefits are important for some cardholders, but they shouldn’t be paid for through interchange fees. These fees ultimately flow through to retail prices, where everyone pays for benefits only some people receive.

“We don’t think the corner dairy should be forced to absorb additional costs or increase their prices to cover the costs of rewards and benefits only those with commercial credit cards get. 

“We expect our draft decision would lower barriers businesses and consumers face when adopting alternative payment methods, such as open banking. Over time, this would support more effective competition between payment methods and improve incentives for issuers and consumers to consider lower cost or more innovative alternatives,” Mr Chapple says.

This draft decision builds on previous moves to lower interchange fees on personal cards, which, once all the changes have taken effect, is estimated to save businesses up to $290 million each year. 

This is the first step in New Zealand to regulate interchange fees on commercial credit cards. Commercial credit cards make up a small share of transactions but generate a disproportionately larger share of interchange fees, which are paid by businesses through their merchant service fees.

“We want to hear from all stakeholders on our draft, and especially businesses as they hold a unique role as both cardholders and card accepters. We expect to make our final decision later this year,” Mr Chapple says.

Background

Interchange fees are paid by a business’ acquirer (that is, the bank or other payment service provider that enables a business to accept credit and debit card payments) to the customer's card issuer for each transaction on the Mastercard and Visa networks. 

New Zealand businesses currently pay approximately $170 million in merchant service fees each year to accept Mastercard and Visa commercial credit card payments, with interchange fees making up approximately $125 million of this.

Interchange exists, in theory, to balance the benefits and costs in the Mastercard and Visa networks between the card issuing side and the card acquiring side of the payment network. It provides a revenue stream incentive for issuers to enter and supply cards to cardholders. Interchange can help fund issuing credentials and physical cards, anti-fraud measures, fraud losses, scheme fees, rewards, and digital wallet fees. 

We estimate that merchants will pay less in merchant service fees for commercial credit card transactions should our draft decision be implemented. Actual savings will vary from year to year depending on a merchant’s share of commercial credit transactions and their pricing arrangements with their acquirer.

The estimated savings are based on the most recent Mastercard and Visa transactions from our ongoing monitoring data. We applied pre-regulation interchange fee rates (prior to November 2022) to the latest data to estimate counterfactual costs, then incorporated reductions in interchange fees from the initial pricing standard, the new caps introduced from December 2025, and the proposed commercial credit caps to estimate total savings. Once fully implemented, we estimate these measures to reduce merchant service fees by up to $290 million annually.