Competition Update – Issues Paper on NZ Retail Payment Systems released

Home Insights Competition Update – Issues Paper on NZ Retail Payment Systems released

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Contributed by: Sarah Keene, Craig Shrive, Christopher Graf and Miriam Bookman

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Published on: October 20, 2016


The Ministry of Business, Innovation and Employment (MBIE) has just released an Issues Paper for consultation on Retail Payment Systems in New Zealand.1 In brief:

  • Who does this affect? Financial sector participants, retailers, anybody who buys goods and services in New Zealand.

  • Why should they be interested? MBIE has identified some potentially material issues with current payment system structures.

  • What can you do? The review is at a very early stage, so there is an opportunity for you to influence its direction and outcome, including by submitting on the Issues Paper.

The Issues Paper has been produced following the Minister of Commerce and Consumer Affairs (Hon Paul Goldsmith) requesting MBIE to undertake a study at the start of the year. It reports on five issues identified by MBIE:

  • the potential for economic inefficiency in the credit card market, on account of market incentives that lead to a greater use of credit cards relative to other payment options;

  • potential cross-subsidisation, across different categories of retail customers, of high-cost (ie reward offering) credit cards;

  • the risk of inefficiencies emerging in the debit card space as scheme debit cards, with their contactless capability (ie Visa / MasterCard Debit cards), experience rapid growth;

  • whether in the context of the expansion of scheme debit cards, the interchange fee model creates barriers to entry or expansion for new debit payment products; and

  • the relative cost differentials for the processing of retail transactions between small merchants and large merchants.

The Issues Paper notes that New Zealand has a highly developed payment system. Its citizens make the highest number of electronic payments in the world per capita, and 93.8 per cent of adults have and use an EFTPOS or debit card.2 The Issues Paper also discusses the wave of alternative payment methods that are emerging in this area (with examples such as Apple Pay and PayPal). Indeed, in releasing the Issues Paper, Minister Goldsmith stated that he “remains cautious” of regulation that could affect innovation.

MBIE notes that payment systems are extremely complex and characterises the Issues Paper as a means to test its analysis with the public. It has emphasised that the Government is not at the stage of considering any potential reform options.

The Issues Paper outlines 33 questions for stakeholder input, with submissions due by 13 December 2016. The Issues Paper, and information about how to make a submission, can be found here.

  1. MBIE, Retail payment systems in New Zealand, Issues Paper, October 2016 (Issues Paper)
  2. Payments New Zealand (2015) Are our payment systems as good as we think they are? cited in the Issues Paper at [60].

This publication is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice.

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