Retail Payment System Bill

I present a legislative statement on the Retail Payment System Bill.

ASSISTANT SPEAKER (Ian McKelvie): That legislative statement is published under the authority of the House and can be found on the Parliament website.

Hon Dr DAVID CLARK: I move, That the Retail Payment System Bill be now read a second time.

This bill fulfils a Government pledge relating to merchant service fees charged to retailers, and wants to bring them into line with comparable economies. The retail payment system is what makes it possible for consumers and merchants to sell and receive goods and services. Before the last election, the Labour Party pledged to regulate these fees to make sure that it was no longer the case that New Zealanders could be charged rapacious amounts for the use of these card systems. The common ones we know, the credit and debit cards, the EFTPOS cards, these are familiar to all New Zealanders.

COVID-19 has, of course, changed the way we spend our money, with online and contactless transactions being used more. These payment methods currently have higher fees, and that puts an additional pressure on businesses that transfers also to consumers. So reducing these fees is a priority for this Government. It’s a pledge the Labour Party made at the last election, and it’s an important contribution to the recovery of the economy from the impacts of COVID-19.

The bill itself introduces a new regulatory regime to ensure the retail payment system delivers long-term benefits to consumers and merchants, and the regime does this in three ways. First, it enables the Commerce Commission to regulate participants in designated retail payment networks. Second, to reduce merchant service fees more quickly, it sets an initial pricing standard for the Mastercard and Visa credit and debit networks. That standard will reduce interchange fees. Interchange fees—as members of this House, I’m sure, know—are generally the largest component of fees charged to merchants for accepting payments. The initial pricing standard targets card products issued by Mastercard and Visa because they cover the largest share of the New Zealand market for retail payments, but other providers will follow suit. Third, the bill enables the Commerce Commission to issue merchant surcharging standards. And I note, too, for the House, the bill also provides for investigation, monitoring, and enforcement by the Commerce Commission.

At this stage, I’d like to thank the members of the Economic Development, Science and Innovation Committee for their consideration of the bill. Given the slightly shorter period for the committee to consider the bill, the members met outside of sitting weeks to give the bill due consideration. So I do say thank you to the members of that committee.

Joseph Mooney: Hard-working group.

Hon Dr DAVID CLARK: And as the member opposite calls out, a very hard-working group and I do thank them for that.

I’d also like to thank all the submitters who considered the bill and took the time to provide feedback for that committee to consider. The committee received 30 written submissions on the bill from a range of industry parties. Two of the common views expressed were that buy now pay later products and, secondly, American Express products should be directly regulated by this bill. So I note here for the House’s benefit that the Government is separately considering wider questions around whether and how to regulate buy now pay later products. And officials have received feedback as part of a submission process and are working on that as we speak. My priority for buy now pay later products is to address any triggers that cause consumers to experience financial hardship.

Submitters also suggested that the likes of American Express, as I’ve mentioned, and other card schemes should be directly regulated by the bill, in addition to the immediate price regulation being applied to Visa and Mastercard. I do want to say, so that this is on record for the House, that American Express is absolutely in scope of regulation under the new regime, although it hasn’t been chosen to be designated straight away. So the Commerce Commission can choose to designate them in due course. But my focus in having a price path, effectively, for Mastercard and Visa payments to start is because that brings about the greatest immediate benefit for merchants and consumers. American Express, as we know, has a relatively small share of the market—their model doesn’t involve interchange fees, and they’re also constrained by competing with Visa and Mastercard in what they can charge—and, of course, if we regulate their fees, that will have a knock-on effect to the model for American Express.

I note that the select committee has recommended a number of changes to the bill. Those changes aren’t significant policy changes, but they do represent minor tweaks and, I think, improvements to the bill, which I trust will enable the legislation to work better. So as previously noted, the initial pricing standard will require Mastercard and Visa, as well as banks and other card issuers, to reduce interchange fees, which are generally the largest component of the merchant service fee. The bill now states the commercial credit card payment products, which are intended to be excluded from the initial pricing standard—the fees cap will not apply to credit payment products issued to a business and used exclusively for their businesses’ commercial purposes. However, for the sake of completeness, if a business customer is issued a personal credit card that they might use for mixed purposes, the card will be captured by the initial pricing standard.

The reported-back version of the bill also addresses comments made by a number of submitters on the provision prohibiting net compensation. In other economies where interchange fees have been capped, we see what’s known colloquially as the waterbed effect; fees or arrangements are adjusted—

Andrew Bayly: Waterbed?

Hon Dr DAVID CLARK: The waterbed effect: the fees and so on are adjusted, other aspects of the fees, to compensate the card issuers for the loss of the interchange fees, and the no net compensation provision was targeted at that kind of behaviour. However, some submitters raised issues with banning net compensation altogether and with the definition of net compensation. So the committee, to its credit, has found a better way to stop caps on interchange fees being undermined by compensation to card issuers through that waterbed effect that Mr Bayly no doubt will also comment on. Interchange fees are now defined as including any net compensation that can reasonably be attributed to retail payment transactions.

Finally, submitters commented on the ability for the Commerce Commission to issue standards that limit merchant surcharging. Some submitters opposed having merchant surcharging standards, while others thought they wouldn’t go far enough and that such charging should be banned altogether. And while caps on interchange fees may reduce the need for retailers to surcharge, the bill allows basically for the Commerce Commission to issue standards if it deems it necessary or desirable at a future point. Ultimately, consumers and competition can be harmed if surcharging is excessive, and so the commission has now provided the powers to set standards and guide what is and isn’t acceptable, and I think that’s a good compromise.

In conclusion, retail payments are the nuts and bolts of the market economy. The payment methods make it easier to secure goods and services, but the fees that sit behind them are simply too high. We want to ease the burden of these fees on retailers and other small businesses who are already struggling with the impacts of COVID-19, and we recognise that when we do that, the knock-on benefit is also to consumers, who will rightly see—well, they won’t be paying the surcharge, effectively, through that business, as the business tries to recover its costs.

So this bill is a step in the right direction, will ensure the retail payment system delivers long term-benefits to New Zealand consumers and businesses, and it also fulfils a pledge of the Labour Party before the last election. It’s a delight to actually have here in the House this evening the former Commerce and Consumer Affairs Minister, the Hon Kris Faafoi, who can also celebrate this gain, and I also acknowledge the work of the Hon Stuart Nash in this area. We’re not through all the reading stages of this bill, but the select committee has approved the bill.

Hon Kris Faafoi: payWave, payWave.

Hon Dr DAVID CLARK: They’re discussing the merits of payWave behind me. We know this bill is a sensible bill that will make things better for New Zealand consumers, better for small businesses and aid the economic recovery from COVID-19. I commend this bill to the House.

The question is that the motion be agreed to.

Thank you, Mr Speaker. It’s a pleasure to be speaking on the second reading of the Retail Payment System Bill. And I hope it gets better than this for the Minister because, whilst this is a good step for small businesses, it is just a minor bit when you compare the over $3 billion worth of costs that the Labour Government has imposed on small businesses across New Zealand. Just hammered them with stuff—holiday pay, 10 days’ sick leave, all of that sort of stuff. Three and a half billion bucks’ worth and, yes, we’re going to save them a bit of money—wow! But, I’ve got to say, yep, for retailers who are hard done by because the public servants won’t come back to work because the Government won’t tell them to come back to work—councillors and council officials are still at home working from the home, who don’t come back into our centres and help places, help our town centres, help our small-business owners, help our retailers; all those operators—that’s probably the more important issue. But I will congratulate the Minister for pushing through yet another piece of legislation, and, hopefully, he’ll make it back into Cabinet, because he is so keen to push this stuff through and, yes, I know it’s an election promise for Labour, and it will give a little bit of benefit but, gee, if I was a small-business owner, I’m not sure I’m going to go, “Yes, I’m saved!”, because I just don’t think it’s going to help that much.

Anyway, let’s talk about some of the detail. I think not everyone will understand what this bill’s about. What it does, it basically sets what’s called the interchange fee. This is the fee that’s charged between a provider of credit facilities and a financial institution—so, to give an example, VISA, Mastercard, American Express (Amex), with the fees that they’ll charge the bank. As the Minister said, that is most of the cost when people are starting to use their credit card when they go to buy something from a retailer. And what this does is allow the Commerce Commission to have oversight of that process and to make sure that the fees are capped, and, at the moment, roughly about 80 percent of the total fee is relating to this interchange fee. Under the new arrangements, they’re going to be set for 0.8 percent on credit card transactions, which is in line with Australia; 0.6 percent for online debit and credit cards—I see you are watching me very closely, Mr Speaker, because I know you are a heavy user of your card or, maybe not you, but your partner is—and 0.2 percent or 5c per transaction for a contactless debit.

Of course, what the Commerce Commission will have the ability to do is to review those fees to make sure they’re appropriate. And, generally, you know there is a reasonable amount of support by Retail NZ, the Restaurant Association, but not everyone thinks this hard nut of writing a new piece of legislation is actually required. In many cases, other jurisdictions have looked at just making sure that the regulations around this are appropriate, without having to go to the extent of spending Parliament’s valuable time ramming through this piece of legislation. A number of the banks were of that view.

It’s interesting to note, and the Minister did talk about it in his speech, that since we’ve seen the advent of COVID 24 months ago, we have seen quite a decline that has voluntarily been put in place by VISA and Mastercard in terms of the fees that they’ve chosen to reduce to make it more acceptable during the period of COVID, when most people—and certainly people if you were going in to try and buy some groceries or whatever—didn’t want to see cash, didn’t want people to deal in cash, and therefore many people were relying on their credit cards or their debit cards to be able to pay for their goods or services that they were trying to buy.

So, I think, first of all, we should acknowledge there has been a decrease in fees quite substantially already, but the background prior to that is New Zealand retailers, in the main, have been paying too much, and this will lead to a decrease. There’s talk of probably about $13,000 for a retailer, on average—although I’m not quite sure whether that is pre or post the recent declines in the voluntary reductions imposed by VISA and Mastercard. All that’s good stuff, and we will be supporting it on that basis.

What I want to just talk about is a couple of little things—first of all, the exclusion of Amex. The Minister did address that in his speech. At the moment, it refers specifically to Mastercard and VISA. Amex has not been included. It has been included in Australia, and they realised that it needed to be included. Amex has quite a smaller market share—we were informed it was less than 10 percent—and the view is that Amex could be captured by this Commerce Commission if it so chooses. There’s a big question why it’s not included at this point in time; albeit it is a relatively small market player but it’s still a reasonably important market player, and the reason why we’ve excluded it yet Australia has deemed that it should be included—it raises some issues around that approach.

The second thing relates to what is termed about rules, and this is covered under clause 19 of the legislation, which I’m desperately trying to find. These are the rules around when there is a change to the rules that may be imposed by the Commerce Commission, what is the process for actually doing that? And I can’t find my—oh, yes I can. So we were very concerned about this because, if you think about it, organisations like Amex, VISA, and Mastercard are large global players. New Zealand is a very small part of their global business, and the thought that the Commerce Commission could be imposing new rules in New Zealand that would lead to a situation where VISA or Mastercard would have to change their entire global protocols to fit for New Zealand was an unlikely proposition, and actually going to lead to some real issues.

On that basis, we thought it was appropriate that there was a slightly softer approach in terms of how the Commerce Commission should go about making those changes, and the requirement to be in consultation with those providers of those services so that there was no unnecessary imposition on those operators, because the last thing we want is to have some of those major global operators pull out of New Zealand, because that would undermine the ability to provide credit facilities to New Zealanders when they’re buying goods and services. So there was a change to clause 19(1)—we took out paragraphs (b) and (c) and just slightly changed the issue around how the Commerce Commission was required to consult with them.

The other thing is the timing of changes. The bill provides for the changes being made within six months of the bill coming into law, and becoming an Act. Providers, particularly VISA and Mastercard, are concerned about this because if the bill goes through committee of the whole House and then the third reading in the next month or so—if you put six months on top of that, what we’ll end up with is actually entering the stage of blackout of IT services, a common term where banks and large institutions choose not to make substantial IT changes. Of course, that would be during the Christmas period—late November through to late January—and so this bill’s timing actually may lead to an issue where it cannot be executed and actioned by the very people it is required to. So I think we will be putting up some Supplementary Order Papers about looking at the delay of this bill, depending on when it passes through the House and, of course, that’s up to the Government to decide that framework. But, as we say, we will be supporting it, but it is not going to largely change the cost structure of small businesses in New Zealand.

Thank you, Mr Speaker. What an exciting night we’re having in the House tonight, and what a bombshell that was dropped by the previous speaker, Andrew Bayly, where he said that the National Party will remove the increased sick leave and holiday pay that’s come in recently. Well, there we go. I look forward to seeing that in the National Party election manifesto next year.

We also heard something else from the previous speaker. The previous speaker said the Retail Payment System Bill is an “insignificant bill”—$74 million per year is not insignificant. That’s going to make a significant increase to small businesses in New Zealand. I’m thinking of a small business literally down the end of my street, a small dairy. I went in there recently, and I spoke to the dairy owners and I explained this bill to them, and they were incredibly excited. And I said, “Will this make a difference?” And they said, “This will make a big difference for our small business.” And there’s a number of small businesses in that same space.

I’m just going to take a short call tonight—the Minister of Commerce and Consumer Affairs clearly outlined what’s been happening through the process, and, you know, shepherding this bill through. And on behalf of the Economic Development, Science and Innovation Committee I would like to thank all of those who made submissions on this bill, I’d like to thank the select committee members for their work, and I’d like to briefly highlight a submission from the Restaurant Association of New Zealand, who said, “Ultimately the Association believes that regulating merchant fees will go some way in supporting the revitalisation of small businesses, particularly those in the hospitality sector”—we know the hospitality sector have been hit hard through COVID. And the Restaurant Association said that this bill will provide important support for “those in the hospitality sector, who have faced exorbitant merchant fees for far too long.” This is an excellent piece of legislation supporting New Zealand’s small businesses—I commend it to the House.

Thank you, Madam Speaker—an excellent choice. So this is a bill that the National Party will support. We are the party of small business, we are the party of entrepreneurs, and we’re the party who understands that this is, actually, a small amount of money compared to the massive costs that have been put on to small businesses—but it is still significant. And it doesn’t bear scrutiny to say, as I’ve seen some submitters have said, that it should be self-regulated, it should be this, it should be fine, the Government shouldn’t do this. We’re looking at 12,000 businesses closed permanently; I’m not sure any of those were in the first three months before the Delta lockdown. Twelve thousand businesses closed permanently; I’m not sure any of those were anything other than small businesses, because it’s the small businesses who don’t have the ability to just keep on going, to get some extra borrowing, to get the shareholders to put in more funds, to be able to capitalise themselves better—actually, it’s the small businesses who have failed. And they haven’t so much failed but they’ve had to shut their doors.

If you walk down Lambton Quay during the daytime, if you walk down Queen Street during the daytime, if you walk down any city or town in New Zealand, all over New Zealand, we have small businesses that have closed up in the last two years. That is not their fault. We know that we have been through and still are at the tail-end of a pandemic. But we also know that those businesses have employed people; they’ve paid the wages, also to the owners of those businesses, many of whom work in their businesses, or did work in them; they’ve paid the mortgages on their homes; they’ve paid school fees; they’ve paid for everything their children need. And those businesses have now died. It is simply irresponsible to think that this bill is going to solve that issue; it will help but, for many businesses, it’s too late.

The Government talked about this in 2020. They said this is what they were going to do to help small businesses as they were putting up the minimum wage, as they were adding extra costs on. What’s actually happened is, in that time, while we’ve been waiting for this bill to come to Parliament and to come through the House, more businesses have had to shut their doors.

What is important to also remember—and Andrew Bayly alluded to this, I thought, very well—is that the move has been made, during the pandemic, away from cash to card. That is simply a fact of life. Even though cash is legal tender, and even though people should have to be able to have their cash accepted, the practice has now come, in many businesses, whether it’s a cafe selling coffees and lunch, or larger businesses, where they won’t accept cash. Primarily, that is around fear of COVID.

It’s also around the fact that these banks, the big banks—oh, and Kiwibank—have, in my cases, shut up shop in our suburban New Zealand, and in the Queen Streets, and in the Lambton Quays. So, for instance, in Papakura, in my electorate, there are now no trading banks open. That is a part of Auckland that is growing substantially, and yet, trading banks, if you’re a business owner and receive cash, and you have to bank that cash for, number one, your own safety but also to make you’re complying with all the regulations and rules that you now have, and to make sure that you don’t suddenly have this cash disappear, or you’re subject to a burglary because people know you keep cash at home—you have to go down to Manukau. So you have to go all that way at some time during the couple of hours a day that the bank is going to be open.

I saw this recently where I went to see when this bank was open, and there it was: two hours, three days a week. That’s a major city—well, it was Manukau—a major part of Auckland, a major part of New Zealand. It is really important we understand that things have changed. They’ve changed, substantially, for the way in which banks operate, and the way in which small business has been forced to operate to cope and to adapt to the circumstances. So, therefore, looking at the submissions, what’s pretty clear to me is that the National Party—and, I believe, the Government too—favour the submissions of the hospitality association, the restaurateurs, the people who end up accepting cards because there is no choice.

I think it’s also important that we look at the fact that the Commerce Commission will now be involved, because do we really have that much competition between the major providers of interchange services, between the Visas and the Mastercards? No doubt they believe that we do. But if you’re a merchant, do you really have that sort of competition? Do you really get to choose who you use or what you pay? The answer is that, for many people, they actually don’t. So I think it is important that we accept that this will help some small businesses, those that are still going. It will, however, not solve the problem. It will not reinvent the way in which business operates. It is simply accepting that there is no good reason for New Zealand to be paying double the cost of Australian businesses to do the same thing.

I was really disturbed, too, to read that smaller merchants, such as one- or two-person businesses, are paying, in many cases, higher fees than those of the larger institutions like the supermarkets, those that have the huge volume coming through. For some people, that might make perfect sense because the large volume is a better operating model for the interchange holders, the card holders and providers, than, say, many smaller businesses. But, actually, when cash is taken out of the equation—or almost taken out of the equation—that is simply not acceptable. That is where we do need to have some legislation.

So I think it’s a good thing to do this. It helps restore some sense of interoperability between small businesses in Australia and New Zealand, but also it tends to give some understanding that while our major banks have all been able to benefit in many ways from nobody marching in the streets against bank closures or anything else, or the cheques that have now disappeared from circulation—a petition which, I recall, Andrew Bayly took up for many people in our electorates who still don’t have access to online banking, in some cases because there is no broadband—

Andrew Bayly: Don’t recall much support from the other side.

Hon JUDITH COLLINS: There was no support from the Government, actually, Andrew Bayly. They’ve left people without any other means to do their banking. So it is really important that we consider these small businesses, that we consider the people who use those small businesses.

Before I rose to speak, I wondered whether or not there were some of us who might feel we have a minor conflict of interest, given our dedication towards the economy and making it grow, but I thought that, probably, in the scheme of things, there’s no more conflict of interest than there is for any other New Zealander who is, nowadays, forced to pay with a card rather than cash. Thank you, Madam Speaker.

Thank you, Madam Speaker. I rise in this House incredibly proud knowing that after we pass this bill, $74 million will be saved for New Zealand businesses—$74 million, a much-needed saving right now in this climate. When I was preparing for this bill today, I thought about telling you guys about my history with contactless payment, and then I realised I probably would start the speech sounding like the confessions of a shopaholic. I won’t.

I’ll briefly just tell people that in 2012, I remember that in the summer holidays of uni, I was in Sydney. That was probably the summer that contactless payment—Visa and Mastercard payWave—was introduced into the New Zealand economy. I still remember very vividly that I was in Australia. Over probably the course of that one summer, the whole entire Australian economy had almost entirely shifted to contactless. They were going through the queues faster, they were going through the shops needing less assistance, and everything was being done at a much faster pace.

Then I came back to New Zealand, and I realised, even though the technology was here in New Zealand, many of our shops still did not offer contactless payment, payWave. I found that incredibly strange, until I realised that we were paying so much more—our New Zealand businesses are paying so much more—than our Australian counterparts. I thought that something needed to be done, and so I’m glad that on our campaign trail last election, our Government had announced that if we were re-elected, we would be reducing the merchant fees for our small businesses. We are now one step closer tonight to achieving that promise.

This is infrastructure building. This is making sure that we have the right cogs in our wheel. If you look at the economy as a machine, this is the right oil in our machine—that’s what payment systems are—and the right cogs to help our economy turn. This is the stuff that we’re doing—the real foundations of our economy—to make sure that we’ve got a good retail system and that we support businesses. On that note, I commend this bill to the House.

Thank you, Madam Speaker. I rise on behalf of the Green Party to speak on the Retail Payment System Bill’s second reading, partly supporting this common-sense bill. Making the reflections after my colleague on the left, Naisi Chen, who spoke about coming to New Zealand, and realising, I guess, the differences in the payment methods that we experience here. One of the reflections when I came to Aotearoa almost 16 years ago was the technologies that we used—and I grew up in a very cash-based society and realised that New Zealand was one of the guinea pigs where EFTPOS as a technology was being used. But I didn’t realise until quite later in life just how regressive some of these fees incurred to low-income people were when contactless systems came about.

I think COVID-19 has pushed us to be a more contactless society for public health reasons; it also showed us that these regressive fees needed to be addressed. So it’s really nice to see that after an extensive select committee report, we’re going to continue seeing this bill addressing things like a limit on fees for payment services, requirements for participants to disclose information relating to the network or payment services, and more. I’m really glad that the select committee report was quite clear on just how regressive these fees are, particularly on how small businesses are impacted.

While $70 million or so in savings in the scheme of the broader economy isn’t massive, in the context of who are the groups that are going to be impacted—which, again, are those that have been struggling the most during the pandemic—I do think it is meaningful, and as legislators, we should always be striving to ensure that these interventions in the economy are as progressive as possible.

I’d wish to end on a note on something that the select committee touched on about the way in which these higher fees are passed on to consumers by small businesses often engaging in reward programmes. And it really struck me to see the very clear reflection of just how we’ve been caught in a perverse system where, effectively, low-income people who cannot necessarily make multiple purchases in a business or participate in a reward system end up subsidising these high costs for high-income earners who can participate in reward programmes. And I think reward programmes are a really good indication of costs being passed on to consumers that ideally should be regulated, and so I’m really glad to see this bill continuing to progress and we look forward to supporting it to the further stages so that this change sees much-needed money into the hands of some low-income people and small businesses. Kia ora.

I hope the Minister’s recovered from his incident this afternoon with the police Minister tipping some water over you, and that you’ve recovered for tonight.

We will be opposing this bill at this stage, until several modifications are made, and then we will take it for reconsideration. The great thing about retail payment systems is that when you go back down the line, petrol-fuel margins haven’t fallen, and it’s true. If you look at the important margin trending up, petrol is going up, according to the Ministry of Business, Innovation and Employment (MBIE). So I just thought I’d clear that up before we get into the bill.

It’s sad to see how animated Mr Bayly can get. I’d really love to get a shot of what he’s got when he’s coming in here every night.

Dr Duncan Webb: Come on, wrong bill. Misuse of drugs is later!

DAMIEN SMITH: Can anybody tell me, Dr Webb, what it is that he takes?

Hon Members: Berocca.

DAMIEN SMITH: Is it a Berocca? OK.

Well, you know, ACT’s got a different party view on this bill. One of the main purposes of the bill is, obviously, to support competition. There’s actually potential here to reduce competition, which is disturbing. This is a classic Commerce Commission, MBIE hit job that was put together for a good-story message prior to the hustings of the Labour Party, and hasn’t really been thought through at a technical level. So Mr Bayly failed to mention that, but then he’s probably off to get another shot of whatever it is somewhere.

You know, the breadth and scope of intrusion this bill does in terms of rule setting, standards setting, price setting, and the ability to provide, you know, input, it’s just mind-blowingly simplified. I know Mr Strange has been running this at the Economic Development, Science and Innovation Committee, but then just shut off everybody’s input after that. That’s just not good enough. So we want that fully explored when we get there.

In terms of competition, I mean, interchange fees favouring large merchants—that reduces price differentiation between schemes and limits competition, reinvestment, and everything that we should be working for, which is to actually have innovation in the marketplace. So, you know, I hope that the post-implementation period after this reading takes into consideration some of our differing views, which are highlighted in the bill.

So, just to recap those, in terms of network operations, we are about to set a standard that in 140 countries around the world doesn’t exist for Mastercard and Visa, and if we bring American Express into that as well. Now, that, to me, is not well-thought-out by MBIE. Don’t know why the Minister took that advice, and it’s impractical. The Commerce Commission should not interfere into the rules that govern this network.

On Schedule 1, Subpart 3, the initial pricing standard, the language directly relates to the clause on prohibition on certain compensation. If you look at that, that means that the way the clause is currently written has potential to diminish, as I said earlier, competition, access to innovation, and may act as a deterrent to new market entrants coming into New Zealand. We want more competition, and that’s usually how you drive down prices. You don’t take monopolies and sledgehammer them when they’re providing the service in a country of only 5 million people.

ACT believes the bill should place no limits in compensation provided by the networks to banks. This could have been the effect of limiting competition, by constraining a bank’s ability to change providers and deter new market entrants, and Subpart 3 of the initial pricing standard could reflect this. It looks like two networks have been designated, but not all networks have been designated. I’m surprised that neither Labour nor the National Party are prepared to bring that out in the open. We live in a free-market economy where democracy rules, and that includes banking and taking out your credit card to buy things.

There’s an imbalance here that drives, of course, to shop owners. We believe that all the systems within the payment category ought to be treated equally and that the Commerce Commission should be sensible and consider the impacts to innovation and competition in their overview of changing practices in just a New Zealand context, and it isn’t. I haven’t seen any cost-benefit analysis comparing this to Australia on a like-for-like basis. You do get discounts for volume. That’s just how it works in terms of big business versus small business. But small businesses are the ones that benefit from the liquidity of being able to use credit cards and service cards to actually take money instantly from the customer.

So we actually believe that the savings promoted by the Minister and the advisers—we’d like to see a two-year review of that to ensure that that $74 million magic number that they purport is actually going to be achieved, and as if it isn’t, let’s have a look at why that didn’t happen. The Credit Contracts and Consumer Finance Act rules may also affect switching by business for services, and that may curtail benefits itself.

So here we are: capitalist economies and democratic Governments are looking at better ways to do things, better than they have done previously, but I don’t think this bill achieves that. So let’s think about it over Easter eggs. Easter eggs make things sweeter. When buying at retail, let’s have a standard playing field that Duncan Webb—or, sorry, Dr Duncan Webb—can actually espouse to and understand the practical realities of cash movements through the network in New Zealand. Thank you, Madam Speaker.

I’m not sure if I’m speaking on the same piece of legislation as that member, because this bill is all about competition and it’s about levelling the playing field and making sure that consumers and small businesses are able to be competitive in an environment where there are some really big international global players, such as Mastercard, Visa, and so on. As we’ve heard tonight, the changes in this bill will save small businesses—and, ultimately, consumers—$74 million. It’s another piece of legislation brought to this House by my friend and colleague Dr David Clark which is all about making sure that more money stays in the pockets of New Zealanders by supporting the small businesses who run our country. We know that New Zealand is made up mainly of small business.

This is a great piece of legislation. What it does is it enables the Commerce Commission to recommend changes to retail payments, including transaction fees. Rather than wait for a comprehensive review of the retail payment systems, the Minister, in his wisdom, has said, “Let’s look at Visa. Let’s look at Mastercard. We know that these are the two dominant players in this market. Let’s get money into New Zealanders’ pockets now. We can look at the price signals that come from that. We can look at whether they try to do anything underhand to avoid competition, and we can adjust our response to that based on what we do with these two players.”

It’s fantastic to see a nimble piece of legislation like this that puts consumers first, that makes sure that we have an environment going into our COVID recovery that really builds on the small businesses that need support, that makes sure that they can do business, and that gets money into New Zealanders’ pockets. It’s a great piece of legislation. I commend it to the House.

The next call is a split call. I call Melissa Lee for 5 minutes.

Thank you, Madam Speaker. It was really interesting listening to members who have spoken earlier, and I completely agree with Damien Smith when he spoke about the passion that our colleague Andrew Bayly speaks with when he’s in the Chamber. I have no idea what vitamins he takes, but I love his passion when he’s in the Chamber, and he spoke with great knowledge and, as always, with high energy.

I just want to take a moment to reflect on the comment that Ingrid Leary, the member who’s just sat down, said in terms of how this bill returns benefits to the consumers. I am actually not quite sure if this bill returns money to the consumers’ pockets. I would like to ask the Minister—and I’m sure that during the committee stage of this bill, the Minister may be able to answer—if, in fact, this bill will provide benefits to consumers, as his colleague Ingrid Leary said, because the overseas experience in Australia and Europe tells us that consumers receive no benefit and tend to lose out on the interchange regulations. However, I just want to say that on this side, we actually supported this bill, and we will continue to support it, bar something going tragically wrong during the committee stage.

As earlier speakers have mentioned, many people in this country pay merchant service fees that are often charged out by the issuing banks that provide credit cards and EFTPOS cards. But, as I think it was the Hon Judith Collins, who talked about her experience, said earlier, during COVID there were many businesses and retailers who did not take cash. I don’t know whether it was fear of the COVID virus, but I know that some retailers who did, in fact, take some cash would actually sanitise it. They would use disinfectants and all that kind of stuff.

So retailers preferred getting credit card payments or EFTPOS payments because of COVID, and often there wasn’t the insert or swipe option on these cards, but the contactless version of the transaction. The merchant service fees for the contactless portion is the interchange portion between the bank that charges it and the fee that they have to pay to Mastercard and Visa. That is the interchange fee, and that is, in fact, like 80 percent of the charge, and it is the highest portion of the merchant service fee. Hence, this bill sets a limit on how much it is. There is a cap on how much the interchange fees will be.

Having seen the speeches earlier in my office, initially, and having listened to Andrew Bayly, I have to say that I agree with him when he says that this Government gives with one hand and takes away with the other. This Government talks about how $74 million in apparent savings is humongous, considering the fact that they’ve just slapped on $3 billion of cost to retailers and small businesses. So when we’re comparing $3 billion and $74 million, I’m not so sure which is actually the greater benefit. I’m sure that the $3 billion cost is going to be something that a lot of retailers and small businesses will be very, very upset about, but any little bit that can help retailers pay less in the transaction fee that is charged on to customers and consumers, I am here to support. So I commend this bill to the House.

Thank you, Madam Speaker. Look, this is a good—very excellent—piece of legislation, because merchant fees and surcharges are a classic economic problem where there is no actual distinction between the product of one bank and another. So there is actually an incentive to drive the cost of the service up across the board and no incentive to lower them. It’s what is known as “sticky pricing”. It happens with petrol as well, because we don’t mind where we go to. So it encourages what looks a bit like cartel behaviour, but you don’t need to communicate to actually achieve what is, essentially, a kind of price fixing, because everything is so blindingly obvious.

So what we’ve got is, essentially, monopoly pricing for these banking services. It’s absolutely appropriate for the Commerce Commission to come in, and I’m surprised at the ACT Party, because I’d have thought that they would want to have competitive and not monopoly pricing, so that the industry is efficient and innovative. That’s what this bill is aimed at—an efficient and innovative and effective banking service—and that’s what this bill will deliver. I absolutely endorse it and commend it to the House.

Point of order, Madam Speaker. It is the Labour Party that has brought up the issue of price fixing and cartel behaviour—

ASSISTANT SPEAKER (Hon Jenny Salesa): The member will take his seat.

DAMIEN SMITH: No, no, it’s a very important construct, because there’s nobody on this side of the House who has said that.

Yes, the member has had a chance to give his speech. I call on Glen Bennett.

Kia ora, Madam Speaker. I am glad to rise and take a call, talking about easing the burden and fees for merchants, ensuring it goes through to customers. We’ve talked a lot about Andrew Bayly tonight, which I’m never that comfortable about, but I don’t think it’s passion; it’s actually just shouty-shouty that seems to come this way, and I actually have removed my earplugs now.

But it has been interesting listening this evening—and these contradictions and this sort of to-ing and fro-ing. We heard from the Opposition they’re the party of small business, but they never got around to doing this when they were in Government, so I’m glad that we are the party of small business who are ensuring that this does happen. This bill will help, and $74 million—it is a small amount. We’ve never talked about it being humungous but it’s those small steps that are significant and, as a member of the Opposition who just sat down said, every little bit counts and that’s why they support this piece of legislation.

I was also concerned by Damien Smith—that he talked about the breadth and scope of intrusion, which I thought was a bit rough. One of the submitters—this is what they had to say in submitting to this piece of legislation. They said, “As a small-business owner we have for years faced price gouging from the banks over merchant service fees. The only tool at our disposal has been to on-charge these increasing fees to our customers through repricing our products or transparently surcharging.” They talked about wanting to get rid of this and move it forward so it is going to get passed down to the customer, and business people—small business—who we serve in part of our manifesto as Labour, we said we’ll do this. We are doing this and so I’m really, really proud that we can move another step forward and I thank you for the support from across the floor and I just hope that we can get the ACT Party there very shortly—and I know they may.

I find myself in the unusual situation, in the first time in my political career, agreeing with that last member, Glen Bennett, when he read out and said that the problem with the interchange fees charged by the banks for the credit cards they use is the poor old retailer must pass them on to the consumer. They can’t absorb them. They can’t put them somewhere else. Actually, many of the retail customers, small shops in New Zealand, are doing it very difficult. They must pass it on. And, of course, that is the case whenever a cost is imposed on a business. They must pass it on. With the Matariki bill that was passed just last week, there’s a $450 million cost that’s being imposed upon these businesses, and, just like what the last speaker said the banks are doing, it must be passed on.

In fact, if we look at what the Labour Party has done in the very, very, very long 4½ years they have been in Government—very, very long for the small businesses that the last speaker said they were sticking up for—there’s almost $2.6 billion worth of additional cost that has been imposed not on the economy, not on the taxpayer—because the Government has borrowed it and spent it—but on businesses in New Zealand. So, on the one hand, we have members of the Government coming forward and saying every little bit counts, and the saving, through this legislation, of $74 million for small business—won’t have to pass on to the consumer any more—is very small by comparison to the cost this Government has imposed upon businesses that is being passed on to consumers. It is no wonder we have a cost of living crisis in New Zealand, with inflation so high, because, on the one hand, in four measures alone that this Government campaigned on and has put in place at a cost of over $2 billion, there is this small saving of $74 million. I tell you what, if you go and ask the average consumer, “Do you want another $74 million worth of savings to small business so your costs don’t go up, but, on the other hand, we’re going to put $2 billion back on you?”, they would work it out for themselves.

This is the interesting thing about the Labour Party. It’s the small things that they try to get right, like this legislation, that actually don’t make the difference for consumers. It’s the big things that they instantly, always, get wrong, that is what is harming business in New Zealand and harming consumers. Take the very, very fast and significant increases to the minimum wage. I’m yet to hear anybody in this House—

Dr Duncan Webb: I raise a point of order, Madam Speaker. The member has been talking about all kinds of things, and I’m just referring to Speaker’s ruling 128/8: “Members must confine themselves to the main purposes and contents of the bill; … [not] with matters not provided for in the bill.” The member’s well out of order.

Hon TODD McCLAY: Speaking to the point of order, Madam Speaker. The thing about debate is one gets to rebut, and members opposite, in every single speech—there hasn’t been a full 10 minutes; it’s been a very short period of time—have made the case of how this is assisting and it is helping consumers. I merely, in drawing on the saving that they’re speaking to in this bill—the additional costs that actually aren’t helping consumers—am making the case that consumers are not better off. I’m actually only three minutes into my speech, which is much longer than most of the Government’s speeches.

ASSISTANT SPEAKER (Hon Jenny Salesa): It is up to the Speaker to determine relevancy, and I invite the speaker to come back to the bill.

Hon TODD McCLAY: Thank you very much. Well, the great thing about this bill is there is a saving of $74 million. A quick amount of maths would suggest that whilst that is welcome, it wouldn’t be as welcome as so very many other changes that could be there.

Here’s the most interesting thing about that point of order: it’s that, actually, the Government would like consumers in New Zealand to only think about what’s in this legislation. They’re not willing to allow debate on anything other, in this case, than what is here. And, yes, there is a saving; it’s not a bad thing. In fact, it would be great if there was a way to add Supplementary Order Papers to this, to amend this when we get to future stages, to save the consumer even more. Because here is something you will notice as this legislation enters into force: the consumer will hardly notice the saving because it will be taken over by additional cost, across the board, that will be levied by this Government. Because here’s something else that is extremely important: when the Government stands up and says it wants to save the consumer money, it should do that in every piece of legislation that comes forward. And every time this Government brings legislation to the House that will impose cost upon consumers, we’ll get to stand up and say, “Remember, a long time ago, that piece of legislation when they decided the banks were the bad guys, so they were going to make a change there and save $74 million?”—long forgotten, because there’s extra costs and the additional costs that will be brought forward.

The members of Government talk a lot about small businesses. They talk very little about the small businesses that have closed and that have gone, who are waiting not for this legislation, but any other help that could allow them to get there. The $74 million of savings from this legislation, spread across small businesses in New Zealand, is very small by comparison to the amount of debt that these small businesses have taken on over the last 2½ years alone. And it is the case that when consumers go and they pay for something with their cards—and, in some cases, some retailers on-charge the cost to them of up to a percent and a half; others absorb it—what the consumer then may say to that small business is “Well, why is it that I have to pay 1.5 percent on this retail item that I’m having to buy for my family that is so much more expensive today than it used to be, when this saving the Government is talking about means that prices in the supermarket, or prices in the corner dairy, or prices anywhere will go down?” And the answer to that, sadly, is they won’t.

This is a worthy piece of legislation. It has taken effect in other countries around the world. And, in fact, the Government is merely mimicking, I suppose, or following changes Australia made some time ago. But here’s the other very interesting thing: this was a promise that was made before the last election by the Government, I would suggest, trying to divert attention from the very other many costs that they also said they would impose.

But I remember another promise made two elections ago, which should be being delivered in this legislation at the same time because there would be less of a saving for the consumer, but more money in the pocket of everyday workers: do you remember when they said they were going to get rid of secondary tax? Well, there are members in the House, actually, who, on a daily basis, have constituents get in touch with them, saying, “We are still being charged secondary tax.” Well, how come that hasn’t been fixed, but this one has? Because the cost to workers having to pay secondary tax and then wait until the end of the year to get it back is much, much greater than the $74 million the Government says is a saving in this legislation and therefore one of the best things that they have done. And, in fact, I will give them that: one of the best things that they have done to help consumers over 4½ years is a $74 million saving that’s not going to make the petrol at the pump cheaper. It won’t make the food any cheaper. It’s not going to make the rent any cheaper. And, in fact, if we look at all the other things the Government has done that are bad for business and bad for small business, bad for consumers, the prices are going one way and it is only up.

Can I finally say, to the Minister of Commerce and Consumer Affairs, who brought this forward: he is digging away in his portfolio as hard as he can. I wish he had more support from his colleagues in other areas, because some of the legislation he’s brought forward is worthwhile. It will make a very, very small difference, but at least he’s bringing things forward to the House to make a difference. Where this Government is letting down the New Zealand public is in the big things, not the small things like this. The next speaker in the debate will get up and say, “Well, a $74 million saving is not small.” It is, when you have just piled $450 million worth of cost on to the New Zealand consumer, through small business, in one day alone next year—in one day alone.

Consumers in New Zealand are worse off under this Government. Retailers in New Zealand, largely particularly small ones, are worse off under this Government. In fact, there’s not a single thing this Government’s got its hands on that’s not going up in price. Congratulations to the Minister for being able to get one of the smallest savings I’ve seen in a long time through Cabinet. It’s a great shame they don’t give this Minister much more responsibility. Imagine if he was allowed to do something big that actually could turn the ship around, help business in New Zealand, get them back on their feet, and be good for consumers at the same time. We live in hope. This legislation won’t do it. Albeit, with the tide of extra cost being dumped on New Zealand households and New Zealand businesses, at least here’s a tiny little win for them here. It’s almost worth celebrating.

I just want to give an illustration to those at home about how this might work. Recently, I helped a gang member out of a gang, and this gang member told a story of taking $650,000 in cash, wrapped in cellophane, from Wellington to Auckland. He then changed that money on behalf of the person he was prospecting for and brought an equivalent amount of dope back to Wellington. When I mention dope, I’m not talking about the previous speaker, of course; I’m speaking about the illicit substance methamphetamine.

So the transaction cost of that was actually the petrol in the car and the cost of the car to drive to Auckland and the cost of bringing it back. Ironically, that member had to borrow money to drive home, because he didn’t have any. But if that was a legal transaction, there would have been a considerable amount of additional cost: the cost of legally sending that money to Auckland. There would have been a considerable amount of cost in that—all sorts of interchange fees, coming back, the distribution of the—as it was illegal—substance. If that had been a legal substance, people would have gone to the dairy, people would have gone to various retail outlets, and each time there would have been an added cost to all of those transactions. So you can imagine how much more money would have been generated, how much more money would have needed to be generated, to actually allow those transactions to take place.

What this bill is about is ensuring that the amount of costs in a legal transaction going through a system like that, where a product, a raw product, through its various stages is turned into the legal product that people use—there will be a less, reduced cost as a result of this bill along the way, whether it be going to the local dairy to buy the product or wherever you go along the way. So this bill is a way of ensuring that there is simply less cost in the system of doing business, something that, on this side of the House, we are very proud to be part of doing. I have no hesitation in commending this bill to the House.

Point of order, Madam Speaker. I move a motion without debate that that member tell us some more about his gang interactions.

That is a disorderly point of order, the Hon Todd McClay. The question is that the motion be agreed to.