The Commerce Commission shares its 2023 regulatory work plan for the retail payment system

Last week, the Commerce Commission published an open letter updating market participants on the current initiatives in the Commission's retail payment system work programme. The Commission has flagged that their next phase of monitoring will focus on the initial impact of the interchange fee caps applicable to transactions on the Visa and Mastercard credit and debit networks. However, the Commission's work plan scope is broader than compliance monitoring. It also proposes further monitoring and information gathering in order to find ways to promote the purpose of the Retail Payment System Act – namely, to promote competition and efficiency in the retail payment system for the long-term benefit of New Zealand merchants and consumers.

This update summarises the Commission's key initiatives and plans for consultation and engagement in the coming months. You can access the full open letter here.

1. Appropriate/reasonable pricing for merchants
   • Interchange fee regulation – compliance: The Commission consulted on a draft guidance paper on the initial pricing standard in September 2022 which included a chapter on information required to assess compliance. The Commission is now looking to publish its expectations on required compliance information and its response to submissions in April/May 2023 which will be followed by information requests to participants for assessing compliance.
   • Interchange fee regulation – understanding the initial impact on merchants: The Commission's initial monitoring suggests that the Visa and Mastercard networks are compliant with the initial pricing standard. The Commission still intends to assess whether acquirers have passed on lower fees to merchants and will be requesting information to test this, with the Commission's findings likely published around mid-2023.
2. A transparent retail payment system: The Commission has been continuing to monitor competition and efficiency and will soon start publishing information to improve the transparency of the retail payment system, including how debit card payments have evolved.
3. An environment for new entrants and payment networks: The Commission has been working to understand how new account-to-account payment options will promote the purposes of the Retail Payment System Act, and the Commission expects to consult on a paper later this year.
4. Appropriate merchant surcharging: The Commission has observed that merchants appear to be frequently surcharging at levels above the merchant service fees they pay. The Commission intends to begin addressing the reasons for this in the coming months by: (i) giving merchants information to assist them with surcharging appropriately; (ii) encouraging payment service providers to remove constraints to merchants surcharging appropriately; and (iii) encouraging improvements from some larger merchants that appear to have suboptimal surcharging practices. Engagement with merchants and merchant organisations (among others) is expected from April 2023.
5. Increased competition and efficiency in the current payment options: The Commission is considering the barriers to competition and efficiency in the retail payment system and encourages sector participants and others to alert the Commission to features or conduct that impacts, or is likely to impact, the competition and efficiency of the retail payment system.

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