Latest / Best of Business / Ruth Riviere: Mastercard New Zealand Country Manager responds to Commerce Commission moving to cap credit card fees

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Ruth Riviere: Mastercard New Zealand Country Manager responds to Commerce Commission moving to cap credit card fees · Best of Business

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  Speaker 2: MasterCard is pushing back at the Commerce Commission's plans to
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  Speaker 2: put a cap on some credit card fees. Interchange fees
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  Speaker 2: are one part of a bunch of charges that the
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  Speaker 2: retailers pay, and the Commerce Commission wants to reduce those
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  Speaker 2: fees by about two hundred and eighty million dollars a
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  Speaker 2: year by introducing a cap on them. But the Commerce
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  Speaker 2: Commission says it can't guarantee that the fall two hundred
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  Speaker 2: eighty mil will actually be passed on to consumers. Ruth
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  Speaker 2: Vervieer is Mastercard's country manager. Ruth, Hello, Hi Ryan, how
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  Speaker 2: are you doing good? Thank you, thanks for coming on
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  Speaker 2: the program. So these charges, the interchange fee, do you
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  Speaker 2: make a profit off the interchange fee?
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  Speaker 3: Nope, So MasterCard doesn't make any money from interchange. Interchange
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  Speaker 3: is a really important balancing mechanism for the payments this
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  Speaker 3: ecosystem that allows continued investment in experience, in technology, and
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  Speaker 3: in safety and security.
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  Speaker 2: So the interchange fee is a charge that you use
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  Speaker 2: for R and D basically, So.
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  Speaker 3: It's what our partners use for that. So it's paid
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  Speaker 3: by the merchant's bank to the card issuers, to the
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  Speaker 3: cardholder's bank, and so it balances that the cost of
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  Speaker 3: issuing the payment credential with the benefit that the merchant
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  Speaker 3: receives from accepting that payment.
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  Speaker 2: So who profits off the interchange fee?
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  Speaker 3: So the person who issues the card or issues the
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  Speaker 3: credential gets that money, and that's experience.
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  Speaker 2: That's you, right, master Card.
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  Speaker 3: So we don't issue any cards that would be your bank,
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  Speaker 3: or that would be a fintech so or that would
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  Speaker 3: be a credit card company, and those would be the
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  Speaker 3: people who receive that revenue and then they would invest
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  Speaker 3: that in a card proposition.
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  Speaker 2: So why have you got a problem with the interchange
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  Speaker 2: fees being kept by the It is suggested by the ComCom.
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  Speaker 3: Because we think it's a really important mechanism in a
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  Speaker 3: market to allow for continued innovation, continued investment in safety
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  Speaker 3: and security, continued investment in experience. And what the Commerce
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  Speaker 3: Commission is suggesting is hollowing that out, and that will
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  Speaker 3: make the business case for investing in new products and
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  Speaker 3: services much harder. It'll make the business case for investing
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  Speaker 3: in new payment types like open banking much harder. So
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  Speaker 3: we're really clear that there's these unintended consequences of what's
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  Speaker 3: being proposed.
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  Speaker 2: How does MasterCard make money off transactions? You know, when
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  Speaker 2: I go to the deary and swipe my card, where
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  Speaker 2: are you making your cut?
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  Speaker 3: Yeah, so we make money as the transaction is processed
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  Speaker 3: by our network, and that's separate to interchange fees.
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  Speaker 4: It's a surcharge, Ryan, So surcharge is what a what
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  Speaker 4: a merchant would would charge the person making the payment
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  Speaker 4: for that payment, and some of that would be used
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  Speaker 4: to cover interchange and scheme fees and the fees from
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  Speaker 4: the bank of the merchant.
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  Speaker 2: Right, So your fee that you tack on, what's your fee?
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  Speaker 2: If you know, if I went and bought a can
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  Speaker 2: of coke or something, what does master Card get.
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  Speaker 3: Yeah, it's a really small proportion of the overall cost
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  Speaker 3: for a merchant, So it would be you know, a
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  Speaker 3: fraction of what that interchange component would be or the
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  Speaker 3: fee that the the retailer's bank would be charging.
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  Speaker 2: So it's a fraction of the interchange fee. So you
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  Speaker 2: do get some of the interchange fee.
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  Speaker 3: No, sorry, I just meant proportionally, so we don't get
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  Speaker 3: do you know what is the fraction? Do you know
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  Speaker 3: it would vary based on based.
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  Speaker 2: On the transaction as a percentage A small percentage, one,
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  Speaker 2: two percent, zero point three, under ten percent, under ten percent.
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  Speaker 2: That's that's quite a lot. I mean that that that
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  Speaker 2: range is quite big. Do you mean up to ten
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  Speaker 2: percent of the overall fees that are charged or do
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  Speaker 2: you mean up to ten percent of the cost of
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  Speaker 2: the good?
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  Speaker 3: No?
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  Speaker 5: No, no, no sorry, no, not of the total bet
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  Speaker 5: of the total overall cost that might be paid.
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  Speaker 3: It's a very small proportion of the overall costs.
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  Speaker 2: Right, So up to ten percent of the fees that
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  Speaker 2: we pay for using cards at shops for the convenience. Yeah, okay,
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  Speaker 2: So the Commerce Commission seems kind of how bent on
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  Speaker 2: doing this, making this change, and they have kept it
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  Speaker 2: once before. What do you think the effect will be?
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  Speaker 2: Will we actually get cheaper? Will it make transactions cheaper
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  Speaker 2: for us as consumers?
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  Speaker 3: We haven't seen that player in any other market. And
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  Speaker 3: what the Commerce Commission said was that by capping interchange
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  Speaker 3: fees so excuse me, surcharges would come down. And they
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  Speaker 3: capped interchange or they brought interchange down two years ago,
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  Speaker 3: and I think you speak to any key we and
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  Speaker 3: they would say that surcharging has not gone down. So
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  Speaker 3: it's really clear that surcharging won't come down as a
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  Speaker 3: result of capping interchange. So what I think we can see,
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  Speaker 3: what you can expect to see as a consumer or
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  Speaker 3: as a card holder, is that you'll be surcharged more often,
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  Speaker 3: and that by taking away this amount of interchange, which
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  Speaker 3: as we've said, is a balancing mechanism between the two
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  Speaker 3: sides of the ecosystem, consumers will pay for that in
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  Speaker 3: other ways because that investment will still need to be made.
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  Speaker 2: Seems like we always paying for everything, doesn't that. Thank
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  Speaker 2: you very much for that. That's Ruth master, Card's country manager.
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