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Speaker 1: Kiota.

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Speaker 2: I'm Chelsea Daniels and this is the Front Page, a

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Speaker 2: daily podcast.

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Speaker 1: Presented by The New Zealand Herald.

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Speaker 2: We've all been caught out when using payWave or contactless

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Speaker 2: payment in stores where.

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Speaker 1: We think we know how much we're paying and then.

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Speaker 2: A surcharge adds a tiny bit more on that final price.

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Speaker 1: Well that is about to change.

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Speaker 2: The government is planning to ban retailers from being able

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Speaker 2: to add surcharges to most in store card payments. It

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Speaker 2: follows a decision by the Commerce Commission last week to

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Speaker 2: reduce interchange fees paid by businesses for accepting credit card payments.

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Speaker 2: So what does all this mean for consumers and business owners?

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Speaker 2: Are there more savings that could be made on these

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Speaker 2: fees or are they a consequence of trying to attract

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Speaker 2: more competition to the market. Today on the Front Page,

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Speaker 2: Massy University Associate professor from the School of Accountancy, Economics

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Speaker 2: and Finance, Claire Matthews is with us to break down

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Speaker 2: what all of this means for you. So, Claire, can

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Speaker 2: you explain to me what these surcharges actually are on

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Speaker 2: contactless payments?

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Speaker 3: The so charges are charge that the business has put

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Speaker 3: to charge the consumer because of the payment method that

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Speaker 3: they've chosen, be at a credit card or payWave, is

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Speaker 3: resulting in a charge to the business. And basically what

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Speaker 3: the business is doing us passing that on to the

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Speaker 3: consumer for the choice that they've made.

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Speaker 2: Right, is that one of these classic examples where technology

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Speaker 2: has outrun the law, so to speak.

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Speaker 3: Not really so, the businesses have been charged for different

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Speaker 3: types of payment acceptances basically forever. That might be a

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Speaker 3: slight exaggeration, but if we think about credit cards, so

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Speaker 3: credit cards have been around for a very long time,

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Speaker 3: and businesses have always been charged for accepting credit cards

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Speaker 3: as payment. Now, initially that wasn't too big an issue

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Speaker 3: for them because it tended to be larger transactions and

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Speaker 3: they weren't as common, and so the businesses would absorb that.

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Speaker 3: As credit card transactions spread, that's when they started to

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Speaker 3: surcharge for credit cards. Then when payWave, particularly has been added,

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Speaker 3: and debit card transactions that go through the credit cards

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Speaker 3: system have become more common, then those super charges have

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Speaker 3: become more common because the surcharges that were associated with

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Speaker 3: credit cards have also been added on to those paywaves

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Speaker 3: and other methods of payment, and therefore they have started

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Speaker 3: to surcharge for those as well.

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Speaker 2: Was there ever any regulation in place around how much

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Speaker 2: these surcharges could be because varies from place to place,

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Speaker 2: doesn't it. Some businesses aren't the cost in themselves, while

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Speaker 2: others give you the choice.

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Speaker 1: Of using payWave or not.

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Speaker 2: Sometimes they see two point five percent on the little

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Speaker 2: cash register written in pen. Sometimes they see four percent

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Speaker 2: one percent. So I mean, is it just up to

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Speaker 2: the store owner or the business owner?

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Speaker 3: Oh?

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Speaker 4: Absolutely, it's up to the store.

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Speaker 3: That's why you will see some businesses say we won't

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Speaker 3: accept credit card, we won't accept payWave. We just don't

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Speaker 3: want to have to deal with those costs. And that's fine.

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Speaker 3: That to be able to accept that, they have to

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Speaker 3: assigned agreements for that. If they do accept them, then

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Speaker 3: they might choose to absorb with that cost depending on

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Speaker 3: the volume of transactions that they receive in that way

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Speaker 3: and the volume of business that they're receiving. But the

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Speaker 3: other reason that you'll see differences in terms of what

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Speaker 3: the actual surcharge is is that all businesses don't pay

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Speaker 3: the same charge for accepting these payments.

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Speaker 4: So the charge to the business varies.

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Speaker 3: Based on the type of business based on the volume

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Speaker 3: that's going through, so they then will have a different surcharge.

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Speaker 3: And effectively, there hasn't been a lot of regulation around this.

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Speaker 3: It's become more of a problem in more recent times,

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Speaker 3: so it's kind of been building up to this situation

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Speaker 3: and now there's a feeling that there needs to be

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Speaker 3: something done. Whether what the government is doing is the

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Speaker 3: right approach, that's a totally different question.

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Speaker 2: Well, you've led me onto my next question actually perfectly,

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Speaker 2: and it was do you think banning surcharges is the

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Speaker 2: right move?

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Speaker 3: And fundamentally, I don't think banning searcharges is the right

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Speaker 3: move because it doesn't eliminate the problem because what will

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Speaker 3: happen is the business is still going to incurb that cost.

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Speaker 3: So if they haven't been able to absorb it up

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Speaker 3: till now, then I don't see that they're going to

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Speaker 3: be able to absorb it. So what they will actually

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Speaker 3: have to do is they will build it into their

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Speaker 3: cost structure and therefore into their prices, and so rather

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Speaker 3: than individual consumers paying we will all end up paying

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Speaker 3: higher prices. So it's not like it gets rid of

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Speaker 3: the cost to the business.

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Speaker 4: It just changes who pays.

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Speaker 2: For it and do you think that it could end

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Speaker 2: up more businesses not accepting payWave as well.

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Speaker 3: It's possible, but I think it's unlikely because the reality

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Speaker 3: is so many consumers use that the risk is that

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Speaker 3: if they say, businesses choose not to accept certain payment methods,

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Speaker 3: then the risk for them is that consumers will simply

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Speaker 3: choose to go somewhere else where they can use their

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Speaker 3: payment method of choice. So it's more likely that they

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Speaker 3: will just build it into their prices. If they didn't

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Speaker 3: want to pay that cost, and they didn't want to

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Speaker 3: have to search charge, then they would already likely have

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Speaker 3: not been doing that.

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Speaker 2: Are there any other fees that the government could crack

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Speaker 2: down on as well if it wanted to.

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Speaker 3: Oh, I'm sure there's lots of other fees that the

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Speaker 3: government could crack down on. The better approach would be

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Speaker 3: to make sure with regard to these charges would be

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Speaker 3: to make sure that the businesses are only passing on

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Speaker 3: the actual cost to them. And I believe that the

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Speaker 3: Communis Commission was doing some work in this regard to

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Speaker 3: make sure that if, for example, and this is just

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Speaker 3: a number pluck out of the air, for example, the

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Speaker 3: business was being charged fifty cents then that's the charge

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Speaker 3: that they were passing on to the consumer. They weren't

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Speaker 3: taking the opportunity to say, oh, well, I've got to

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Speaker 3: surcharge you, so I'm going to charge you a dollar

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Speaker 3: and I'm going to make an extra fifty cents. That's

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Speaker 3: that's not reasonable and cracking down on that. And the

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Speaker 3: government could also be looking at the costs that the

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Speaker 3: credit card companies and the banks are charging businesses to

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Speaker 3: make sure that those are reasonable and that the costs

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Speaker 3: that they are passing on again reflect the costs to

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Speaker 3: them for those transactions. So those are some of the

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Speaker 3: things that the government could be looking at. But things,

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Speaker 3: you know, if they want to really looking at it,

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Speaker 3: things like what about credit card fees in terms of

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Speaker 3: just holding the you know, the fee for having a

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Speaker 3: card and for having a joint account, for example, if

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Speaker 3: you've got a joint account.

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Speaker 4: So those fees.

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Speaker 3: So there's there's all sorts of fees that banks and

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Speaker 3: businesses charge. And you know why pick on surcharges simply

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Speaker 3: be because they're a little bit more visible and they

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Speaker 3: create a bit of inks for some customers.

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Speaker 1: What's a good headline, isn't it?

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Speaker 4: Absolutely And a new measure announce to announced.

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Speaker 5: Today will ensure that kiwis are the price ke we

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Speaker 5: see on the price tag is the same one that

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Speaker 5: they pay at the checkout. Commerce and Consumer Affairs Minister

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Speaker 5: Scotsiinson has announced that the government ban install credit and

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Speaker 5: debit card surcharges like payway fees. You will no longer

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Speaker 5: be penalized for your choice of payment method, whether that's tapping, swiping,

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Speaker 5: or using your phones digital wallet. Measures like these are important,

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Speaker 5: but the most important thing we can do to make

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Speaker 5: you better off is to double down on our long

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Speaker 5: term economic plan.

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Speaker 2: Another thing that I've always found interesting is account fees

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Speaker 2: you've mentioned, but also overdraft fees. Now, generally I don't

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Speaker 2: know about you or right, I don't know about a

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Speaker 2: lot of people, but I guess generally overdrafts happen when

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Speaker 2: a you've forgotten that your Netflix is going to come

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Speaker 2: out of a certain encounter a certain time of month,

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Speaker 2: or they happen because you simply do not have any

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Speaker 2: money and you are at the end of your tether

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Speaker 2: and you need bread.

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Speaker 1: Or milk or something right overdraft?

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Speaker 2: But why charge overdraft fees a for people who don't

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Speaker 2: have any money to pay? The fees in the first place,

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Speaker 2: and b if it's just you're forgotten about, well, the

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Speaker 2: thing is.

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Speaker 3: When you've taken out an overdraft, or when you effectively

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Speaker 3: help yourself to an overdraft. Potentially, if it's just that

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Speaker 3: your payments are going through and being approved, the bank

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Speaker 3: is lending to you and so they do have fees.

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Speaker 4: So if you were to go in and apply for

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Speaker 4: an overdraft, they would charge you for that.

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Speaker 3: But the other thing with an overdraft facility is that

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Speaker 3: they always have an actual interest rate. But then if

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Speaker 3: you actually have an overdraft facility, they have interest rate

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Speaker 3: that you pay on what you actually use, but they

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Speaker 3: have an ongoing fee as well to reflect the fact

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Speaker 3: that if the bank has given you a thousand dollar overdraft,

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Speaker 3: that they have to always be willing and able to

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Speaker 3: give you that thousand dollars even though you don't use it.

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Speaker 4: So they pay a little or get you to pay

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Speaker 4: a little.

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Speaker 3: Bit to reflect the fact that they're putting that money

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Speaker 3: on hold for you effectively, but you may not be

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Speaker 3: using it. And if you're not using that can't charge

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Speaker 3: your interest. And so if you help yourself to an

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Speaker 3: overdraft effectively because you've got overdrawn because payments have gone

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Speaker 3: through or whatever. Then what they're doing is simply applying

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Speaker 3: the same overdraft charges that they would if you'd actually.

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Speaker 4: Applied for one.

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Speaker 2: Okay, so you've got me back on board with the

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Speaker 2: overdraft fees. What about account fees? So I want a

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Speaker 2: certain account, I want to set up another account, and

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Speaker 2: they're like, great, you can do this, but it's an

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Speaker 2: extra ten dollars a month, ten dollars a year. Even

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Speaker 2: are they should they be able to do that or

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Speaker 2: to be other us?

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Speaker 4: I didn't know there were that many account fees around

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Speaker 4: these days.

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Speaker 3: I thought the banks had generally got rid of those

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Speaker 3: because they had reached the point where they didn't think

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Speaker 3: they were to be useful. If they are still charging them,

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Speaker 3: there is a question as to whether they should be.

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Speaker 3: I mean, there is a cost to the bank of

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Speaker 3: just having an account and operation, irrespective of how often you're

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Speaker 3: using it. But I would suggest that these days it's

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Speaker 3: marginal and it would be more difficult to continue to

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Speaker 3: justify that. But with some of those accounts, it depends

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Speaker 3: they may that they are providing you with the service

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Speaker 3: and there may not be.

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Speaker 4: Any other income associated with that.

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Speaker 3: So if they're not changing your transaction fees for example,

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Speaker 3: then the only fee they've got coming in is that

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Speaker 3: account fee. And so that's a small cost to pay

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Speaker 3: for having the ability to make those transactions and to

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Speaker 3: have that account that you can use.

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Speaker 2: I saw the Commerce Commission last week announced that it

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Speaker 2: was reducing interchange fees businesses pay to the likes of

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Speaker 2: Visa and your MasterCard, etc. Firstly, what are interchange fees?

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Speaker 3: Well, the interchange fees actually are the basis of the surcharges.

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Speaker 4: The interchange fees are the fees that.

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Speaker 3: The various parties in the transaction for credit cards and

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Speaker 3: payway transactions, et cetera, are charging each other and that

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Speaker 3: eventually get passed on to the businesses. So interchange is

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Speaker 3: just the fee that goes from MasterCard or Visa to

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Speaker 3: the bank and then gets passed on to the business.

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Speaker 2: Right, so everybody kind of gets a little piece as

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Speaker 2: it goes back and forth. If I was to try

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Speaker 2: and visualize it, your money is hopping about and then

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Speaker 2: it it costs something each little hop. Right. So the

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Speaker 2: Comments Comission has announced that ninety million dollars in savings

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Speaker 2: that will save, but it costs a billion dollars a

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Speaker 2: year to accept Visa and master card payments. That seems

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Speaker 2: like a lot or is it just the fact of

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Speaker 2: the matter is that we're using our cards lots and

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Speaker 2: we don't use cash anymore.

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Speaker 3: Oh, it certainly reflects the volume of transactions that are

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Speaker 3: going through on cards. If the fees that are being

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Speaker 3: paid that high, then that says that there's a huge

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Speaker 3: amount of money that is being spent on cards. And yes, absolutely,

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Speaker 3: we're not spending on cash using cash anywhere near as

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Speaker 3: much as we did, and increasingly the f post cards

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Speaker 3: that we use more likely to be payWave cards. So

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Speaker 3: even if we're taking the money out of our accounts

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Speaker 3: rather than through a credit card account, it's going through

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Speaker 3: the payWave system rather than the direct if post system,

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Speaker 3: and therefore that's catching those interchange fees.

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Speaker 4: So it is the ongoing expense.

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Speaker 3: And you know, as well as the volume is going

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Speaker 3: through on cards, we're just spending more money generally, So yeah,

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Speaker 3: that's where that's coming from.

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Speaker 2: Can you talk me through this idea of open banking.

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Speaker 2: It's something we've kind of heard about, but if you

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Speaker 2: aren't paying attention to it, I guess the specifics of it,

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Speaker 2: you've probably kind of passed it by.

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Speaker 4: Hey, yeah, so open banking.

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Speaker 3: I'm actually going to quote a definite that comes from

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Speaker 3: Payments New Zealand, who are the body operated by the

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Speaker 3: banks that looks after the payments, because I think it's

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Speaker 3: quite useful that they've got quite what I consider quite

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Speaker 3: a good definition.

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Speaker 4: So they say that the term.

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Speaker 3: Has evolved to describe a series of initiatives which gives

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Speaker 3: consumers greater access to and control over their banking data.

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Speaker 4: So that's really what open banking is about. It's about having.

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Speaker 3: Access to and control of the data around your banking,

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Speaker 3: your accounts, your transactions, et cetera. So it can provide

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Speaker 3: consumers with new, innovative and convenient ways to make use

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Speaker 3: of their banking data through third party products and services.

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Speaker 3: So it's about how can you access that information? How

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Speaker 3: can you use that information for your benefit? So you

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Speaker 3: have a fintech company that may set up a system

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Speaker 3: through the open banking arrangements whereby you can if you've

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Speaker 3: got accounts at multiple banks, you can actually collect.

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Speaker 4: That into one site.

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Speaker 3: Some of the FinTechs that are using open banking are

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Speaker 3: doing it for new and different payment metsits, so there's

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Speaker 3: a whole lot of fintech companies that are out there

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Speaker 3: making use of the new open banking standards to provide

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Speaker 3: different services to consumers.

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Speaker 2: Right, So would would one example be a I download

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Speaker 2: a budget app on my phone and then through that application,

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Speaker 2: I'm able to say, yes, you can have access to

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Speaker 2: my Westpac, an Z and Keywi bank accounts, say and

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Speaker 2: it'll all collate onto one app.

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Speaker 4: Yeah.

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Speaker 3: So that's certainly an example of open banking. And so

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Speaker 3: the budget, the company that's providing that budgeting app, is

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Speaker 3: able to use the open banking standards to be able

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Speaker 3: to draw your information from the banks without you having

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Speaker 3: to disclose your pin details or your password details. They

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Speaker 3: can access it in different ways because obviously you're not

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Speaker 3: supposed to provide your password to somebody else, and so

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Speaker 3: they can just draw that information through what we call

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Speaker 3: what they call APIs. And don't ask you what own

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Speaker 3: API stands for now because I can't rem but as

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Speaker 3: a computer term, and it refers to the connection between

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Speaker 3: the app and the bank that allows them to draw

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Speaker 3: that information into the app so that you can then

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Speaker 3: access sort of use it in different ways. Ah.

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Speaker 2: Right, because that was going to be my next question,

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Speaker 2: is I'm not sure about giving this random app on

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Speaker 2: the Apple Store my bank account password, but that's good

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Speaker 2: that they circumvins that kind.

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Speaker 3: Of Absolutely, you're still going to give them authority to

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Speaker 3: access your account information in some way.

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Speaker 4: But you don't actually have to give them your password.

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Speaker 6: So our concern has been, well, now that reduction's happened,

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Speaker 6: how do we make sure that gets passed through to

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Speaker 6: you when you're at the shop. What's to stop the

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Speaker 6: retailer just charging you the same fee even though their

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Speaker 6: costs have dropped. And so we think the simplest, fearest,

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Speaker 6: most transparent thing to do is to say no more

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Speaker 6: pay wave chargers. Treat it like you do any other

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Speaker 6: cost in your business, whether it's rates, rents, fuel, insurance,

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Speaker 6: and just included in the price tag that people get

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Speaker 6: on the shelf. That way, everyone knows what they're up

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Speaker 6: for and doesn't get stung at the checkout.

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Speaker 2: Is there an argument to be made that the government

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Speaker 2: and the Commerce Commission, if they wanted to, could reduce

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Speaker 2: all fees until they're basically zero. But if they did that,

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Speaker 2: I suppose would that then mean these companies can't make

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Speaker 2: a profit, And then that would mean they just wouldn't

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Speaker 2: offer their services here.

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Speaker 3: Yeah, so in terms of the open banking products, they

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Speaker 3: have to be able to make money somehow.

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Speaker 4: And the reality is as consumers that in.

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Speaker 3: General, we're not too happy about paying for that type

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Speaker 3: of service. We're not happy to pay for financial advice.

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Speaker 3: We're not happy to pay for mortgage advisers to help

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Speaker 3: us get home loans. We're just not generally happy to

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Speaker 3: pay for things around accessing and managing our money beyond

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Speaker 3: the basic account fees. The companies that provide open banking

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Speaker 3: products do need some way, and so that may be

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Speaker 3: via some of the fees that they will charge them

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Speaker 3: this way.

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Speaker 4: And if the Commis.

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Speaker 3: Commission or any other government entity was to something regulate

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Speaker 3: away fees, which is absolutely a possibility, then it will

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Speaker 3: make it harder for organizations to provide the services because

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Speaker 3: if they're not going to be able to charge the consumer,

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Speaker 3: then where are they going to get the money from

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Speaker 3: to be able to continue to operate.

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Speaker 2: So how do these fintech groups work? I know that

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Speaker 2: I gave my little budget app example, but I suppose

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Speaker 2: there's something like Polly as well, and I've only encountered

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Speaker 2: that name. While I'm like late night online shopping and

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Speaker 2: I'm putting my visa card details in and there's a

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Speaker 2: lot option that says Polly. Is that another one of

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Speaker 2: these open banking kind of situations.

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Speaker 3: Actually Poly isn't around a lot longer and pre dates

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Speaker 3: the open banking arrangements. I'm not sure whether they will

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Speaker 3: seek to rearrange how they operate to come with in

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Speaker 3: that open banking sphere of operation. But actually, and because

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Speaker 3: I have personally used Polly a lot, I trust it.

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Speaker 4: I don't have a problem with it.

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Speaker 3: But technically, in terms of using Polly, I am going

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Speaker 3: against bank regulation because I'm actually putting in my passwords,

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Speaker 3: so Polly does have access to my password that they're

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Speaker 3: passing on to the bank to take the money out

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Speaker 3: of my account. I have to admit I've used a

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Speaker 3: lot for various things with reputable companies, but because I

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Speaker 3: trust Polly as well. But it's not an open making

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Speaker 3: app at the stage in terms of the way it operates.

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Speaker 2: Claire, Do consumers ultimately when or lose when it comes

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Speaker 2: to reducing any kind of fees when it comes to

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Speaker 2: our money.

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Speaker 3: Well, it does depend on the type of fees, and

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Speaker 3: the banks have actually done quite a.

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Speaker 4: Bit of work.

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Speaker 3: If you looked at what the fees were ten fifteen

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Speaker 3: years ago that they were charging, they're charging a lot

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Speaker 3: fewer fees than they were.

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Speaker 4: They've done a lot of work to try and make

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Speaker 4: that sol plot for people.

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Speaker 3: And to reduce the costs. So it does depend on

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Speaker 3: the type of fee. If you're simply eliminating a fee

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Speaker 3: at that level, then consumers are going to be better off.

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Speaker 3: But if you're doing things like taking the surch charges out,

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Speaker 3: then that's not necessarily making consumers better or worse off.

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Speaker 3: They might be a little bit better off on one front,

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Speaker 3: but they're going to be worse off on another front

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Speaker 3: because it's just changes the way that the payments are made.

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Speaker 3: And arguably, you know, if you remove the search charges,

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Speaker 3: for example, it may make it better and that some people,

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Speaker 3: you know, some firms may decide well, they need to

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Speaker 3: therefore compete and therefore may start taking payway. But at

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Speaker 3: the same time that may then mean that their costs

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Speaker 3: go up. So it's it's really hard to see with

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Speaker 3: some with some charges, getting rid of the fees is

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Speaker 3: not necessarily going to improve things.

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Speaker 2: Should we just still go back to using cash?

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Speaker 3: Well, theoretically we can, but increasingly it's going to be

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Speaker 3: difficult to get cash. There's not the number of ATMs

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Speaker 3: around bank ATMs, and if you go to the non

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Speaker 3: bank ATMs, it's there's fees associated with those, quite large

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Speaker 3: fees actually, so you don't necessarily want to do that.

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Speaker 4: And if you've got cash, then.

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Speaker 2: What you do with that very in the backyard, Claire.

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Speaker 4: There are some budgeting benefits to use.

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Speaker 3: In cash, but yeah, fringing on your matress and then

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Speaker 3: there's all those security risks and the reality is businesses

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Speaker 3: don't actually want you to deal with cash because of

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Speaker 3: the collecting cash then they've got to do something with

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Speaker 3: it and that becomes a hassle, particularly in smaller communities,

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Speaker 3: because they don't have the access to bank services to

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Speaker 3: be able to offload that cash easily.

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Speaker 1: Thanks for joining us, Claire, my pleasure. That's it for

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Speaker 1: this episode of The Front Page.

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Speaker 2: You can read more about today's stories and extensive news

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Speaker 2: coverage at enziherld dot co dot z.

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Speaker 1: The Front Page is produced.

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Speaker 2: By Ethan Sells and Richard Martin, who is also our editor.

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Speaker 2: I'm Chelsea Daniels. Subscribe to the Front Page on iHeartRadio.

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Speaker 1: Or wherever you get your podcasts

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Speaker 2: And tune in tomorrow for another look behind the headlines.