Paywave fees too high says NZ Commerce Commission

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Forums › Finance and wealth management › Paywave fees too high says NZ Commerce Commission

gzt

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#315533 23-Jul-2024 20:01

Paywave fees too high says NZ Commerce Commission and estimates an easy $250 million reduction from the current $1000 million collected by transaction processors:

Commerce Commission NZ: When someone uses a Mastercard or Visa card without inserting it in a terminal, the business receiving the payment is charged a ‘merchant service fee’. “We see the opportunity to reduce a significant component of the merchant service fee, which should in turn allow businesses to reduce retail prices as well as surcharges, for the benefit of their customers.”

It really bothers me that this and similar technologies are not deployed everywhere and accessible to everyone. Reducing fees will definitely help. In practical terms this is a consultation phase.

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Networkn
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#3263740 23-Jul-2024 21:36

Generally, digital processing fees annoy me.

Cash costs a lot of money to process, digital far less, yet I get a booking fee if I don't involve a human to book a movie ticket for example.

I remember when the parking meters took cash and digital payment and digital had a payment fee. The cost of having someone empty those machines was huge (I did work for one of the people who ran Aucklands CBD Meters).

solaybro

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#3263744 23-Jul-2024 21:51

I wonder what percentage of that $1b is profit.

geek3001

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#3263833 24-Jul-2024 08:05

I have just received a new routine replacement VISA card from a major NZ bank, interestingly sixteen months before the current one expires, with instructions to begin using it immediately.

The card arrived with a note saying it was activated, meaning that I did not have to insert the card at a payment terminal and key my PIN to activate it, nor use any activation functionality on my smartphone app for that bank.

In the event that the envelope in the mail with the card went astray or was intercepted by someone who then went shopping with my new card and used it and found it was activated, they could have had a spending spree.

I would not have known anything until I either tried to use my current card and found it was now inactive or I received my monthly bill and found lots of fraudulent transactions incurred by someone else.

Perhaps I'm too cynical, however I begin to wonder if the contactless payment 'service fee' is actually the banks cunningly collecting funds from card holders that are later used for refunds for fraud like I have just described, caused in part by questionable bank processes.

Bee

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#3263842 24-Jul-2024 08:25

solaybro:

I wonder what percentage of that $1b is profit.

ALL of it? Seriously whats the difference between EFTPOS and Paywave and why?

I cant wait for open banking so we can just bypass Mastercard and VISA completely!

Doing your best is much more important than being the best.

Dulouz

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#3263862 24-Jul-2024 09:17

Interestingly, paying with cash incurs no additional fees, unlike electronic payment methods such as paywave. This seems counterintuitive, as cash handling typically involves higher costs for businesses.

Amanon

Jvipers2

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#3263894 24-Jul-2024 09:37

Weird how customers do everything themselves yet being charged in the name of convenience and safety but business bare the cost when customers pay cash..

all this and the QR pay technology being used elsewhere have not even landed yet...

richms

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#3263919 24-Jul-2024 10:39

Jvipers2: Weird how customers do everything themselves yet being charged in the name of convenience and safety but business bare the cost when customers pay cash..

all this and the QR pay technology being used elsewhere have not even landed yet...

Places do that to make you get their app on your phone. Walmart in the US is the most known hold out from taking contactless in store. Also they still have terrible card processing methods which is why most of the redundant crap in PCI compliance is there because its to protect their dumb systems that handle card numbers in the clear.

I do not want to have to have apps installed to pay places from my phone.

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michaelmurfy

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#3263920 24-Jul-2024 10:40

geek3001: In the event that the envelope in the mail with the card went astray or was intercepted by someone who then went shopping with my new card and used it and found it was activated, they could have had a spending spree.

I would not have known anything until I either tried to use my current card and found it was now inactive or I received my monthly bill and found lots of fraudulent transactions incurred by someone else.

Perhaps I'm too cynical, however I begin to wonder if the contactless payment 'service fee' is actually the banks cunningly collecting funds from card holders that are later used for refunds for fraud like I have just described, caused in part by questionable bank processes.

Contactless is not active when you get these cards. The cards are activated by a "Chip + Pin" transaction so if somebody were to steal your card and use your pin then this is a whole other kettle of fish than somebody stealing your card, trying contactless, finding it declines then dumping the card.

So, you don't need to worry here. Visa's Zero Liability does cover you for contactless as long as you were not involved and fraud systems are reasonably good at picking up trends and specific indicators that don't match yours (eg, going to a service station and trying a smaller transaction, doing a larger transaction (cigarettes) then going off to get some fast food).

You're absolutely not wrong though with fees being used to cover fraud but the fees imposed here (Credit Card / Paywave fees that some retailers have set) are in many cases greedy, and not needed. For myself, my terminal has a fixed cost based on the amount of transactions I do in a month so I don't care if somebody taps or inserts their card as it is the same cost for me. I would personally call any fee above 1% excessive but even still I feel that should be accounted for with your product pricing.

Michael Murphy | https://murfy.nz
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Handsomedan

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#3263924 24-Jul-2024 11:19

It just amazes me when the vast majority of merchants are charged on a "interchange plus" basis, so they are only being charged for the card and transaction type. Contactless debit fees are incredibly low as a percentage of the transaction.

The cost to accept a contactless debit card (tapped instead of swiped) would be 0.65% + bank margin to cover cost of processing a nd profit margin (usually fractions of a percentage).
For a retailer to then surcharge that transaction at 2.5% (as an average) is criminal.

Let's assume that the bank margin is (it's never going to be this much) 1% added to the 0.65% interchange. That's 1.65% total to accept a contactless transaction. Where is the remainder of the 2.5% going? Straight into the retailer's pocket. But of course the banks are the ones seen to be profiting from the retailers and the retail customers.

https://www.visa.co.nz/about-visa/interchange.html

It's all here and publicly available - interchange rates are not actually that high, unless you're talking premium or international cards. Interchange funds things like "free" insurance and concierge services (which nobody I know ever uses).
The additional margin that the banks add to the interchange is largely absorbed into the cost of things like chargebacks, fraud monitoring and actual physical costs.

The lack of education, the kneejerk reactions and assumptions and the bank-baiting really gets on my wick. We should be looking at the likes of the ticket companies who charge a fee for using a card, a fee to print your own ticket, a fee for using their service - all when there is no other choice, but to both buy from them AND use a card.

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RunningMan

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#3263930 24-Jul-2024 11:38

michaelmurfy:

So, you don't need to worry here. Visa's Zero Liability does cover you for contactless as long as you were not involved and fraud systems are reasonably good at picking up trends and specific indicators that don't match yours

Yeah but that isn't paid for by the bank out of the goodness of their heart - that cost is passed indirectly back to the customer in the form of other fees. You should worry, as it's indirectly your money being taken from you.

richms

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#3263933 24-Jul-2024 11:54

Handsomedan:

It just amazes me when the vast majority of merchants are charged on a "interchange plus" basis, so they are only being charged for the card and transaction type. Contactless debit fees are incredibly low as a percentage of the transaction.

The cost to accept a contactless debit card (tapped instead of swiped) would be 0.65% + bank margin to cover cost of processing a nd profit margin (usually fractions of a percentage).
For a retailer to then surcharge that transaction at 2.5% (as an average) is criminal.

Let's assume that the bank margin is (it's never going to be this much) 1% added to the 0.65% interchange. That's 1.65% total to accept a contactless transaction. Where is the remainder of the 2.5% going? Straight into the retailer's pocket. But of course the banks are the ones seen to be profiting from the retailers and the retail customers.

The surcharge on the terminal cannot be by card type, its a fixed amount. The comcom had a document about the correct way to work it out to get the average so it was not generating a profit, but since implementing it we have found the split has gone way away from debit cards as people with those will insert and use the pin and its only people that didnt bring their card that seem to pay debit over paywave from their phone.

So really if we redo the average it should be going up from the 2% that it started with now.

Richard rich.ms

geek3001

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#3263942 24-Jul-2024 12:21

michaelmurfy:

Contactless is not active when you get these cards. The cards are activated by a "Chip + Pin" transaction...

I absolutely agree with your remarks @michaelmurfy and that is the behaviour I am used to with a new card, however, the new card worked immediately with contactless payment and no requirement for a PIN, when I used it the first time at my local supermarket. This is the first time that I have encountered this behaviour which concerns me somewhat.

richms

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#3263944 24-Jul-2024 12:30

geek3001:

I absolutely agree with your remarks @michaelmurfy and that is the behaviour I am used to with a new card, however, the new card worked immediately with contactless payment and no requirement for a PIN, when I used it the first time at my local supermarket. This is the first time that I have encountered this behaviour which concerns me somewhat.

Name and shame this clueless bank. Does it start with kiwi?

Richard rich.ms

geek3001

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#3263949 24-Jul-2024 12:40

Hmm, no, not that one, I better not say publicly, as I might get growled at.

gzt

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#3264003 24-Jul-2024 15:17

geek3001: Hmm, no, not that one, I better not say publicly, as I might get growled at.

Anyone here will be super-surprised if any NZ bank really does that. If you name the bank and specific card the most likely thing that will happen imo - someone here using the exact same card will tell you you're at least partially mistaken about it.

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