Retail Payment System Bill

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

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

I move, That the Retail Payment System Bill be now read a first time. I nominate the Economic Development, Science and Innovation Committee to consider the bill. At the appropriate time, I intend to move that the bill be reported to the House by 3 March 2022.

The Retail Payment System Bill introduces a new regime to ensure that the retail payment system—that is, the way we pay for goods and services—delivers long-term benefits to consumers and to small businesses or merchants. It does this in three ways. Firstly, it enables the Commerce Commission to regulate participants in designated retail payment networks. Secondly, to reduce merchant service fees sooner rather than later, it sets an initial pricing standard for the MasterCard and Visa credit and debit networks, and that standard targets interchange fees, which are the larger part of merchant service fees, making it less costly for retailers when accepting payments. Thirdly, it enables the Commerce Commission to issue merchant surcharging standards to limit excessive surcharging, and the bill enables the commission to monitor, investigate, and enforce the rules. This bill fulfils a Government commitment—indeed, a Labour manifesto promise—to regulate merchant service fees charged to retailers and bring them in line with the other comparable economies that we look to.

COVID-19 has changed the way we spend our money. We spend more and more time online transacting, with contactless transactions as well. There is growing pressure for all retailers, including the local dairy, to accept the available technologies, but they do come with an added cost. Reducing these fees is a priority for this Government and is critical to the recovery of the economy from the impacts of COVID-19.

So in December 2020, I began looking at the merchant service fees regime and the broader retail payment system, and the findings of the research generated by officials as we looked broadly showed that the system could indeed benefit from regulation. The first finding was that the costs merchants are charged to accept some payments are indeed high. Evidence shows that in many respects, some of our payments are parallel to what happens in Australia, but they’re actually about twice as high for credit card payments and for online debit transactions.

The second finding was that there are barriers to competition in the current regime. Retailers want to accept payment types that are widely used by consumers and vice versa, and that means a few large banks and card schemes dominate the retail payment system, making it difficult for new entrants to offer fresh payment options.

A third finding was that merchant service fee pricing has particularly adverse impacts on small businesses. In part, this is due to their smaller scale and their limited ability to negotiate good terms, but also they’re at greater risk of losing customers if they decide to surcharge or to steer customers away from certain payment methods. For many small businesses, they are simply forced to accept payment methods and then absorb the costs. It’s a cost of doing business for them.

Lastly, consumers like to use higher-cost payment methods. Indeed, we know credit card loyalty schemes are popular. They earn rewards for those that can participate in them, and banks encourage this because they in turn get higher returns as well. But that creates an equity issue, because someone has to pay for those rewards. Every consumer gets charged the same price for an item, typically in a store, but some get rewards back, and that tends to be the wealthy, who can afford and are offered those higher reward schemes. So, effectively, that amounts to a transfer of wealth from poorer folk to wealthier folk as a part of those loyalty schemes. So the Retail Payment System Bill helps to alleviate some of these pressures consumers and small businesses are facing as a consequence.

I’d like now to go into further detail about the proposed regulation of designated payment networks. The bill allows the Commerce Commission to make recommendations to the Minister of Commerce and Consumer Affairs as to which retail payment networks should be designated. The Minister then, of course, makes a decision, and it futureproofs the regime by allowing it to respond to any changes in the system that come up along the way, such as new payment methods that may emerge.

Once a network has been designated and a Minister has accepted that advice and designated a network, the commission will have a broad set of tools to regulate aspects of the network. For example, the bill seeks to address the lack of competition by enabling the commission to issue access standards. They could require established participants to open up access to parts of the network to make it easier for new entrants to use crucial infrastructure as a part of the payment system. The commission could also issue directions to network operators to set or amend network rules, and the bill enables the commission to monitor the retail payment system and impose information disclosure requirements, if it wishes. It can also improve the transparency of fees through describing how fees may be presented, and that will all make it easier for small businesses to compare the different offerings in the market, the different merchant service fees they might be charged for using this network system or that system.

In addition, the bill directly addresses the problem of high merchant service fees by enabling the commission to regulate pricing through network standards. Now, the network standards could cover pricing principles and limits on fees, as well as pricing methodologies and how prices are expressed. Small businesses then will have greater transparency, greater clarity, about how the different systems compare and, as I’ve said, they can choose to use the ones that suit them best, and that will put overall downward pressure on fees that are charged to merchants.

The second key aspect of the bill is that MasterCard and Visa credit and debit card networks have been designated off the bat for an initial pricing standard. Now, that makes sure that we get to one of the challenging issues that’s in the system straight off the bat, and we’re doing that by regulating the interchange fees that they can charge, which are a big part of merchant service fees. So that will be something that, immediately it comes into effect, people will see the change.

There are also some anti-avoidance provisions that are coming into play. So this is to avoid something known overseas as the waterbed effect, where you regulate one part of the merchant service fee, like the interchange fee, and see fees for other parts of the merchant service fee go up to compensate the issuers. So we’re alive to that, and that standard is there to ensure that that waterbed effect doesn’t happen here in New Zealand.

I want to see merchants benefit from lower fees as soon as possible, and I want to see them pass on those savings to consumers in New Zealand. Both small businesses and consumers will be better off as a result of these changes.

Now, the initial measures target card products issued by MasterCard and Visa because they cover the lion’s share of the market for retail payments. With the other schemes present in the market, some of them don’t have interchange fees—they have different models—but we think that this will make a significant difference. That initial pricing standard will commence six months after the initial enactment of this bill, and that allows regulated parties sufficient time to ensure that they do comply with the new standards. Those standards are meant to be an initial and interim measure while the Commerce Commission gets up and running, and then it will be able to adjust—

💬 Hon Todd McClay: What do you mean if it gets up and running?

—the pricing standards as needed—in this particular regime, sir.

There are, finally, limits on merchants’ surcharging that I’d like to mention. Sometimes, retailers use surcharges to recover the costs of merchant service fees, but where they charge more than the actual cost, that can cause a harm to consumers. So if the true costs are not being passed on, the commission can issue standards to ensure that surcharging is not excessive.

💬 Hon Todd McClay: There’s not a problem that a good standard won’t fix.

Those standards could include information disclosure and record-keeping requirements, and may also set out how merchants must represent surcharges. That’s a very similar approach to that taken in Australia, and I’m sure Mr McClay will have something to say about that.

To conclude, retail payments are central to the economy. Consumers continue to demand that more innovative payment methods are available to them, but we know that the fees being charged are indeed too high. This bill ensures that consumers are supported. As we’re in difficult COVID times, consumers are supported, small businesses will be supported, and they will help with the economic recovery. It’s an important step in the right direction to ensure that our retail payment system delivers long-term benefits to consumers and businesses in New Zealand. I commend this bill to the House.

The question is that the motion be agreed to.

Thank you, Mr Speaker. Consumers around New Zealand had such high hopes for David Clark as the consumer and commerce Minister. Nine and a bit years ago, when he made his speeches down in Dunedin to be selected for the Labour Party to come here, I’m sure he started his speech by saying, “The reason I want to go to Parliament is to set some standards.” because that’s all we heard there.

Look, we will be supporting this because it is a very small step in the right direction, but when it comes to steps in the right direction, this is one of the tiniest ones this Government and this Minister might have made. He introduced this piece of legislation as a proud father of a tiny little bill of significance, he said, but of great insignificance to retailers and consumers in New Zealand. You see, during the campaign last year when Labour announced this, the day after or the day before they said, “There’s $2.8 billion worth of costs we’re going to impose upon business in New Zealand if we’re re-elected. But don’t worry, we’re going to fix these tiny little fees that merchants have to pay and that will fix it.”

You see, Minister Clark just said that actually the fees that merchants pay when it comes to credit card transaction in New Zealand compared to Australia are higher. What he didn’t tell the consumer was rents are higher in New Zealand than Australia. House prices are higher in New Zealand than Australia. Food prices are higher in New Zealand than Australia. Petrol is higher here, transport costs are higher, cars cost more, hotels costs more, electricity costs more, doctors visits cost more, medicine costs more—but don’t worry, we’re going to set a standard for the amount that Skycity can charge you as a result of the card that you may use when you get there.

So it will level the playing field to some degree for smaller merchants compared to larger merchants but what we also heard from Minister Clark was that envy of people who had done well. He’s saying rich people benefit because poorer people end up paying those same fees when it comes to the use of the cards and some fanciful rewards scheme. So he’s going to set a standard to perhaps deal with that but actually nothing in as far as consumers are concerned when it comes to rents, houses, petrol, electricity—all the other things that mean the cost of living in New Zealand has gone up so very, very much that people are struggling and that we have such a thing as the working poor. What that means is people having to choose to pay their bills before they feed their kids often because, under this Government, actually prices have run away. But don’t worry. The solution is at heart. We’re going to jump on board and beat up on a couple of credit card companies that charge a small percentage on a transaction because that is a solution.

Now, there is no question that actually where there is a charge, it should be fair, it should be equitable. I do notice in some of the submissions that have already been received in the one year the Minister has been considering this legislation to fix it for consumers that actually the transaction costs by two of the credit card companies he mentioned, at least on their network, Visa and Mastercard, have fallen by almost 18 percent. That suggests to me something’s happening in the market, probably around competition—could be a number of other things. But, in effect, there are so many other things that this Government should be doing to help consumers than this very, very small piece of legislation that the Minister spent 10 minutes talking about.

You see, Kiwis were doing it very hard, long before the effects of COVID, long before the now 270 days that New Zealand has been in some form of restriction imposed by this Government. You see, in Auckland there’s not very many small businesses that are sitting there losing sleep because of the cost of the transactions that they have to consider if ever the Government finds a way to allow them to get back to business. Most businesses in New Zealand are struggling; they are not trading at the moment—in Auckland, sorry, you’re not trading at the moment. They need all sorts of other consideration from the Government than this piece of legislation, a small-time fix for the retail payment system.

I hope that the Government will allow the full period of time for this piece of legislation, this bill, to be before the committee, because it was announced more than a year and a half ago and it has taken the Minister almost a year from when he thought to get around to doing something to bring legislation before the House, and all of a sudden we have a sense that he might rush it through because this is the big fix. I think it is very important that we hear from all of those who are engaged in the sector: the banks themselves who run the system, the credit card companies that actually do have costs upon them—and they want to find ways to minimise these so that people can enjoy different ways of paying for the goods and services they may consume. But to leave it to the Government by way of setting standards, I don’t think is the very best way. So the committee will need to take a full period of time to allow proper submissions and full consideration of this unless the Minister is saying that this is so urgent to fix the ailments the businesses suffer as a result of the $2.8 billion of costs annually this Government has imposed upon them through extra regulation, extra cost, and the effects of the extended long-term lockdown that Auckland businesses are facing but almost every business in New Zealand is suffering from.

This is a very small piece of legislation. If it goes a small way to levelling the playing field and assisting small businesses with some of their costs, we’ll take the time in the committee to consider it, we’ll work through it. But very, very clearly when it comes to commerce and consumer affairs, I hope the tin is not empty. I hope Minister Clark has more to bring to the House. I hope that there is a step change—a step change that will shake these things up and make everything work all of the time. I’m sure that actually he didn’t start his speech when he went for selection in Dunedin almost 11 years ago with “Send me to Parliament. I want to set some standards when it comes to retail payment systems in New Zealand.”

Kia ora, Mr Speaker. Thank you for allowing me to move beyond our previous speaker. The previous speaker did mention something several times around this tiny piece of legislation. He mentioned only several million dollars of money that was going on on this side of the House, but I did look it up: this is going to save merchants $74 million a year. We know where that goes. It gets passed on, right? Seventy-four million gets passed on. So I’m really proud to be standing and supporting this piece of legislation this evening.

I look at the different systems around credit cards and fees, and, to be honest, you know, there’s early adopters, there’s the early and late majority, and there’s the laggards. For many things I’m a bit of a laggard, to be honest, but for many things I’m an early adopter when it comes to social change, when it comes to technology and systems. I do remember particularly payWave when it was introduced, and thought “What a ridiculous, stupid, weird idea. It’s fast enough doing your four digits and pressing your buttons—that type of thing.” But now I can’t do without payWave. It’s just something we use all the time. It’s been great that we have ensured that we froze payWave fees at this time, obviously, in a global pandemic, to ensure the safety of our people. But this piece of legislation is ensuring that we get it right when it comes to merchant fees.

Now, I won’t go into too much detail, but many years ago I actually owned a coffee cart. I was a small-business owner myself, and so I know the challenges when it comes to what types of cards, because of the fees that I had to pay and that I wasn’t able to provide for my customers, because I had a very small but effective business. So I’m really glad to be supporting this legislation. As a member of the select committee, of the Economic Development, Science and Innovation Committee, I look forward to hearing submissions on this and to supporting this piece of legislation through to the next stage.

Well, I’m standing here to talk on the Retail Payment System Bill, first reading. Wow, I’m just sitting, looking at the Minister, and saying: is this as good as it gets? Obviously we want to see fees reduced over time, but, gee, we’re going to take up—what—an hour and a half. What’s that worth in terms of time spent in Parliament? What’s that worth? About a million bucks—a million bucks? And so no doubt the select committee is going to have a great deal of time looking at this and considering it.

Look, there’s no doubt that we want to see fees reduced as much as possible. But as my colleague the Hon Todd McClay said, in the scheme of events this is pretty small beer. I can understand why Retail New Zealand, Hospitality New Zealand, and the Restaurant Association all wanted to support it. It’s fine; it will do some good. But it’s not going to be a game-changer, unfortunately, particularly right now, when you’ve got those industries—retail, hospitality, accommodation, events sector—who are just crying out for support, and we’re putting up a bill like this tonight.

Why, on Friday, didn’t Mr Grant Robertson actually do something meaningful for them? He did nothing in his thing, because nothing will help them more than actually helping them with things like insurance schemes for the event sector, allowing retail operations to actually operate, and allowing people to come in and buy stuff from their shops, or, in fact, for the restaurant people to actually work in the streets, actually have places out on the street so they can entertain people and get some money coming in. Instead, what we’ve got is a bill like this tonight. This is not that important, Dr Clark. What we should be talking about is what is really important—those thousands of businesses, particularly in Auckland, and the Waikato now, who are just going to die over the next three weeks until they finally can apply for their next increased resurgence payment, which has been delayed for three weeks before they can even apply for it. That is the difference between this bill and what the Government really should be focused on.

I think it’s just interesting how much time that the committee will spend debating a thing like this. Look, just get it through the House. Everyone agrees with that. It doesn’t need a lot of time. As a Government, Labour should be focusing on the big stuff. And I think you’re missing the big stuff when it comes to a bill like this, because right now, in the next three weeks, thousands more of those retail, hospitality, accommodation, events people who will use these types of payments will fail—will fail—and as a result, they’ll lose all their life savings. And, worse than that, the people that they employ will end up on the job seeker benefit and they will stay there, as we’ve got, and we’ve seen since the first lockdown, 56,000 who have joined the job seeker unemployment benefit since the first lockdown in March last year and are still on the job seeker benefit.

So, of course we support this, but this is not that important in the scheme of stuff. What the Government should be talking about is some real stuff to stop these people losing their jobs, their livelihoods, and all the other stuff that’s really creating carnage in places like the Auckland and Waikato regions.

I rise to speak, but I must say that on the other side of the House the volume seems to have been getting louder. There is a microphone there. We can hear you. The emotion that is coming from the other side of the House is just unbelievable—he might need a bit of Berocca!

Anyway, back to the bill—back to the bill. This bill is actually a very, very practical bill; a practical bill that is going to have an immediate impact on the shoppers, the people, the customers, saving money—$74 million. Apparently that is not even worth it on the other side of the House. This side of the House believes that every dollar is a dollar well spent. It goes round and round into the economy. That’s what is important and that is why this legislation is so critical for just keeping things going for small businesses as well.

How many of us have gone into a shop and gone to use the card, and the business owner says, “Oh no, we don’t have payWave, because they’re charging us too much.”? Those little transactions, those quick things, and in a COVID world where we want to make sure that we have every safety mechanism possible.

The other thing I would like to say is businesses are resilient. I’ve been a small-business owner. In fact, I might be one of the only small-business owners that are in the House speaking tonight. I can tell you that I know what it is like—20 years in small business. People are innovative. We work through things like this. That is what makes small business the big part of the economy that will keep going strong and we’ll keep going for it. That is why I commend this bill to the House.

Kia ora, Mr Speaker. I just wanted to acknowledge the verbal Berocca that we got over there from that corner of the House. I won’t need my credit card for that one, but I believe that will keep me going for the rest of the night.

This bill will create a regulatory system for merchant fees for debit and credit networks, payWave and other similar service fees, which are increasingly used more than EFTPOS, and this delivers on a Government commitment made in 2020. So, good on them. We will be supporting this bill, because we know that credit card transactions are the main method of retail payment in Aotearoa New Zealand and are routed through either the “switch to issuer” or the “switch to acquire” systems, and so ensuring those technologies and systems work for everyday people is critical.

We heard about the carnage—they used the word “carnage” in the corner there as well. It’s so good to hear that passion about merchant service fees. I would like to see that passion sometime around climate change or the COVID crisis and all those other sorts of crises in front of us.

The Greens support reducing compliance costs for businesses. We know—and I’m taking this from the Ministry of Business, Innovation and Employment (MBIE) March 2021 regulatory impact statement—that our payment systems are not fully working for consumers and merchants. Merchants end up paying a disproportionate cost of retail payment systems, which end up being passed on to the consumers, and for too long, we’ve relied on voluntary industry initiatives to address these issues, without meaningful outcomes.

Just going back briefly on the issue of costs of merchant service fees being passed on to consumers through the price of goods and services, we know this disadvantages low-income people while only occasionally benefiting high-income earners. Some of the retail payment cost that is passed on to consumers is used to fund rewards and other inducements for using credit cards. MBIE estimates merchants have to increase their prices to all consumers by around $187 million per year to fund rewards paid to certain credit card users. Due to the way credit card rewards schemes are structured, this leads us to an annual regressive cross-subsidy of $59 million from low-income to high-income households. This is effectively a trickle-up scheme, where some of our lowest-income people are subsidising a system that only works for those with the means to reap its rewards. That’s why we are supportive of this bill, the Government’s intent to create a regulatory system for merchant service fees for debit and credit networks. On that, we support this bill. Thank you, Mr Speaker.

Thanks, Mr Speaker. I rise on behalf of ACT to speak to the Retail Payment System Bill. ACT opposes this bill for a number of reasons, but mainly because ACT believes in free markets and the less Government has to do with things, the better outcome for all. Having a Minister put his two cents in—or her two cents in—often creates more problems, even if it might look good on paper. I suppose the Government can espouse how much they care about and understand small businesses, but the unintended consequences in this bill must be considered, because Government intervention in private transactions over time will eventually hurt the very people it purports to help.

This bill will reduce competition in the sector. Why bother coming up with new innovations, new technology if you’re going to be told how to use it? Why would new providers want to enter the market knowing that there will be a Minister making sure they’re not too successful? A sector that’s constantly changing needs investment, not restrictive regulations. Submissions in the select committee from ANZ, Business New Zealand, Visa, and Westpac said that the Government should not intervene by way of regulation. They noted that market forces have been and continue to drive competition, and if the profits available within the payment system can be reduced by regulation, their ability to develop new services that will benefit merchants and consumers will be adversely impacted. This sort of tinkering and interfering with the way business is run as unhelpful.

Several years ago, I met with my business banking manager to discuss merchant fees, among other things. After some negotiation—and I mentioned other banks in the process, during that negotiation—the fees were reduced to what I thought was fair. Negotiation with providers already happens. Businesses don’t need someone to hold their hand to make sure they run their business the way the Government thinks they should, to be told what surcharge they can charge if they choose to charge one.

Over the last two years, providers have cut merchants fees for a period of time to reflect the COVID-19 impact. It shows that there is already competition in the system. Small businesses are going through a hard time—in fact, they have been for the last four years, and it’s great that the Government are trying to help. Taking control isn’t helping. It just seems like the Ministers want control of everything. We’ve seen many examples of that over the last year, and there’s a name for it.

It’s estimated that a 20 percent reduction of credit card interchange and a 30 percent reduction in online fees would equate to savings, for consumers, of merchants’ fees of about $74 million. There are 550,000 businesses in New Zealand. Divided up, it amounts to about $130 each. Businesses are doing it tough during this pandemic. They’ve continually been hit with more costs by this Government. We’ve had two minimum wage rises with no expectation of increased productivity and at a huge cost to businesses. The first rise was two weeks into the pandemic, when businesses were forced to close their doors. We’ve had a new public holiday, which will cost businesses between $377 million and $444 million. There’s been the doubling of sick leave provisions, which will cost businesses almost $2 billion. Seventy-four million dollars isn’t to be sneezed at, but pales into insignificance when we compare it with the extra expenses that have been thrust upon businesses by this Government.

The Government will trumpet about how they care about small businesses while business owners roll their eyes. It’s incredibly frustrating, but it’s quite understandable when we have a Minister of Finance who daily blows his own trumpet and tries to convince the public that the COVID wage subsidy is an example of looking after businesses. The wage subsidy looks after workers, and rightly so, but costs the business money. The business has to administer it, pay holiday pay, and it costs them money, otherwise staff would be on a benefit. I’m sure tomorrow he’ll tell the New Zealand public how the wage subsidy helps business.

This is unnecessary legislation, Government getting involved when there’s absolutely no need. There are many other ways this Government can help business—just by not hurting them any more would be a good start. ACT opposes this bill.

Thank you, Mr Speaker. I’m intrigued—I’m intrigued by the contributions of that last speaker, Chris Baillie, and I’m intrigued by the contributions of the National Party. You would have thought by listening to Andrew Bayly that they oppose this bill, but, in fact, they agree with it. And you would think, from the party that’s supposedly anti-regulation, apart from when, of course, that impacts on those living in Epsom—they don’t want to see regulation on their flash neighbourhoods—that they would support this too. Well, we’ve just heard a contribution saying how we need to support small business. Well, this bill does exactly that, because what we found is that merchant fees are a disproportionate cost, particularly on small business where they don’t often have an alternative way to accept transactions. And this fee, this regulation, that they may hate, actually will help the people that they stand and advocate for, because it is without regulation—the supposed free market—that is imposing costs on small business. And I note that Chris Baillie has nothing to say. He had a lot to say in support of small business. And I think it might grate him—it might grate him to know that perhaps his business and the businesses of those that support his party will benefit from this bill. It makes absolute sense.

There is no rationale to allow high, unjustified costs on merchant transactions, particularly in the COVID era when many businesses who want to do the right thing—in terms of a public health response, they are limiting or restricting cash transactions—get stung by this because there is no alternative. This Government is acting on it. We campaigned on it. And I can say with the utmost sincerity and honesty that when this policy was announced, I was contacted by local business owners in Wairarapa who said, “Good on you. This will make a big difference for us.” Small business: this Government is delivering on it. We are being consistent in our support for small business. And Chris Baillie may laugh, but he wants to support small businesses. The wage subsidy has supported small businesses, the Government continues to support small businesses, and this bill will do exactly that.

It’s really interesting listening to Government members talking about business, because nothing is more obvious than, actually, they know very little about business. They don’t understand the basic way businesses work, the way capital works. They don’t understand how customers are motivated. They don’t understand supply. They don’t understand business. This has been a failing of socialist Labour Governments in New Zealand and around the world for years and years and years, and this Labour Government, this socialist Labour Government, is absolutely no different.

But on this bill, we will support this piece of legislation, not because it is a piece of Labour Party ideology but because, actually, there is a time when, occasionally, small regulation is required, and this is one of them. But Labour’s great plan is actually to regulate business at every opportunity, to issue proclamations from the Beehive about every aspect of individuals’ personal lives—how they live their life, how they spend their money—and particularly when it comes to business. This is a Government that just loves to tell people and businesses how to operate their business. They like the grand gesture, but my colleague Andrew Bayly so clearly and loudly articulated to the Chamber earlier this evening that, actually, this is only a very, very small step, a very modest step, by a Labour Government that usually likes to impose far bigger restrictions and costs on businesses and regulate in a far grander way than just this.

If this is the only way that they were deciding to impose regulation upon business, well, then maybe it wouldn’t be such a bad thing, but over the last few years businesses have had to endure enormous extra cost foisted upon them by this Government for very little reason other than ideological ideals that are more from the textbook in academia than they are from the practical commercial or business world. Those extra costs have added nothing—zero, zip, nada, nothing—to the productivity of New Zealand businesses and actually have done exactly the reverse, and the statistics are very stark.

So when this bill goes to select committee, the select committee will need to be cognisant of the fact that pre-Delta something like 12,000 New Zealand businesses have ceased to trade—and that was pre-Delta. Goodness knows what the number is now, after what someone has just reminded me is the 70th consecutive day that Auckland has been lockdown. There will be literally thousands of businesses—many of them small businesses—where people have put in their capital, they’ve mortgaged their home, and they’ve put their entire life savings into that business, and then, through no fault of their own, a Government that is cruel and heartless has seen fit to provide extra cost on variety of parts of their business: an extra week’s sick leave, rapid increases to the minimum wage, an extra public holiday, and a whole range of other things—and fair pay agreements are coming very shortly. All these extra costs that businesses have to absorb, and without any increase in productivity, are simply something that they either pass on to their customers or try and reduce, and often—too often—the way they reduce costs is actually by reducing the labour component in their business, and that means putting people off. So 12,000 businesses ceased to trade in the last year before Delta; goodness only knows what it is after Delta, after 70 days of lockdown.

One thing that COVID has taught us is that cashless forms of payment have become more common, and there’s actually nothing wrong with that. There will be many, many small businesses who have had to absorb the cost of the fees that are associated with cashless payments, and this is a bill that’s designed to at least create an even playing field. But we should never forget that we are a very small market place, and when we regulate even in a light-handed way, it has consequences. We are a small market place, something smaller than the size of metropolitan Sydney, which we should never forget, and we are a nation of small businesses. There are always going to be winners and losers when consequential regulatory reform of this sort takes place, and someone will pay, and, ultimately, it will be customers. Someone will pay, because those costs don’t disappear; they just get moved around and shifted somewhere else within our economy.

So, look, we’ll support the bill. We’ll have a look at it at select committee.

Order! The member’s time has expired.

It is a pleasure to take a short call on the Retail Payment System Bill. I just want to make the point that—because members opposite have been claiming that this somehow is regulating small business—this isn’t a bill that regulates small business; it is a bill that regulates the merchant service fees charged by banks.

Just in the short amount of time I had to do some research on this bill, I just want to note that a KPMG report from June this year showed that, in the March quarter, banks made an increased profit of 20 percent on the previous December quarter. Banks are the ones who are charging these fees, and they are making billions of profits at the expense of small businesses.

I’ve visited a number of small businesses in my electorate, and often, if I go to pay and they don’t have payWave, they’re incredibly apologetic and they say to me, “I really would like to have payWave. I’d really like to be able to use it, but I can’t afford it, because the fees that are charged to me are just far too high. They stop me from being able to offer the technology that, I know, customers like.”, and also the Government wishes for them to use it in order to protect customers from touching buttons, and the like.

So, look, this is an excellent bill. It is disappointing to hear pot-shots about it being regulatory against small business—it is not. I note it has gone very quiet on the other side there. This is a bill designed to support small businesses—our cafes, our restaurants, our accommodation providers, and our retail sector—so that they can offer a technology that is safer for customers and safer for their staff, so that they are not continuing to be stung by outrageous fees that make that technology unavailable. So, on that note, it is a pleasure to take a call and I commend this bill to the House.

It’s often said that the less you believe what you’re saying, the louder you say it, and, certainly, some of the speeches we have heard from the opposite side of the House would be an indicator of that. But I say good on them, because when you are confronted with a very good piece of legislation like this, there’s really nowhere else to go but to actually support it. And so support it the Opposition generally have done.

Anyone who goes around their electorate over the next few days and explains what’s happening here to their local dairy owner, to any other small retailer, will get nothing but praise for this. Because you’ve only got to have a look at some of the figures we’re talking about here: average of 1.6 percent per transaction when it’s done with a credit card, 1.2 percent with a debit card. Often, we’re told here that we should be doing it more like the Aussies, more like the English. Well, perhaps, in this case, we could, because in England it’s a 0.2 percent fee on average; in Australia, 0.6. This piece of legislation is designed to bring us in line with those two countries, certainly, and most others, because our retailers, and, as a consequence, our purchasers, are paying far more than they need to.

Some of my colleagues have already spoken about the profits being made by banks. This will come off their bottom line, not off the bottom line of those small to medium businesses and not off the bottom line of consumers. Therefore, it is a very good piece of legislation, which this whole House should support. Thank you, Mr Speaker.

Thank you, Mr Speaker, and the whole House does support this bill. Despite a few ribbings and rebukes, I can say that Mr McClay thought that Dr David Clark was campaigning on lowering merchant service fees in his candidate speech 11 years ago. I can tell the members that it wasn’t that but eliminating poverty. He’s having a damn sight better go at eliminating merchant service fees than he is about eliminating poverty.

I’m just going to take a—

💬 Hon Simon Bridges: Poverty of ideas.

That’s exactly right, Mr Bridges. I’m going to take a bit of a walk down memory lane, because my first job after school was actually in retail banking. I was in the National Bank in Dunedin North branch at a time of cheque writing and zip-zaps. That was the way we transacted business, and a couple of our—

💬 Hon Simon Bridges: And look at him now!

—clients—thank you, Mr Bridges—were student pubs in Dunedin. And on a Monday after a busy weekend they would come in literally with a satchel full of cheques, and the cheques were written in various stages of inebriation, usually not for very much—about $10 or $15—and often by the same account holder three or four times during the evening. It was quite interesting to watch: the handwriting changed the more cheques they wrote.

Of course, in those days cheques were subject to bounce, and so the merchants took quite a bit of a risk in accepting a cheque. You would probably hand over some form of ID, but those poor students, with their bursary backstop accounts, often got into overdraft more than their limit, and those cheques bounced back. With credit cards, of course, payment was guaranteed, and that’s where the zip-zap comes in. I’m sure Mr O’Connor remembers the awful, awful National Bank ad of that fellow in a three-piece suit dancing along the Parnell shopping mall, saying something like “Zip-zap, the only card you really need is National Bank Visa.” And it was a very good card, but, of course, there was a whole pile of paper to be processed and the overhead of the Visa companies guaranteeing payment.

So in the 1970s and 1980s, when credit card use was a growing but very manual process, it was probably quite acceptable to the merchants to have what was then a 3 or 3.5 percent service fee in return for the fact that once that transaction was completed, it was guaranteed payment into the merchant’s bank account. Now, if you fast forward through the advent of the ATM and then the EFTPOS machine and then tap-and-go technology, we are long past the point where there was any risk, firstly, either in cheques—because I don’t know if anybody writes a cheque these days. Most banks don’t even issue them. So there’s—

💬 Hon Simon Bridges: Stuart Nash knows—Nashy knows a bit about tap and go!

Ha, ha! I won’t even repeat that to put it on the Hansard—or maybe I just have. But, obviously, there’s guaranteed payment through the EFTPOS system, and, of course, there’s no advantage to the merchants with the tap-and-go system for Visas, because they already had a guaranteed payment. The banks, of course, had the great benefit of not having to process manually those millions of bits of paper, and so they, I think, for years have been generating merchant service fees for a reason which has long since been made redundant. As Mr Bennett said, I think, the cost was something like about $74 million, not on the merchant; almost probably three quarters of those costs are passed on to the customers. One could argue that the customer has a choice not to use their credit card, but it has become a very convenient way of paying and then getting interest-free credit for 55 days. So there is actually a real benefit to doing so.

Normally, I would say that the State should not interfere with the private arrangements of purchaser and provider, but I am going to suspend that philosophical view on this bill because, actually, I think unless there’s a circuit breaker, this will continue to be free money for banks, because, as I say, the reason for having the fee in the first place has long since passed. There’s a small fee maxima in here. That makes sense. I hope—well, it is a forlorn hope—that the Government doesn’t take this as carte blanche to interfere with other transactions between willing buyers and willing sellers. Indeed, they’re already doing that. They’re doing that in private contract law between landlord and tenant through the omnibus bill and COVID-19, and a plethora of other unnecessary State interventions on private transactions. But on this one, I can see the need, if not the merit, for doing so.

So we’ll support this at first reading. We’ll be interested in what the merchants, the customers, the banks, and, of course, the credit card companies will have to say about this. They’ll probably have to swallow the rat and pretend that they like it and that it’s good for their business. I doubt that it is, but I also doubt that they’re going to be losing too much sleep over the lost revenue. What will be good, though, is that this will ultimately benefit the consumers as much as the merchants, and, for that, that’s a good thing.

It was interesting to listen to the speech of Michael Woodhouse, and at around five minutes I was able to work out that he was actually supporting the bill and his reasons for it. And I did get a good lesson in cheque writing and student behaviour, so thank you for that. But Andrew Bayly talked about this bill as being a small affair, and I think that’s really indicative of the attitude that the other side of the House shows to small business in New Zealand. They’re suggesting that $74 million doesn’t mean much. Actually, the Stuff website has done an analysis that shows that small businesses stand to save around $13,000 difference in fees each in the hospitality business compared to their Australian counterparts. That’s a significant amount of money for businesses that operate on small margins. And if we look at how many small businesses there are in New Zealand, according to the Ministry of Business, Innovation and Employment, 97 percent of our businesses in New Zealand, have 50 employees or under. So this is not a small deal to them, and they make up a third of New Zealand employees. Lots and lots of people stand to benefit from this legislation. This is not a small deal.

Chris Baillie, I couldn’t quite understand his logic around the wage subsidy not helping businesses but the workers. On this side of the House, the workers are the business. When there are 50 employees or less in a business, those people make up that workforce. It is their sweat that makes up those businesses. And that wage subsidy that this Government has introduced is not only helping those workers and the business, it’s helping cash flow, and getting cash flow into the economy is helping the economic recovery. And can I just remind the House that the economy expanded 2.8 percent in the June 2021 quarter and 12 of the 16 industries recorded growth in the June quarter. So this is not a small deal.

I also don’t think it’s fair to my friend and colleague and fantastic MP for Dunedin, David Clark, to say that this is the bill that he’s standing on. Minister Clark has introduced a suite of measures around unfair competition, including the section 36 amendments in the Commerce Amendment Bill. He’s done the reports into the dominance of the food and grocery sectors, and a number of other things that look specifically at anti-competitive behaviour. So this is a fantastic bill. I am really thrilled to be supporting my friend and colleague Dr Clark and I commend this bill to the House.

The question is, That the Retail Payment System Bill be considered by the Economic Development, Science and Innovation Committee.

Motion agreed to.

Bill referred to the Economic Development, Science and Innovation Committee.

Instruction to the Economic Development, Science and Innovation Committee